BANK UNITED CORP, S-1/A, 1996-08-07

BANK UNITED CORP
S-1/A, 1996-08-07
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1996

REGISTRATION NO. 333-06229
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3 TO

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BANK UNITED CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
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DELAWARE 6711 13-3528556
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

SUITE 500
50 CHARLES LINDBERGH BLVD.
UNIONDALE, NY 11553
(516) 745-6644
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

JONATHON K. HEFFRON, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
SUITE 500
50 CHARLES LINDBERGH BLVD.
UNIONDALE, NY 11553
(516) 745-6644
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

Copies to:

<TABLE>
<S> <C> <C>
WILLIAM F. BAVINGER, ESQ. CRAIG M. WASSERMAN, ESQ. JAMES F. MUNSELL, ESQ.
BRYAN CAVE LLP WACHTELL, LIPTON, ROSEN & KATZ CLEARY, GOTTLIEB, STEEN & HAMILTON
700 THIRTEENTH STREET 51 WEST 52ND STREET ONE LIBERTY PLAZA
WASHINGTON, D.C. 20005 NEW YORK, NY 10019 NEW YORK, NY 10006
(202) 508-6037 (212) 403-1000 (212) 225-2000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after the effective date of
this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / / ________

If this Form is a post-effective amendment filed pursuant to Rule 462(e)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please 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.

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<PAGE> 2

BANK UNITED CORP.

CROSS-REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B)

<TABLE>
<CAPTION>
ITEM
NO. LOCATION IN PROSPECTUS
- ----- ------------------------------------------
<C> <S> <C>
I. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
II. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page; Table of Contents
III. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; Risk Factors; The
Company
IV. Use of Proceeds........................... Use of Proceeds
V. Determination of Offering Price........... Underwriting
VI. Dilution.................................. Not Applicable
VII. Selling Security Holders.................. Selling Stockholders
VIII. Plan of Distribution...................... Outside Front Cover Page; Underwriting
IX. Description of Securities to be
Registered................................ Outside Front Cover Page; Inside Front
Cover Page; Description of Capital Stock
X. Interests of Named Experts and Counsel.... Not Applicable
XI. Information with respect to the
Registrant................................ Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Company; Use of
Proceeds; Dividend Policy; Capitalization;
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; Management; Selling
Stockholders; Description of Capital
Stock; Underwriting; Legal Matters;
Experts; Available Information; Financial
Statements
XII. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3

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.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED AUGUST , 1996

PROSPECTUS
10,500,000 SHARES

LOGO

CLASS A COMMON STOCK
------------------------

Of the shares of Class A common stock, par value $0.01 per share ("Class A
Common Stock"), of Bank United Corp. (the "Company") offered hereby, 910,694
shares are being issued and sold by the Company and 9,589,306 shares are being
sold by the general partners and certain of the limited partners of Hyperion
Partners L.P., a Delaware Limited Partnership ("Hyperion Partners"), three other
entities with which an affiliate of Hyperion Partners has a fiduciary
relationship and the Federal Deposit Insurance Corporation (the "FDIC"), as
manager of the Federal Savings and Loan Insurance Corporation (the "FSLIC")
Resolution Fund (the "FRF") (collectively, the "Selling Stockholders"). Other
than the FDIC, Selling Stockholders selling in excess of 500,000 shares in this
offering (the "Offering") are The Prudential Insurance Company of America,
Ameritech Pension Trust, American Home Assurance Company, The Equitable Life
Assurance Society of the United States and LSR Hyperion Corp. Following the
consummation of the Offering, the Selling Stockholders and the other limited
partners of Hyperion Partners who are not selling Shares of Class A Common Stock
will own 20,777,254 shares of Common Stock representing 65.8% of the voting
power of the Company, assuming all shares of Class B common stock, par value
$0.01 per share ("Class B Common Stock") are converted to shares of Class A
Common Stock and no exercise of the Underwriters' over-allotment option. See
"Selling Stockholders". The Company will not receive any of the proceeds from
the sale of the shares by the Selling Stockholders. It is currently anticipated
that the initial public offering price for Class A Common Stock will be between
$18 and $20 per share. See "Underwriting" for information relating to
determination of the initial public offering price.

The Class A Common Stock and the Class B Common Stock (the "Common Stock")
have identical dividend and other rights, except that the Class B Common Stock
is non-voting and is convertible into Class A Common Stock upon sale or transfer
to unaffiliated parties or, subject to certain limitations, at the election of
the holder thereof. The shares offered by the Selling Stockholders pursuant to
the Offering consist solely of shares of Class A Common Stock that will have
been converted from shares of Class B Common Stock. See "Description of Capital
Stock -- Conversion".

Prior to the Offering, there has been no public market for the Class A
Common Stock. The Class A Common Stock has been approved for quotation on the
NASDAQ Stock Market ("NASDAQ") under the symbol "BNKU". There can be no
assurance that an active public market will develop for such stock or, if
developed, will be sustained following the Offering. See "Underwriting".

Up to 10% of the shares of Class A Common Stock offered hereby are being
reserved for sale to certain employees of the Company and its affiliates at the
initial public offering price. See "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE CLASS A COMMON STOCK
OFFERED HEREBY.

------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), 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 SHARES OF CLASS A COMMON STOCK 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.

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<S> <C> <C> <C> <C>
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PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) THE COMPANY(2) STOCKHOLDERS
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Per Share.................. $ $ $ $
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Total(3)................... $ $ $ $
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</TABLE>

(1) The Company and the Selling Stockholders have severally agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting".
(2) Before deducting expenses payable by the Company estimated to be $3,000,000.
(3) The Selling Stockholders, other than the FDIC as manager of the FRF (the
"FDIC-FRF"), have granted to the Underwriters an option, exercisable within
30 days after the date hereof, to purchase up to 1,575,000 additional shares
of Class A Common Stock on the same terms and conditions as set forth above
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount, Proceeds to the Company and
Proceeds to the Selling Stockholders will be $ , $ , $ , and
$ , respectively. See "Underwriting".
------------------------

The shares of Class A Common Stock are being offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Class A Common Stock will be made
in New York, New York on or about , 1996.
------------------------

MERRILL LYNCH & CO.
LEHMAN BROTHERS

SMITH BARNEY INC.

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

The date of this Prospectus is , 1996.
<PAGE> 4

[LOGO]

BANKING NETWORK

[GRAPHIC]
------------------------

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET, ON THE NASDAQ OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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

2
<PAGE> 5

PROSPECTUS 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 subsidiary, Bank United, a federally chartered savings
bank (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 149 for the Index of Defined Terms used in this
Prospectus.

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 currently
operates 70 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 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. The Company's address is 50 Charles Lindbergh
Blvd., Uniondale, NY 11553, and its phone number is (516) 745-6644. Following
the consummation of the Offering, the Company intends to create a new wholly
owned subsidiary ("Holding Co.") to which it will transfer all of the common
stock, par value $0.01 per share, of the Bank ("Bank Common Stock") currently
held by the Company and to relocate the headquarters of the Company to Houston.

BUSINESS STRATEGY

From its incorporation in December 1988 through the early 1990's, the
Company's strategy was to obtain assets and deposits through the acquisition of
failed thrifts and through purchases of thrift assets and liabilities from the
Resolution Trust Corporation (the "RTC") during the resolution of the banking
and thrift crisis. Operationally, the Company focused on traditional single
family mortgage lending and deposit gathering. As a complement to these
activities, the Company entered the retail and wholesale mortgage banking
businesses, leveraging management's experience in the origination, purchase,
sale, structuring and securitization of mortgage loans, and the purchase and
sale of mortgage servicing rights ("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 the core holdings of its loan portfolio.
The Company was very active in the buying and selling of loans, mortgage-backed
securities ("MBS") and MSRs when economically attractive.

In addition, over this period the Company benefited substantially from
certain federal financial assistance and tax benefits received and recorded in
connection with its acquisition during the period 1988-1994 of certain assets
and certain liabilities of failed thrift institutions. Federal financial
assistance and the ownership and management by the Bank of Covered Assets (as
defined below) were terminated on December 28, 1993. See "Business -- The
Assistance Agreement".

3
<PAGE> 6

consumer and commercial lending lines of business. During this time, the Company
has engaged in more aggressive marketing campaigns and increased its portfolio
of multi-family, residential construction, consumer and commercial loans as well
as the level of lower cost transaction and commercial deposit accounts. While
the pursuit of this strategy entails risks different from and in addition to
those found in traditional single family lending lines of business, the Company
believes it has taken appropriate measures to manage these risks adequately. To
manage potential credit risk the Company has developed comprehensive credit
approval and underwriting policies and procedures for these lines of business.
To offset operational and competitive risk, the Company has hired experienced
commercial bank professionals, trained other personnel to manage and staff these
businesses, and closely monitors the conduct and performance of the businesses.
In addition to its efforts to increase originations of commercial and consumer
loans, the Company has been increasing the retention of higher yielding single
family and multi-family mortgage loans that, in the past, may have been sold or
securitized. The Company intends to continue to pursue additional expansion
opportunities while maintaining adequate capitalization. See "Risk
Factors -- Evolution of Business" and "-- Reduced Profitability of Mortgage
Banking Business" and "Business -- Community Banking Group" and "-- Commercial
Banking Group".

From December 31, 1988 to March 31, 1996, the Company's total assets, loans
and deposits have increased from $5.0 billion, $562 million and $3.3 billion,
respectively, to $11.3 billion, $7.9 billion and $5.0 billion, respectively. In
addition, as of March 31, 1996, the Company's stockholders' equity was $526.4
million (not adjusted for the dividend paid to holders of its common stock and
the related contractual payment made to the FDIC in May 1996), a more than
fourfold increase from $118.0 million (total stockholders' equity at December
31, 1988, adjusted for subsequent capital contributions totaling $57.9 million).

OPERATIONAL OVERVIEW

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

[ORGANIZATIONAL CHART]

- Community Banking Group. The Community Banking Group's principal
activities include deposit gathering, consumer lending, small-business
banking and investment product sales. The Community

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Banking Group, which has marketed itself under the name "Bank United"
since 1993, operates a 70 branch community banking network, a 24-hour
telephone banking center and a 64-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 37 branches in the
greater Houston area, 29 branches in the Dallas/Ft. Worth metropolitan
area, and two branches each in Austin and San Antonio. 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 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, 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's servicing portfolio at March 31, 1996 was $11.6 billion. The
Company has initiated a profitability improvement plan with respect to
its mortgage origination business. As a result of the plan, which
includes office closures, workforce reductions and related actions, the
Company recorded a $10.7 million charge in June 1996 for lease
termination expenses, severance payments and the write-off of goodwill
and other costs.

BACKGROUND OF THE OFFERING

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. The general partner of Hyperion
Partners is indirectly controlled by three individuals, including Lewis S.
Ranieri, who from the Company's organization in 1988 has served as Chairman of
the Board of the Company and, until July 15, 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 to Hyperion
Holdings and other holders of its common stock and made a related contractually
required payment in lieu of dividends to the FDIC-FRF in the amount of $5.9
million. The dividends received by Hyperion Holdings were paid by Hyperion
Holdings as a dividend to Hyperion Partners which distributed such amount to its
limited and general partners in accordance with its limited partnership
agreement. For the quarter ended June 30, 1996, the Company also recorded a
$101.7 million tax benefit related to its net operating loss carryforwards
("NOLs").

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<PAGE> 8

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 its limited partnership agreement (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 non-voting common stock received shares of Class A
Common Stock and Class B Common Stock and the holders of the Company's Class C
common stock, par value $0.01 per share ("Class C Common Stock") received shares
of Class B Common Stock as set forth under "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. Subsequent to the Restructuring, there were
no shares of Class C Common Stock outstanding. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Restructuring was undertaken to simplify the ownership
structure of the Company in order to facilitate financial and tax reporting,
marketing of the Class A Common Stock and management of the Company's
operations. In addition, immediately prior to the Offering, the FDIC-FRF
surrendered to the Bank a portion of the warrant (the "Warrant") it held to
purchase 158,823 shares of Bank Common Stock for a cash payment of approximately
$5.9 million and exercised the remainder of the Warrant. Immediately thereafter,
the FDIC-FRF exchanged the shares of Bank Common Stock issued upon exercise of
the balance of the Warrant for 1,503,560 shares of Class B Common Stock, all of
which are being sold in the Offering. See "Business -- The Assistance Agreement"
and "Selling Stockholders". The Offering is intended to establish a public
market for the Class A Common Stock while providing the Company with funds for
general corporate purposes and providing the Selling Stockholders with liquidity
for their current holdings in the Company. Although the Class A Common Stock has
been approved for quotation on NASDAQ, there can be no assurance that an active
public market will develop for such stock or of greater liquidity for such stock
following the Offering.

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
Offering, on July 15, 1996 Mr. Burkholder became 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 eight 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 41 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, previously served as Chairman of the
Board of the Bank and of the Company as well as President and CEO of the Company
in which capacities he has served as a source of strategic advice to the senior
management of the Bank. Following the Offering, Mr. Ranieri will continue to
serve as Chairman of the Board of the Company and as a director of the Bank and
will continue to provide strategic and managerial advice to the Company under
the terms of a three year consulting agreement entered into between Mr. Ranieri
and the Company pursuant to which he will receive an annual consulting fee of
$250,000. See "Risk Factors -- Dependence on Key Personnel" and
"Management -- Certain Relationships and Related Transactions".

Future Tax Benefits

In connection with the acquisition from 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

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<PAGE> 9

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 specified portion of
net tax benefits obtained through the taxable year ending nearest to September
30, 2003. See "Regulation -- Taxation -- FSLIC Assistance".

The Offering is structured with the intent to preserve the beneficial tax
attributes of the Company as described above. See "Regulation -- Taxation".
Accordingly, transfers and other dispositions of Common Stock by certain of the
Selling Stockholders and other holders of the Common Stock are limited by
provisions of the Company's Restated Certificate of Incorporation (the
"Certificate") and the Company's By-Laws (the "By-Laws") for up to three years
following the Offering, except in certain circumstances, including 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 and
other dispositions of Common Stock allowed 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",
"Capitalization" and Note 21 to the Consolidated Financial Statements.

Claims Related to Forbearance Agreement

In connection with the original acquisition of the Bank by the Company, the
Federal Home Loan Bank Board (the "FHLBB") 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 Hyperion Partners (collectively,
"Plaintiffs") filed suit against the United States in the Court of Federal
Claims for alleged failures of the United States (i) to abide by a capital
forbearance which would have 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 $110 million of subordinated debt as regulatory capital for
all purposes and (iii) to abide by an accounting forbearance, which would have
allowed the Bank to count as capital for regulatory purposes, and to amortize
over a period of twenty-five years, the $30.7 million difference between certain
FSLIC payment obligations to the Bank and the discounted present value of those
future FSLIC payments. The lawsuit is in a preliminary stage. Discovery was
stayed pending the United States Supreme Court's review of United States v.
Winstar Corp., an action by three other thrifts raising similar issues (the
"Winstar cases"). On July 1, 1996, the Supreme Court upheld lower court rulings
that the United States had breached the contracts involved in the Winstar cases
and remanded the case for further proceedings on the issue of damages. There is
uncertainty about how the Court of Federal Claims will manage the over 100
lawsuits on its docket that, like Plaintiffs' case, involve issues similar to
those raised in the Winstar cases. On July 8, 1996, the Chief Judge of the Court
of Federal Claims designated Stephen D. Susman, Esq. of Houston, Texas as
"Special Counsel to the Court" to facilitate the adoption of methods for
"rationalizing" the litigation. At a Court of Federal Claims status conference
held on July 30, 1996, Mr. Susman presented a proposed case management plan and
schedule supported by a large number of the plaintiffs in the FIRREA-related
cases, including Plaintiffs. Counsel for the United States proposed a different
plan, but, while asserting objections to a number of the features of Mr.
Susman's plan, expressed a willingness to work with Mr. Susman and a
coordinating committee of plaintiff's counsel on achieving an agreed pretrial
order for management of the cases. The Chief Judge of the Court of Federal
Claims scheduled another status conference for August 19, 1996 and directed
counsel for the United States and the plaintiffs' counsel coordinating committee
to report to the Chief Judge by August 15 on their efforts to agree on a
proposed case management plan. The Chief Judge also encouraged the FDIC, which
has indicated a desire to participate in or take over certain lawsuits (unlike
Plaintiffs' lawsuit) involving post-FIRREA failed institutions, to become
involved in this process. The Chief Judge indicated that he may enter a case
management order at or shortly

7
<PAGE> 10

after the August 19 status conference. While the Company expects Plaintiffs'
claims for damages to exceed $200 million, the Company is unable to predict the
outcome of Plaintiffs' suit against the United States and the amount of judgment
for damages, if any, that may be awarded. Consequently, no assurances can be
given as to the results of this suit. See "Legal Proceedings". The Company and
the Bank have entered into an agreement with Hyperion Partners acknowledging the
relative value, as among the parties, of their claims in the pending litigation.
The agreement confirms that the Company and the Bank are entitled to receive 85%
of the amount, if any, recovered as a result of the settlement of or a judgment
on such claims, and that Hyperion Partners is entitled to receive 15% of such
amount. The agreement was approved by the disinterested directors of the
Company. Plaintiffs will continue to cooperate in good faith and will use their
best efforts to maximize the total amount, if any, that they may recover.

Senior Note Exchange

Substantially simultaneously with the consummation of the Offering, the
Company intends to commence an exchange offer (the "Exchange Offer") for its
outstanding Senior Notes due May 15, 1998 (the "Senior Notes"). 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. See Note 11 to the Consolidated Financial Statements.

8
<PAGE> 11

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 YEAR 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 -- --
Long-term borrowings(11)............ 115,000 115,000 115,000 115,000 115,000 106,090 111,090
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
----------- ----------- ----------- ---------- ---------- ---------- ----------
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(12).................... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370 $ 56,605 $ 19,115
=========== =========== =========== ========== ========== ========== ==========
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)
Operating earnings(7)............... $ 55,039 $ 48,849 $ 91,295 $ 75,514 $ 77,105 $ 50,024 $ 16,510
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
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
</TABLE>

9
<PAGE> 12

- ---------------
(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".

(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 $505.7 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) Earnings per common share represent net income (adjusted for earnings on
the common stock equivalents attributable to the Warrant) divided by the
weighted average number of common shares outstanding. 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 Bank Common Stock are currently owned by
the Company. It is anticipated that following the Offering, the Company
will transfer all of its Bank Common Stock to Holding Co. The Bank had
issued to the FDIC-FRF the Warrant 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 Warrant), at an exercise price
of $0.01 per share. Payments in lieu of dividends relate to the Warrant.
Immediately prior to the Offering, the FDIC-FRF surrendered to the Bank a
portion of the Warrant for a cash payment of approximately $5.9 million and
exercised the remainder of the Warrant. Immediately thereafter, the
FDIC-FRF exchanged the shares of Bank Common Stock issued upon exercise of
the Warrant for 1,503,560 shares of Class B Common Stock, which are being
sold by the FDIC-FRF pursuant to the Offering. See "Business -- The
Assistance Agreement" and Notes 16 and 21 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, including net gains (losses) on the
sales of single family servicing rights and single family warehouse loans,
before taxes, minority interest, and extraordinary loss and excludes net
gains (losses) on securities, MBS, and other loans. Management believes
operating earnings, as defined, reflects the revenues and expenses of the
Company's business segments and facilitates trend analysis as it excludes
transactions that are typically considered opportunistic and not part of
the routine core business operations of the Company. Operating earnings is
provided as other data and should not be considered an alternative to net
income as an indicator of the Company's operating performance or to cash
flow as a measure of liquidity.

(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 5.79%,
5.87% and 11.93%, respectively, as of March 31, 1996.

(11) Long-term borrowings are comprised of Senior Notes and other long-term
debt. Long-term borrowings exclude FHLB advances with maturities greater
than one year. FHLB advances with maturities greater than one year were
$277,993 and $1,689,873 as of March 31, 1996 and 1995, respectively. FHLB
advances with maturities greater than one year were $1,992,131, $782,129,
$708,945, $55,445, and $102,345 as of September 30, 1995, 1994, 1993, 1992,
and 1991, respectively.

(12) Net income for fiscal 1994, 1993, 1992 and 1991 included $23.1 million,
$9.3 million, $32.1 million and $52.6 million, respectively, of financial
assistance payments received from the FRF. No such payments were received
during the six months ended March 31, 1996 or during fiscal 1995 as a
result of the termination of the Assistance Agreement (as defined below) in
December 1993. See "Business -- Assistance Agreement".

10
<PAGE> 13

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by the
Company............................ 910,694 shares Class A Common Stock
Class A Common Stock offered by the
Selling Stockholders............... 9,589,306 shares Class A Common Stock(1)
Common Stock to be Outstanding
immediately after the Offering..... 10,881,925 shares Class A Common Stock(2)
20,713,671 shares Class B Common Stock(3)
Total......................... 31,595,596 shares of Common Stock
Risk Factors......................... General Business Risks; Evolution of Business; Reduced
Profitability of the Mortgage Banking Group; Interest
Rate Risk; Competition; Funding and Liquidity;
Concentration of Loan Portfolio; Active Purchaser of
Loan Portfolios; Limitations on Use of Tax Losses;
Restrictions on Transfers of Stock; Holding Company
Structure; Ability to Pay Dividends; Regulation;
Recapitalization of the SAIF and its Impact on SAIF
Premiums; Other Legislative Proposals; Federal
Programs; Limitations on Stock Ownership; Anti-
takeover Provisions; Concentration of Ownership;
Dependence on Key Personnel; Governmental Immunity of
the FDIC; Conversion of Class B Common Stock; Dilution
of Voting Power; No Prior Market for the Class A
Common Stock; Liability under Representations and
Warranties and Other Credit Risks; Litigation.
Use of Proceeds...................... The net proceeds received by the Company from the
shares it is selling in the Offering will be
contributed to the capital of the Bank, where they
will be used for general corporate purposes. The
Company will receive none of the proceeds of the sales
of shares by the Selling Stockholders. See "Use of
Proceeds".
Dividend Policy...................... The Company intends, subject to its financial results,
contractual, legal and regulatory restrictions, and
other factors that the Company Board may deem
relevant, to declare and pay a quarterly dividend of
$0.14 per share of Common Stock beginning in the first
quarter of fiscal 1997. The declaration of dividends
by the Company and the amount thereof, however, will
be at the discretion of the Company Board. See "Risk
Factors -- Holding Company Structure; Ability to Pay
Dividends".
NASDAQ Symbol........................ BNKU
</TABLE>

- ---------------
(1) Excludes 1,575,000 shares of Class A Common Stock that the Underwriters have
the option to purchase to cover over-allotments, if any. The Offering will
include shares of Class B Common Stock that will convert automatically to
shares of Class A Common Stock in the Offering.

(2) Excludes shares issuable upon exercise of options to be issued to employees
of the Company and shares to be issued, or issuable upon exercise of options
to be issued, to non-employee directors of the Company. See
"Management -- Executive Management Compensation Program" and
"-- Compensation of Directors".

(3) Assuming no conversion of Class B Common Stock into Class A Common Stock
other than as a result of sale pursuant to the Offering and no exercise of
the Underwriters over-allotment option. As described

11
<PAGE> 14

under "Description of Capital Stock", the two classes of Common Stock are
identical other than with respect to conversion and voting rights. The Class B
Common Stock is non-voting common stock, but is convertible to Class A Common
Stock upon sale or transfer to unaffiliated parties or at the election of the
holder, subject to certain restrictions. See "Description of Capital Stock --
Common Stock --Conversion".

RECENT DEVELOPMENTS

The following sets forth selected financial data for the periods indicated.
The selected consolidated financial data as of and for the three and nine months
ended June 30, 1996 and 1995, respectively, are derived from the unaudited
consolidated financial statements of the Company, 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 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"
included elsewhere in this Prospectus. The results of operations for the nine
months ended June 30, 1996 are not necessarily indicative of the results of
operations to be obtained for the entire fiscal year.

<TABLE>
<CAPTION>
AT AT
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF FINANCIAL CONDITION DATA:
Total assets........................................................ $11,023,270 $ 11,983,534
Loans............................................................... 7,597,406 8,260,240
Deposits............................................................ 5,053,605 5,182,220
Borrowings(1)....................................................... 4,769,264 5,556,428
Minority interest: Bank Preferred Stock............................. 185,500 185,500
Total stockholders' equity.......................................... 529,432 496,103
</TABLE>

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- ---------------------------
1996 1995 1996 1995
------- ------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net interest income.............................. $60,461 $48,645 $172,393 $136,271
Provisions for credit losses..................... 4,305 10,473 10,155 14,630
Non-interest expense............................. 68,689 40,465 167,993 142,110
Non-interest income.............................. 23,473 23,127 78,082 89,780
Income before income taxes and minority
interest...................................... 10,940 20,834 72,327 69,311
Net income....................................... 99,110 9,540 125,869 33,199
Earnings per common share(4)..................... 3.26 0.31 4.13 1.07
</TABLE>

<TABLE>
<CAPTION>
FOR THE THREE FOR THE
MONTHS NINE MONTHS ENDED
ENDED JUNE 30, -------------------
------------------- JUNE 30, JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER DATA:
Operating earnings(2)(3).............................. $ 29,941 $ 21,207 $ 84,980 $ 70,056
</TABLE>

12
<PAGE> 15

<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
CERTAIN RATIOS(5):
Return on average assets............................................... 1.48% 0.45%
Return on average common equity........................................ 33.05 9.47
Stockholders' equity to assets......................................... 4.80 4.31
Tangible stockholders' equity to tangible assets....................... 4.65 4.07
Net yield on interest-earning assets................................... 2.09 1.91
Non-interest expenses to average total assets(3)....................... 1.76 1.92
Efficiency ratio(3)(6)................................................. 61.57 63.03
Allowance for credit losses to net nonaccrual loans.................... 45.21 45.27
Allowance for credit losses to total loans............................. 0.49 0.43
Net loan charge-offs to average loans.................................. 0.17 0.09
Nonperforming assets to total assets................................... 1.03 0.86
REGULATORY CAPITAL RATIOS OF THE BANK:
Tangible Capital....................................................... 6.15 5.20
Core Capital........................................................... 6.23 5.30
Total Risk-Based Capital............................................... 12.53 11.49
</TABLE>

- ---------------
(1) Includes FHLB Advances, securities sold under agreements to repurchase and
long-term borrowings.

(2) Operating earnings represents net income, including net gains (losses) on
the sales of single family servicing rights and single family warehouse
loans, before taxes and minority interest and excludes net gains (losses) on
securities, MBS, and other loans. Management believes operating earnings, as
defined, reflects the revenues and expenses of the Company's business
segments and facilitates trend analysis as it excludes transactions that are
typically considered opportunistic and not part of the routine core business
operations of the Company. Operating earnings is provided as other data and
should not be considered an alternative to net income as an indicator of the
Company's operating performance or to cash flow as a measure of liquidity.

(3) Excludes a one-time restructuring charge of $10.7 million relating to the
restructuring of the origination business of the Mortgage Banking Group and
a one-time compensation expense of $7.8 million recorded in June 1996
related to the Executive Management Compensation Program. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Discussion of Results of Operations -- Mortgage Banking
Restructure", "Management -- Executive Management Compensation Program" and
Note 21 to the Consolidated Financial Statements.

(4) Earnings per common share represent net income (adjusted for earnings on the
common stock equivalents attributable to the Warrant) by the weighted
average number of common shares outstanding. 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) Ratio, yield, and rate information are based on weighted average daily
balances for the nine months ended June 30, 1996 and 1995, with the
exception of return on average common equity which is based on average
monthly balances. Interim rates and yields are annualized.

(6) 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.

Net income was $99.1 million for the three months ended June 30, 1996,
compared to $9.5 million for the three months ended June 30, 1995. Net income
was $125.9 million for the nine months ended June 30, 1996, compared to $33.2
million for the nine months ended June 30, 1995. The increase in net income
during the

13
<PAGE> 16

three months ended June 30, 1996 compared to the same period in the prior year
primarily reflects the recognition of a $101.7 million tax benefit for the
expected utilization of NOLs and, to a lesser extent, higher net interest income
from increased average interest-earning assets and an increase in net yield on
interest-earning assets. Average interest-earnings assets for the nine months
ended June 30, 1996 were $11.0 billion, compared to $9.6 billion for the nine
months ended June 30, 1995. Income before taxes and minority interest was $10.9
million for the three months ended June 30, 1996, compared to $20.8 million for
the three months ended June 30, 1995. The decrease in net income before taxes
and minority interest for the three months ended June 30, 1996, compared to the
same period in the prior year primarily reflects increased non-interest expenses
during the quarter ended June 30, 1996 primarily attributable to a $10.7 million
charge relating to the restructuring of the origination business of the Mortgage
Banking Group and $7.8 million of compensation expense related to the adoption
in June 1996 of an executive management compensation program. See
"Management -- Executive Management Compensation Program" Note 21 to the
Consolidated Financial Statements. Other non-interest expense included $2.0
million of losses and $8.4 million of gains on sales of real estate owned
("REO") properties for the three months ended June 30, 1996 and 1995,
respectively.

Total assets were $11.0 billion at June 30, 1996, reflecting a $960. 3
million decrease from September 30, 1995. The decrease in assets primarily
reflects principal repayments on the single family loan and MBS portfolios.

During the quarter ended June 30, 1996, the Bank paid a $100 million
dividend to the Company on the Bank Common Stock and a related contractually
required payment in lieu of dividends to the FDIC-FRF in the amount of $5.9
million. On the same day, the Company paid a dividend in the amount of $100
million to Hyperion Holdings and shareholders of its common stock. The dividends
received by Hyperion Holdings were paid by Hyperion Holdings as a dividend to
Hyperion Partners which distributed such amount to its general and limited
partners in accordance with its limited partnership agreement. The Company and
the FDIC-FRF agreed that immediately prior to the Offering the FDIC-FRF would
surrender a portion of the Warrant to the Bank for a cash payment of
approximately $5.9 million and would exercise the balance of the Warrant.
Immediately thereafter, the FDIC-FRF agreed to exchange the shares of Bank
Common Stock issued upon exercise of the Warrant for 1,503,560 shares of the
Company's Class B Common Stock. The FDIC-FRF has agreed to sell all of its
shares of Class B Common Stock in the Offering and, following the consummation
of the Offering, the FDIC-FRF will not own any shares of Common Stock.

The Company has been in the process of evaluating its strategic
alternatives with respect to its mortgage banking business in order to mitigate
the negative effect on profitability resulting from increased competition in the
loan origination business. Increased competition has resulted in the Company
receiving lower fees and lower rates on originated loans. Additionally,
profitability is impacted by fluctuations in the volume of originations due to
changes in market interest rates. The Company has initiated a profitability
improvement program to reduce the amount of fixed charges necessary to operate
its loan origination business in response to lower levels of fee revenue and to
reduce the volume of staff necessary to process loan applications and to
complete the loan origination process. The plan includes the closure and
consolidation of 24 mortgage origination branches, the closure of 6 regional
operation centers and a workforce reduction of approximately 265 employees. As
of June 30, 1996, 15 mortgage origination branches and 2 regional operation
centers had been closed and the workforce was reduced by 129. Upon completion of
the restructure, the mortgage origination segment will operate approximately 91
branches and 4 regional operation centers. In addition, the plan includes
process and operational restructuring, as well as changes in management
structure and compensation, all designed to attempt to create operational
efficiencies and promote profitability. As a result of the office closures,
workforce reductions, and related actions, the Company recorded the
aforementioned $10.7 million charge in June 1996 for lease termination expenses,
severance payments, and the write-off of goodwill and other costs. No assurances
can be given regarding the efficacy of the profitability improvement plan or the
timing or impact of any further restructuring (including a possible future sale
or liquidation) of the Company's residential mortgage lending business. The
Company is not currently engaged in active negotiations to sell its mortgage
banking business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Discussion of Results of
Operations -- Mortgage Banking Restructure".

14
<PAGE> 17

SELLING STOCKHOLDERS

The outstanding shares of Class A Common Stock and Class B Common Stock are
primarily owned by the limited and general partners of Hyperion Partners and by
the FDIC-FRF as described more fully under "Selling Stockholders". The following
table sets forth information concerning each person who, following the Offering,
will beneficially own (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) more than 5% of the total
number of outstanding shares of Class A Common Stock assuming conversion of all
shares of Class B Common Stock (including those not sold in the Offering) into
Class A Common Stock and no exercise of the Underwriters' over-allotment option.

<TABLE>
<CAPTION>
PERCENT OF CLASS
AMOUNT AND NATURE FOLLOWING
NAME OF BENEFICIAL OWNER TITLE OF CLASS OF BENEFICIAL OWNERSHIP OFFERING
- -------------------------------------- --------------------- ----------------------- -----------------
<S> <C> <C> <C>
The Prudential Insurance Company
of America Class A Common Stock 2,903,942 9.2%
LW-SP1, L.P. and LW-SP2, L.P. Class A Common Stock 2,146,748 6.8%
</TABLE>

Certain Selling Stockholders which are affiliates of Lewis S. Ranieri are
selling 580,512 shares of Common Stock (approximately 29% of their holdings
prior to the Offering) in the Offering and will own 1,396,143 shares following
the Offering (assuming no exercise of the Underwriters' over-allotment option).

Each of the Selling Stockholders (other than the FDIC-FRF) and each of
LW-SP1, L.P. ("LW-SP1"), LW-SP2, L.P. ("LW-SP2") and the other limited partners
of Hyperion Partners who hold Common Stock and are not Selling Stockholders (the
"Non-selling Stockholders") has agreed to hold its Common Stock pursuant to the
Letter Agreements (as defined below) and will be subject to certain limitations
on transfers contained in the Certificate and the By-Laws. See "Selling
Stockholders -- Selling Stockholder Letter Agreement", "Underwriting", "Risk
Factors -- Limitations on Use of Tax Losses; Restrictions or Transfers of Stock"
and "Description of Capital Stock -- Common Stock -- Restrictions on Transfers
of Stock".

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<PAGE> 18

RISK FACTORS

Investment in the Class A Common Stock 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.

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 are
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. Specifically, the performance of commercial, construction
and small business loans is more sensitive to regional and local economic
conditions. Collateral valuation requires more detailed analysis and is more
variable than residential mortgage lending. Loan balances for these types of
loans are typically larger than those for residential mortgage loans and, thus,
when there are defaults and losses, they can be greater on a per loan basis than
those for residential mortgages. Similarly, loss levels are more difficult to
predict. Commercial and community banking typically includes a greater amount of
unsecured lending, which presents different risks than secured residential
mortgage lending. The sources of repayment are not related to collateral and can
be more difficult to understand and pursue. Similarly, loan default prevention
and collection for commercial and community banking also can be more complex and
difficult than that for residential mortgage lending. For example, business
loans are not typically made with standardized loan documents. Thus, the
opportunity for mistakes and documentation risks are increased. Moreover, a
liquid secondary market for most types of commercial and business loans does not
exist. The operational, interest rate, and competitive risks associated with
commercial and community banking are different than those for residential
mortgage lending and require skills and experience of management and staff
different than that for residential mortgage lending. When evaluating such
credits, more factors need to be considered. Management must be more
knowledgeable of a wider variety of business enterprises and industries that
borrow money. Intensive, ongoing customer contact is required, as well as
complex analysis of financial statements at the time of loan approval and on an
ongoing basis. Servicing these customers requires closer monitoring and more
individualized analysis than does residential mortgage lending. Commercial and
community banking pricing is very competitive and more subjective than that for
residential mortgage lending.

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.

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<PAGE> 19

REDUCED PROFITABILITY OF THE MORTGAGE BANKING GROUP

In furtherance of the increasing emphasis on its community and commercial
banking businesses, the Company has been evaluating its strategic alternatives
with respect to its mortgage banking business. As a result of this evaluation,
and in order to attempt to mitigate the negative effect on profitability of
increased competition in the loan origination business of the Mortgage Banking
Group, the Company has initiated a profitability improvement plan. The plan
includes the closure and consolidation of 24 mortgage origination branches
resulting in the group operating 91 branches, the closure and consolidation of 6
regional operation centers and a reduction of approximately 865. In addition,
the plan includes process and operational restructuring, as well as changes in
management structure and compensation, all designed to attempt to create
operational efficiencies and promote profitability. As of June 30, 1996, 15
mortgage origination branches and 2 regional operation centers had been closed
and the workforce was reduced by 129. As a result of the office closures,
workforce reductions, and related actions, the Company recorded a $10.7 million
charge in June 1996 for lease termination expenses, severance payments, and the
write off of goodwill and other costs. No assurances can be given regarding the
efficacy of the profitability improvement plan or the timing or impact of any
further restructuring (including a possible future sale or liquidation) of the
Company's residential mortgage lending business. The Company is not currently
engaged in active negotiations to sell its mortgage banking business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Discussion of Results of Operations -- Mortgage Banking
Restructure".

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. See "Business -- Asset and
Liability Management".

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. The Company competes primarily with seven commercial banks and five
thrift institutions, all of which have a substantial presence in the same
markets as the Company. Based on consumer deposit balances at December 1995 the
Company ranked third in the Houston and fifth in the Dallas/Ft. Worth
metropolitan areas in terms of deposits. 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. The Company and its peers
compete primarily on price at which products are offered and on customer
service. A number of institutions with which the Company competes for deposits
and loans have significantly greater assets and capital than the Company and
some also

17
<PAGE> 20

may have significantly lower deposit insurance costs. See "-- Recapitalization
of the SAIF and Its Impact on SAIF Provisions; Other Legislative Proposals".

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. If the Bank or the Company were to establish a national bank subsidiary,
such subsidiary's ability to borrow funds from FHLB Dallas would be subject to
regulatory limitations. See "Regulation -- Safety and Soundness
Regulations -- Charter, Supervision and Examination -- Federal Home Loan Banks".

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. All the
major metropolitan areas in California showed increased employment gains, with
each, except for Los Angeles, showing a decrease in the unemployment rate,
during the fourth quarter of 1995. Major California housing markets continue to
improve with increases in home prices based on repeat sales being registered in
most markets, except for Los Angeles which had a 1.6% annual decrease in home
prices. Unfavorable or worsened economic conditions throughout California could
have a material adverse effect on the Company's financial condition and results
of operations. See "Business -- Loan Portfolio".

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

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<PAGE> 21

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 approximately $31.8 million. If the Company were to undergo an
Ownership Change, a significant portion of the $101.7 million tax benefit
recognized in the quarter ended June 30, 1996 would be required to be reversed,
with a corresponding charge to earnings. The amount of the charge to earnings
would decline as the Company utilizes its NOLs.

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 of the Company 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 Class A Common 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 Company'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. 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 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 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".

HOLDING COMPANY STRUCTURE; ABILITY TO PAY DIVIDENDS

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

19
<PAGE> 22

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. 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.
In addition, following the consummation of the Offering, the Company intends to
create Holding Co. as a direct subsidiary to hold the Bank Common Stock. Holding
Co.'s ability to pay dividends to the Company will be dependent on the extent to
which it receives dividends on the Bank Common Stock. 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 (through Holding Co.) 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 circumstances which
would limit or preclude the declaration of such dividends will not exist in the
future. 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 $148.5 million of
dividends on its capital stock without prior approval of the OTS, and the
Company would be able to pay $51.2 million of dividends on its Common Stock
under the covenants of the Senior Notes. See "Dividend Policy", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity", "Regulation -- Safety and
Soundness Regulations -- Capital Requirements -- Capital Distributions" and
Notes 11, 15, 16 and 21 to the Consolidated Financial Statements. If the Company
were to undergo an Ownership Change, these amounts would be significantly
reduced. See "-- Limitations on Use of Tax Losses; Restriction on Transfers of
Stock".

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. If the Bank establishes a
national bank subsidiary, the Bank and the Company would become subject to the
Bank Holding Company Act of 1956, as amended (the "BHCA") and would be subject
to restrictions on activities that are not applicable to the Company as a
savings and loan holdings company. Were the Federal Reserve Board to impose
restrictions on the Bank's activities or operations as a condition of the
approval of the Bank's application to establish a national bank subsidiary, or
if the Company otherwise deems it advisable, the Company, rather than the Bank,
would likely establish the national bank subsidiary in order to avoid such
restrictions. The Company believes that if it became a bank holding company
subject to the BHCA it would be permitted to continue its activities and
operations substantially as currently conducted.

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. The Bank's insurance assessments for the six months
ended March 31, 1996 and fiscal 1995 were $6.1 million and $11.4 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 0.04% and 0.31% of

20
<PAGE> 23

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.

Recently, the FDIC announced that a BIF-insured institution that is
affiliated with a SAIF-insured institution may offer more favorable interest
rates in order to attract deposits from customers of the SAIF-insured
institution without violating the moratorium on changing deposit insurance funds
which has been in effect since 1989. In addition, such institutions may operate
from the same premises as long as customers are able to differentiate between
the institutions. If the BIF/SAIF premium disparity has not been resolved by the
time the Bank's application to establish a national bank subsidiary is approved,
the Company may pursue this as a long-term strategy in order to achieve savings
on deposit insurance premiums. See "Regulation -- Safety and Soundness
Regulations -- Charter, Supervision and Examination -- Insurance Assessments".

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. The Company believes that it would be permitted to continue its
activities and operations substantially as currently conducted if the Company
were to convert to a bank holding company or become a bank holding company
through the establishment of a national bank subsidiary. See "-- Regulation". On
August 1, the Congress approved legislation that eliminates the recapture of the
pre-1988 tax bad debt reserve allowed to thrifts. The legislation, when signed
into law, will have the effect of eliminating an after-tax charge to the Bank's
earnings of approximately $18 million that would otherwise have been imposed
upon conversion of the Bank to a commercial bank charter. The legislation
requires 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 will be no financial
statement impact from the recapture of the post-1987 tax bad debt reserve
because the Bank has already provided for this liability. The legislation is
awaiting the President's signature.

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

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<PAGE> 24

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".

LIMITATIONS ON STOCK OWNERSHIP

With certain limited exceptions, federal regulations prohibit a person or
company or a group of persons deemed to be acting in concert from, directly or
indirectly, acquiring more than 10% of any class of voting stock or obtaining
the ability to control in any manner the election of a majority of the directors
or otherwise direct the management or policies of a savings institution, such as
the Bank, without prior notice or application to and the approval of the OTS.
See "Regulation -- Regulation of Savings and Loan Holding Companies". See also
" --Limitations on Use of Tax Losses; Restrictions on Transfers of Stock".

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. See
"Description of Capital Stock -- Certain Provisions of the Certificate and
By-Laws; Anti-takeover Effects" and "-- Delaware Business Combination Statute".

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 -- Background of the Offering" and "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 Offering, the
Selling Stockholders will continue to hold a significant ownership interest in
the Company, and certain Selling Stockholders are subject to restrictions which
limit their further disposition of Class A Common Stock. Lewis S. Ranieri serves
as non-executive Chairman of the Company Board and a director of the Bank. In
addition to Mr. Lewis Ranieri, four other members of the boards of directors of
the Company and the Bank are Selling Stockholders who received their shares
through the general partner of Hyperion Partners.

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<PAGE> 25

DEPENDENCE ON KEY PERSONNEL

The Company and the Bank are managed by a small number of senior management
and operating personnel, the loss of certain of whom could have a material
adverse effect on the Company. See "Management" for detailed information on the
Company's management and directors. The key employees of the Company are Messrs.
Burkholder, Nocella, Heffron, Bender and Coben. The Company does not maintain
key person insurance for any of these individuals. The primary retention
vehicles used by the Company are employment agreements or letters and
participation in the Executive Management Compensation Program and the 1996
Stock Incentive Plan.

As discussed under "The Company -- Background of the Offering", effective
as of the date of the consummation of the Offering, the Company will enter into
a three-year consulting agreement with Mr. Lewis Ranieri, under which Mr.
Ranieri will provide strategic and managerial advice to the Company in addition
to his continuing role as non-executive Chairman of the Company and a director
of the Bank. While the Company will enter into a consulting agreement with Mr.
Ranieri, he may devote a substantial amount of time to other business ventures,
including activities which are competitive with the Company, through Hyperion
Partners II L.P., a Delaware limited partnership ("Hyperion Partners II") and
its affiliates and otherwise. While the Company does not believe that the loss
of Mr. Ranieri's services would have a material adverse effect on the day-to-day
operations of the Company, the loss of the overview afforded by Mr. Ranieri's
market experience, contacts and insight would be difficult for the Company to
replace. In addition, three other directors of the Company, Ms. Sloan, Mr. Shay
and Mr. Golush, also have an economic interest in Hyperion Partners II.

GOVERNMENTAL IMMUNITY OF THE FDIC

The doctrine of sovereign immunity, as limited by the Federal Tort Claims
Act (the "Federal Tort Claims Act"), provides that claims may not be brought
against the United States of America or any agency or instrumentality thereof
unless specifically permitted by act of Congress. The Federal Tort Claims Act
bars claims for fraud or misrepresentation, and courts have held, in cases
involving the FDIC as well as other federal agencies and instrumentalities, that
the United States may assert its sovereign immunity to claims brought under the
federal securities laws. Thus, any attempt to assert a claim against the
FDIC-FRF alleging a violation of the federal securities laws, including the
Securities Act and the Exchange Act, resulting from an alleged material
misstatement in or material omission from the Registration Statement (as defined
below) or this Prospectus, or any other act or omission in connection with the
offering to which this Prospectus relates, probably would be barred. In
addition, Section 2(f)(1) of the Federal Deposit Insurance Act (the "FDI Act")
specifically provides that directors, members, officers and employees of the
FDIC have no liability under the Securities Act with respect to any claim
arising out of or resulting from any alleged act or omission by such person
within the scope of such person's employment in connection with any transaction
involving the disposition of assets (or any interests in assets or any
obligations backed by any assets) by the FDIC.

CONVERSION OF CLASS B COMMON STOCK; DILUTION OF VOTING POWER

Certain Selling Stockholders will retain shares of Class B Common Stock
(which have no voting rights) which they may elect to convert to Class A Common
Stock subject to certain restrictions. See "Description of Capital
Stock -- Common Stock -- Conversion". Class B Common Stock is also converted to
Class A Common Stock automatically upon transfer to a person who is not an
affiliate of the holder, including in any such transfer effected pursuant to the
Offering. Transfers of Class B Common Stock by certain persons are subject to
certain restrictions. See "Description of Capital Stock -- Common
Stock -- Restrictions on Transfers of Stock".

NO PRIOR MARKET FOR THE CLASS A COMMON STOCK

Prior to the Offering, there was no public market for the Class A Common
Stock. The initial public offering price of the Class A Common Stock will be
determined through negotiations between the Company and the Underwriters, and
may not be indicative of the market price for the Class A Common Stock after the

23
<PAGE> 26

Offering. The Company believes that certain factors, such as fluctuations in
operating results of the Company or of its competitors and market conditions
generally for similar stocks, could cause the market price of the Class A Common
Stock to fluctuate substantially. Such market volatility may adversely affect
the market price of the Class A Common Stock. Although the Class A Common Stock
has been approved for quotation on NASDAQ, there can be no assurance that an
active public market will develop for such stock or, if developed, will be
sustained following the Offering. See "Underwriting".

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. The Bank has had asserted against it one putative class
action claim under the TILA, one putative class action claim under the RESPA and
three separate putative class action claims involving the Bank's loan servicing
practices. Management does not expect these claims, in the aggregate, to have a
material adverse impact on the Company's financial condition, results of
operation, or liquidity.

Maxxam, Inc. ("Maxxam") has filed a petition for review in a Federal
appeals court and a motion to intervene in a 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. In its brief to the Court of Appeals, Maxxam has asserted
that the court should order the OTS "to award Bank United to Maxxam" and that
the Company would bear no harm in that event because it is entitled to full
indemnification by the FDIC, as manager of the FRF, pursuant to section 7(a)(2)
of the Assistance Agreement. Management of the Company believes, after
consultation with legal counsel, that Maxxam's claims for relief 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".

24
<PAGE> 27

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 currently
operates 70 Texas-based community banking branches serving nearly 182,000
households and businesses, 9 commercial banking offices and a nationwide network
of mortgage offices that originated $3.4 billion of single family mortgage loans
during fiscal 1995. 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 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 from USAT Holdings Inc. to Bank United Corp. The
Company's address is 50 Charles Lindbergh Blvd., Uniondale, NY 11553, and its
phone number is (516) 745-6644. Following the consummation of the Offering, the
Company intends to create Holding Co. solely to hold all of the Bank Common
Stock. Holding Co. will have no assets other the Bank Common Stock and will
engage in no activities other than ownership of the Bank Common Stock. Following
the creation of Holding Co., the headquarters of the Company will be moved to
the Bank's headquarters in Houston, Texas.

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. 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 assets approximating $1.2
billion and assumed certain liabilities, primarily deposit liabilities
approximating $4.3 billion, 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. As a result of federal legislation, the RTC
no longer exists. 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. The Company intends to continue to pursue
additional expansion opportunities, including through acquisitions, while
maintaining adequate capitalization.

BACKGROUND OF THE OFFERING

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 July 15, 1996, also as President and CEO of the Company and
Chairman of the Board of the Bank.

25
<PAGE> 28

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 and made a
related contractually required payment in lieu of dividends to the FDIC-FRF in
the amount of $5.9 million. The proceeds of this dividend received by Hyperion
Holdings were paid by Hyperion Holdings as a dividend to Hyperion Partners which
distributed such amount to its limited and general partners in accordance with
its limited partnership agreement. For the quarter ended June 30, 1996, the
Company also recorded a $101.7 million tax benefit related to its NOLs.

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
1,800 to one. See Note 21 to the Consolidated Financial Statements for a
discussion of subsequent events and see "Capitalization". The Restructuring was
undertaken to simplify the ownership structure of the Company in order to
facilitate financial and tax reporting, marketing of the Common Stock and
management of the Company's operations. In addition, immediately prior to the
Offering, the FDIC-FRF surrendered to the Bank a portion of the Warrant for a
cash payment of approximately $5.9 million and exercised the remainder of the
Warrant. Immediately thereafter, the FDIC-FRF exchanged the shares of Bank
Common Stock issued upon exercise of the balance of the Warrant for 1,503,560
shares of Class B Common Stock, all of which are being sold in the Offering. See
"Business -- The Assistance Agreement" and "Selling Stockholders". The 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. Although the Class A Common Stock has been approved for
quotation on NASDAQ, there can be no assurance that an active public market will
develop for such stock or, if developed, will be sustained following the
Offering. See "Underwriting".

The Offering has been structured with the intent to preserve the beneficial
tax attributes of the Company as described below. See "Regulation -- Taxation".
Accordingly, pursuant to the provisions of the Certificate, certain of the
Selling Stockholders and other holders of Common Stock may not make further
transfers or other dispositions of Common Stock for up to three years following
the Offering except in certain circumstances, including with approval of the
Company Board. See "Description of Capital Stock -- Common Stock -- Restrictions
on Transfers of Common Stock". The limitations on transfers allowed 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.

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
Offering, on July 15, 1996 Mr. Burkholder became 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 eight 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 41 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".

26
<PAGE> 29

Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, served as Chairman of the Board of the
Bank and of the Company, as well as President and CEO of the Company from the
inception of the Company and the Bank until July 15, 1996. In his capacities
with the Company and the Bank, Mr. Ranieri has been involved in numerous
significant aspects of the development of the Company, beginning with the
Acquisition, and continuing through formulation of original business plans,
hiring of key management personnel, strategic advice on growth of the deposit
and mortgage franchises, including by de novo branches and through acquisitions,
and asset and liability management. Following the Offering, Mr. Ranieri will
continue to serve as non-executive Chairman of the Company Board and as a
director of the Bank and will continue to provide strategic and managerial
advice to the Company under the terms of a three-year consulting agreement which
will be entered into between Mr. Ranieri and the Company effective as of the
consummation of the Offering pursuant to which he will receive an annual
consulting fee of $250,000.

Senior Note Exchange

Substantially simultaneously with the consummation of the Offering, the
Company intends to commence the Exchange Offer for the Senior Notes. 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. See Note 11 to the Consolidated Financial Statements.

Claims Related to Forbearance Agreement

In connection with the original acquisition of the Bank by the Company, the
FHLBB 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. After the 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, Plaintiffs filed suit
against the United States in the Court of Federal Claims for alleged failures of
the United States (i) to abide by a capital forbearance, which would have
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 $110
million of subordinated debt as regulatory capital for all purposes and (iii) to
abide by an accounting forbearance, which would have allowed the Bank to count
as capital for regulatory purposes, and to amortize over a period of twenty-five
years, the $30.7 million difference between certain FSLIC payment obligations to
the Bank and the discounted present value of those future FSLIC payments. The
lawsuit is in a preliminary stage. Discovery was stayed pending the United
States Supreme Court's review of Winstar. On July 1, 1996, the Supreme Court
upheld lower court rulings that the United States had breached the contracts
involved in the Winstar cases and remanded the case for further proceedings on
the issue of damages. There is uncertainty about how the Court of Federal Claims
will manage the over 100 lawsuits on its docket that, like Plaintiffs' case,
involve issues similar to those raised in the Winstar cases. On July 8, 1996,
the Chief Judge of the Court of Federal Claims designated Stephen D. Susman,
Esq. of Houston, Texas as "Special Counsel to the Court" to facilitate the
adoption of methods for "rationalizing" the litigation. At a Court of Federal
Claims status conference held on July 30, 1996, Mr. Susman presented a proposed
case management plan and schedule supported by a large number of the plaintiffs
in the FIRREA-related cases, including Plaintiffs. Counsel for the United States
proposed a different plan, but, while asserting objections to a number of the
features of Mr. Susman's plan, expressed a willingness to work with Mr. Susman
and a coordinating committee of plaintiffs' counsel on achieving an agreed
pretrial order for management of the cases. The Chief Judge of the Court of
Federal Claims scheduled another status conference for August 19, 1996 and
directed counsel for the United States and the plaintiffs' counsel coordinating
committee to report to the Chief Judge by August 15 on their efforts to agree on
a proposed case management plan. The Chief Judge also encouraged the FDIC, which
has indicated a desire to participate in or take over certain lawsuits (unlike
Plaintiffs' lawsuit) involving post-FIRREA failed institutions, to become
involved in this process. The Chief Judge indicated that he may enter a case
management order at or shortly after the August 19 status

27
<PAGE> 30

conference. While the Company expects Plaintiffs' claims for damages to exceed
$200 million, the Company is unable to predict the outcome of Plaintiffs' suit
against the United States and the amount of judgment for damages, if any, that
may be awarded. Consequently, no assurances can be given as to the results of
this suit. See "Legal Proceedings". The Company and the Bank have entered into
an agreement with Hyperion Partners acknowledging the relative value, as among
the parties, of their claims in the pending litigation. The agreement confirms
that the Company and the Bank are entitled to receive 85% of the amount, if any,
recovered as a result of the settlement of or a judgment on such claims, and
that Hyperion Partners is entitled to receive 15% of such amount. The agreement
was approved by the disinterested directors of the Company. Plaintiffs will
continue to cooperate in good faith and will use their best efforts to maximize
the total amount, if any, that they may recover.

28
<PAGE> 31

USE OF PROCEEDS

The net proceeds to the Company from the Offering (after deduction of the
underwriting discounts and commissions and estimated offering expenses) are
estimated to be approximately $13 million (calculated at the mid-point of the
offering price range). The Company will not receive any of the proceeds from the
sale of Common Stock by the Selling Stockholders. The net proceeds to the
Company from the Offering will be contributed to the capital of the Bank where
they will be used for general corporate purposes. See "Selling Stockholders".

DIVIDEND POLICY

The Company Board currently intends to declare and pay quarterly dividends
on its Common Stock. It is expected that the quarterly dividend payment will be
$0.14 per share (a rate of $0.56 annually), with the initial dividend to be
declared and paid in the first quarter of fiscal year 1997. The declaration and
payment of dividends by the Company are subject to the discretion of the Company
Board and limitations imposed by the Senior Notes on Restricted Payments (as
defined in the Senior Notes), including dividends. At March 31, 1996, pro forma
after giving effect to the Restructuring and other subsequent events, the
Company would be permitted to pay $51.2 million in dividends on its capital
stock. See Note 21 to the Consolidated Financial Statements.

The Company's ability to pay dividends and to meet its other cash
obligations, including debt service on the Senior Notes and its other debt
obligations, is dependent on 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. 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 -- Holding Company Structure; Ability to Pay Dividends." In
addition, following the consummation of the Offering, the Company intends to
create Holding Co. as a direct subsidiary to hold the Bank Common Stock. Holding
Co.'s ability to pay dividends to the Company will be dependent on the extent to
which it receives dividends on the Bank Common Stock. 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 (through Holding Co.) with the cash
flow necessary to meet its debt service obligations in respect of the Senior
Notes and to pay dividends to holders of Common Stock, subject to applicable
regulatory restrictions, no assurance can be given that circumstances which
would limit or preclude the declaration of such dividends will not exist in the
future. See "Risk Factors -- Holding Company Structure; Ability to Pay
Dividends". The Company has not historically paid dividends on its Common Stock
with the exception of a $100 million dividend paid to holders of Class A Common
Stock and its former Class C Common Stock on May 6, 1996. On the same day, the
Bank paid a dividend on the Bank Common Stock in the amount of $100 million and
also made a related contractually required payment in lieu of dividends in the
amount of $5.9 million to the FDIC, the holder of the Warrant. Thus, the
dividends historically paid by the Company are not indicative of its future
dividend policy.

29
<PAGE> 32

CAPITALIZATION

The following table sets forth (a) the historical capitalization of the
Company at March 31, 1996, (b) the pro forma capitalization of the Company at
March 31, 1996 after giving effect to the transactions discussed in the
following sentence, and (c) the pro forma, as adjusted, capitalization of the
Company as of March 31, 1996. The pro forma capitalization of the Company at
March 31, 1996 reflects (i) the Restructuring, (ii) a $100 million dividend paid
in May 1996 and a related $5.9 million contractually required payment to the
FDIC-FRF, (iii) a $101.7 million tax benefit recorded in June 1996, (iv) a $4.8
million charge, after tax, in connection with the executive management
compensation programs, (v) a $10.7 million before tax ($6.6 million after tax)
charge related to restructuring the origination business of the Mortgage Banking
Group, (vi) the transactions resulting in the receipt by the FDIC-FRF of
1,503,560 shares of the Class B Common Stock and approximately $5.9 million in
cash, and (vii) estimated expenses related to the Offering. See Note 21 to the
Consolidated Financial Statements. The pro forma, as adjusted, figures reflect
those transactions discussed in the preceding sentence and the issuance and sale
of the shares of Class A Common Stock by the Company pursuant to the Offering
(assuming no exercise of the Underwriters' over-allotment option) at an assumed
initial public offering price of $19.00. 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.

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-Term Debt -- Senior Notes(1)...................... $115,000 $115,000 $115,000
Minority Interest(2)................................... 185,500 185,500 185,500
Stockholders' Equity:
Preferred Stock(3)................................... -- -- --
Common Stock(4)...................................... 289 307 316
Paid-in capital(5)................................... 117,722 112,512 128,811
Retained earnings.................................... 411,498 395,904 395,904
Unrealized gains (losses) on securities and
mortgage-backed securities available for sale, net
of tax............................................ (3,068) (3,068) (3,068)
---------- ---------- ----------
Total stockholders' equity........................... 526,441 505,655 521,963
---------- ---------- ----------
Total Consolidated Capitalization................. $826,941 $806,155 $822,463
========== ========== ==========
Ratio of equity to assets.............................. 4.67% 4.49% 4.63%
Ratio of tangible equity to tangible assets............ 4.48% 4.33% 4.47%
Shares outstanding(6)
Class A.............................................. 23,828,400 9,971,231 10,881,925
Class B.............................................. -- 20,713,671 20,713,671
Class C.............................................. 5,034,600 -- --
Book value per common share(6)......................... $18.24 $16.48 $16.52
Tangible book value per share (6)...................... $17.44 $15.84 $15.90
Regulatory capital of the Bank(7)(8)
Tangible Capital
Amount............................................ $770,764 $647,570 $663,878
Ratio............................................. 6.88% 5.79% 5.94%
Core Capital
Amount............................................ $780,227 $657,033 $673,341
Ratio............................................. 6.96% 5.87% 6.02%
Total Risk-Based Capital
Amount............................................ $816,772 $693,578 $709,886
Ratio............................................. 14.20% 11.93% 12.21%
</TABLE>

- ---------------
(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.

30
<PAGE> 33

(2) Minority interest consists of $185.5 million stated value of the Bank
Preferred Stock. See Notes 7 and 16 to the Consolidated Financial
Statements.

(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 1,850,000 shares of its Class A Common Stock for
issuance and to be available for grants under two separate plans. See
"Management -- The 1996 Stock Incentive Plan" and "-- The Director Stock
Compensation Plan".

(5) Offering expenses estimated to be $3,000,000.

(6) Historical, pro forma and pro forma, as adjusted, 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 and pro
forma, as adjusted, per share amounts also include the effects of Common
Stock issued pursuant to an executive management compensation program and
to the FDIC - FRF.

(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 and pro forma, as adjusted, 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-FRF.
These payments were made in May 1996. The Bank's pro forma ratios, as
adjusted, also reflect the proceeds from the issuance and sale of the
Company's Common Stock at an assumed initial public offering price of
$19.00, net of Underwriting Discount, the proceeds of which will be
contributed to the Bank as an infusion of capital.

31
<PAGE> 34

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(16)............... 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
=========== =========== ========== ========== ========== ==========
</TABLE>

32
<PAGE> 35

<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C>
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(8)............................ $ 26,759 $ 23,659 $ 41,719 $108,970 $127,370 $ 56,605 $ 19,115
======== ======== ======== ======== ======== ========
Earnings per common share(10)
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(10)............ $ 18.24 $ 16.52 $ 17.19 $ 15.64 $ 13.48 $ 8.19 $ 6.87
CERTAIN RATIOS AND OTHER DATA(2)(11)
Operating earnings(9)...................... $ 55,039 $ 48,849 $ 91,295 $ 75,514 $ 77,105 $ 50,024 $ 16,510
Regulatory capital ratios of the Bank(12):
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(13)... 2.00 1.92 1.92 2.20 2.61 2.60 2.16
Interest rate spread(13)................... 1.66 1.61 1.61 1.95 2.41 2.54 2.15
</TABLE>

33
<PAGE> 36

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

(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 shares of Bank Common Stock are currently owned by
the Company. It is anticipated that following the Offering, the Company
will transfer all of its Bank Common Stock to Holding Co. The Bank had
issued to the FDIC-FRF the Warrant 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 Warrant), at an
exercise price of $0.01 per share. Payments in lieu of dividends relate to
the Warrant. Immediately prior to the Offering, the FDIC-FRF surrendered to
the Bank a portion of the Warrant for a cash payment of approximately $5.9
million and exercised the remainder of the Warrant. Immediately thereafter,
the FDIC-FRF exchanged the shares of Bank Common Stock issued upon exercise
of the Warrant for 1,503,560 shares of Class B Common Stock which are being
sold by the FCIC-FRF pursuant to the Offering. See "Business -- The
Assistance Agreement" and Notes 16 and 21 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) Net income for fiscal 1994, 1993, 1992 and 1991 included $23.1 million,
$9.3 million, $32.1 million and $52.6 million of financial assistance
payments received from the FRF. No such payments were received during the
six months ended March 31, 1996 or during fiscal 1995 as a result of the
termination of the Assistance Agreement (as defined below) in December
1993. See "Business -- Assistance Agreement".

(9) Operating earnings represents income, including net gains (losses) on the
sales of single family servicing rights and single family warehouse loans,
before taxes, minority interest, and extraordinary loss and excludes net
gains (losses) on securities, MBS, and other loans. Management believes
operating earnings, as defined, reflects the revenues and expenses of the
Company's business segments and facilitates trend analysis as it excludes
transactions that are typically considered opportunistic and not part of
the routine core business operations of the Company. Operating earnings is
provided as other data and should not be considered an alternative to net
income as an indicator of the Company's operating performance or to cash
flow as a measure of liquidity.

(10) Earnings per common share represents net income (adjusted for earnings on
the common stock equivalents attributable to the Warrant outstanding)
divided by the weighted average number of common shares outstanding. 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.

(11) 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.

34
<PAGE> 37

(12) 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".

(13) 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.

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

(15) 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.

(16) Long-term borrowings are comprised of Senior Notes and other long-term
debt. Long-term borrowings exclude FHLB advances with maturities greater
than one year. FHLB advances with maturities greater than one year were
$277,993 and $1,689,873 as of March 31, 1996 and 1995, respectively. FHLB
advances with maturities greater than one year were $1,992,131, $782,129,
$708,945, $55,445, and $102,345 as of September 30, 1995, 1994, 1993, 1992,
and 1991, respectively.

35
<PAGE> 38

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, including net gains (losses) on the
sales of single family servicing rights and single family warehouse loans,
before taxes, minority interest, and extraordinary losses and excludes net gains
(losses) on securities, MBS, and other loans. Management believes operating
earnings, as defined, reflects the revenues and expenses of the Company's
business segments and facilitate trend analysis as it excludes transactions that
are typically considered opportunistic and not part of the routine core business
operations of the Company. Operating earnings is provided as other data and
should not be considered an alternative to net income as an indicator of the
Company's operating performance or to cash flow as a measure of liquidity.
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.

36
<PAGE> 39

Mortgage Banking Restructure

The Company has been in the process of evaluating its strategic
alternatives with respect to its mortgage banking business in order to mitigate
the negative effect on profitability resulting from increased competition in the
loan origination business. Increased competition has resulted in the Company
receiving lower fees and lower rates on originated loans. Additionally,
profitability is impacted by fluctuations in the volume of originations due to
changes in market interest rates. The Company has initiated a profitability
improvement program to reduce the amount of fixed charges necessary to operate
its loan origination business in response to lower levels of fee revenue and to
reduce the volume of staff necessary to process loan applications and to
complete the loan origination process. The plan includes the closure and
consolidation of 24 mortgage origination branches, the closure of 6 regional
operation centers and a workforce reduction of approximately 265 employees. As
of June 30, 1996, 15 mortgage origination branches and 2 regional operation
centers had been closed and the workforce was reduced by 129. Upon completion of
the restructure, the mortgage origination segment will operate approximately 91
branches and 4 regional operation centers. In addition, the plan includes
process and operational restructuring, as well as changes in management
structure and compensation, all designed to attempt to create operational
efficiencies and promote profitability. As a result of the office closures,
workforce reductions, and related actions, the Company recorded a $10.7 million
charge in June 1996. The restructuring charge includes estimated costs for
severance and other benefits of $0.8 million, asset write-downs of $5.3 million,
lease termination costs of $3.4 million and other costs of $1.2 million. The
non-cash write-off of $5.3 million reflects $3.5 million of goodwill and $1.8
million of fixed assets and leasehold improvements written off in connection
with the closed production offices. At June 30, 1996, the unpaid liability
relating to the restructuring charge was $5.4 million and is expected to be paid
in full during fiscal 1999. No assurances can be given regarding the efficacy of
the profitability improvement plan or the timing or impact of any further
restructuring (including a possible future sale or liquidation) of the Company's
residential mortgage lending business. The Company is not currently engaged in
active negotiations to sell its mortgage banking business.

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,
------------------- ----------------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BANK
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

37
<PAGE> 40

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.

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, 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 in 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. See Note 12 to the Consolidated Financial Statements.

38
<PAGE> 41

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

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.

39
<PAGE> 42

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 NET
-------- ------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <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 $ 4,718
Trading account assets...... 2 4 6 (7) 213 206 (1,058) (5,310) (6,368)
Securities.................. (801) (37) (838) 390 496 886 4,924 20 4,944
Mortgage-backed
securities................ (18,037) 1,602 (16,435) 1,418 19,765 21,183 73,970 (5,523) 68,447
Loans....................... 93,144 12,416 105,560 166,278 51,446 217,724 2,725 (38,436) (35,711)
FHLB stock.................. 2,266 131 2,397 2,453 3,435 5,888 1,677 786 2,463
Covered Assets and related
assets.................... -- -- -- (4,490) -- (4,490) (23,971) (2,306) (26,277)
-------- ------- -------- -------- -------- -------- -------- -------- --------
Total................. 80,070 13,565 93,635 166,240 85,813 252,053 60,251 (48,035) 12,216
-------- ------- -------- -------- -------- -------- -------- -------- --------
INTEREST EXPENSE
Deposits.................... 5,554 10,452 16,006 10,219 45,113 55,332 (4,640) (12,309) (16,949)
FHLB advances............... 40,476 3,744 44,220 65,246 68,461 133,707 37,186 5,280 42,466
Reverse repurchase
agreements and federal
funds purchased........... 9,189 (89) 9,100 34,151 8,495 42,646 (2,535) 1,929 (606)
Note payable to related
party..................... -- -- -- -- -- -- (601) -- (601)
Long-term debt.............. -- -- -- -- -- -- (10,214) -- (10,214)
Senior Notes................ -- 3 3 -- 230 230 6,357 374 6,731
Other....................... -- -- -- (79) -- (79) (373) (361) (734)
-------- ------- -------- -------- -------- -------- -------- -------- --------
Total................. 55,219 14,110 69,329 109,537 122,299 231,836 25,180 (5,087) 20,093
-------- ------- -------- -------- -------- -------- -------- -------- --------
NET CHANGE IN NET INTEREST
INCOME.................... $ 24,851 $ (545) $ 24,306 $ 56,703 $(36,486) $ 20,217 $ 35,071 $(42,948) $ (7,877)
======== ======= ======== ======== ======== ======== ======== ======== ========
</TABLE>

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

40
<PAGE> 43

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 due
to the level of market interest rates and the related reset margin being less
than the current coupon rate on the mortgage loan plus the applicable periodic
cap limitation. 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

41
<PAGE> 44

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.

42
<PAGE> 45

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. Increased losses in fiscal 1995 reflect the increasingly
competitive pricing in the market during that period.

43
<PAGE> 46

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.

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.

44
<PAGE> 47

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 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".

45
<PAGE> 48

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 due to limitations on NOLs if an
ownership change had occurred. Prior to the second half of fiscal year 1996, an
Ownership Change was considered likely. 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. As of June 30, 1996, future taxable income of $692.3 million would fully
utilize the net deferred tax asset. The Company earned taxable income of $129
million in 1995 and estimates taxable income of $112 million for the nine months
ended June 30, 1996. 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. During this time, the Company has engaged in more aggressive marketing
campaigns and has increased its originations of commercial and consumer loans
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. While the pursuit of this strategy entails risks
different from and in addition to those found in traditional single family
lending lines of business, the Company believes it has taken appropriate
measures to manage these risks adequately. To manage potential credit risk, the
Company has developed comprehensive credit approval and underwriting policies
and procedures for these lines of business. To offset operational and
competitive risk, the Company has hired experienced commercial bank
professionals, trained other personnel to manage and staff these businesses and
closely monitors the conduct and performance of the businesses. 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 Company intends to continue to pursue additional expansion
opportunities, including through acquisitions, while maintaining adequate
capital.

46
<PAGE> 49

The following chart reflects activity in the MBS portfolio.

MORTGAGE-BACKED SECURITIES

<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>
HELD TO MATURITY
Beginning balance................ $2,051,304 $2,394,978 $2,394,978 $ 358,896 $ 131,253
Loans securitized.............. -- -- -- 906,652 5,492
Purchases...................... 3,841 38,515 38,515 83,854 480,915
Net change in unrealized gains
(losses) before tax......... 1,869 28 162 (10,202) --
Sales.......................... -- -- -- (38,252) --
Repayments..................... (135,527) (183,210) (390,364) (162,328) (40,966)
Transfers(1)................... (1,244,945) -- -- 1,260,971 (216,727)
Other.......................... (2,054) 4,347 8,013 (4,613) (1,071)
---------- ---------- ---------- ---------- ----------
Ending balance................... $ 674,488 $2,254,658 $2,051,304 $2,394,978 $ 358,896
========== ========== ========== ========== ==========
AVAILABLE FOR SALE
Beginning balance................ $ 346,959 $ 433,925 $ 433,925 $1,817,029 $ 702,172
Loans securitized.............. -- -- -- 275,520 567,090
Purchases...................... -- -- 230 583,444 731,677
Net change in unrealized gains
(losses) before tax......... 3,340 2,081 8,415 (61,613) 53,414
Sales.......................... (198,753) (77,646) (77,610) (174,702) (359,417)
Repayments..................... (115,954) (10,819) (16,346) (760,111) (289,304)
Transfers(1)................... 1,244,945 -- -- (1,260,971) 408,528
Other.......................... (955) (1,323) (1,655) 15,329 2,869
---------- ---------- ---------- ---------- ----------
Ending balance................... $1,279,582 $ 346,218 $ 346,959 $ 433,925 $1,817,029
========== ========== ========== ========== ==========
</TABLE>

- ---------------
(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 unrealized gains on the MBS held to maturity portfolio were $2.5
million at March 31, 1996, $892 thousand at March 31, 1995, $14.5 million at
September 30, 1995, $1.7 million at September 30, 1994 and $6.3 million at
September 30, 1993. The unrealized losses on the MBS held to maturity portfolio
were $19.5 million at March 31, 1996, $54.1 million at March 31, 1995, $34.6
million at September 30, 1995, $56.0 million at September 30, 1994 and $486
thousand at September 30, 1993. The changes in the unrealized gains and losses
in the MBS held to maturity portfolio relate to changes in market conditions
relating to MBS. At March 31, 1996, the Company's MBS held to maturity portfolio
was comprised primarily of privately-issued and credit-enhanced MBS, of which
99% were rated AA/Aa or higher by the Standard & Poor's Corporation or Moody's
Investor Services, Inc., respectively. These ratings and the individual MBS are
reviewed monthly to ensure that no credit deterioration has occurred. At June
30, 1996, none of the MBS in the held to maturity portfolio was on credit watch
for possible downgrading by either of the ratings agencies. See
"Business -- Investment Portfolio".

47
<PAGE> 50

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>
HELD TO MATURITY
Beginning balance.......................... $ 7,763,676 $4,780,328 $ 4,780,328 $ 3,434,440 $ 2,385,882
Originations
Single family(1)...................... 493,180 659,186 1,012,771 1,319,020 528,666
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................. 106,100 130,437 246,131 207,546 60,489
Purchases
Single family......................... 92,320 747,780 2,640,755 1,312,827 1,202,970
Consumer.............................. -- 68 68 24,982 9,133
Multi-family and commercial real
estate.............................. 7,927 17,270 17,270 68,466 --
Net change in mortgage banker finance
line of
credit................................ 32,437 (76,009) (38,124) (238,223) 385,548
Repayments............................... (1,103,113) (458,652) (1,188,489) (807,574) (749,324)
Securitized loans sold or transferred.... -- -- -- (1,125,050) --
Transfers from (to) single family held
for sale.............................. (92,267) 1,134 805 398,645 (575,306)
Transfers from (to) multi-family held for
sale.................................. (95,579) -- -- -- --
Sales.................................... -- -- (34,865) (26,930) (2,878)
Other.................................... (19,598) (6,731) (11,704) (15,583) (4,736)
----------- ---------- ----------- ----------- -----------
Ending balance............................. $ 7,447,500 $5,936,873 $ 7,763,676 $ 4,780,328 $ 3,434,440
=========== ========== =========== =========== ===========
AVAILABLE FOR SALE
Beginning balance.......................... $ 496,564 $ 265,846 $ 265,846 $ 1,427,939 $ 1,715,834
Originations
Single family......................... 1,452,254 794,081 2,213,553 4,105,530 6,116,430
Multi-family, commercial real estate,
and business credit................. 40,209 32,460 61,505 23,449 --
Purchases
Single family......................... 52,957 24,251 65,103 60,900 58,879
Multi-family and commercial real
estate.............................. -- 38,823 38,823 -- --
Repayments............................... (6,737) (1,368) (3,667) (54,846) (208,003)
Securitized loans sold or
transferred(2)........................ (1,335,333) (802,549) (1,864,313) (4,470,275) (6,439,835)
Transfers from (to) single family held to
maturity.............................. 92,267 (1,134) (805) (398,645) 575,306
Transfers from (to) multi-family held to
maturity.............................. 95,579 -- -- -- --
Sales.................................... (452,211) (125,145) (273,747) (430,342) (399,151)
Other.................................... (4,969) (706) (5,734) 2,136 8,479
----------- ---------- ----------- ----------- -----------
Ending balance............................. $ 430,580 $ 224,559 $ 496,564 $ 265,846 $ 1,427,939
=========== ========== =========== =========== ===========
</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.

48
<PAGE> 51

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 the offering
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 resulting from 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.

49
<PAGE> 52

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 Bank was in compliance with the required FHLB stock balance at March
31, 1996.

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 the offering of these products.

50
<PAGE> 53

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 was 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. 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

51
<PAGE> 54

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, September 30, 1995, 1992, and 1991. 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.

52
<PAGE> 55

The following tables present the Company's nonperforming assets.

NONPERFORMING ASSETS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans
Single family(1)............... $101,936 $ 83,954 $ 85,722 $ 61,451 $ 60,209 $ 57,666
Single family residential
construction................ 35 505 -- -- 672 --
Consumer....................... 745 563 506 427 -- 46
Multi-family................... 510 213 3,802 3,233 -- --
Commercial real estate......... 488 -- 2,342 -- -- --
-------- -------- -------- --------
103,714 85,235 92,372 65,111 60,881 57,712
-------- -------- -------- --------
(Discounts)/Premiums
Accretable(2).................. (449) (560) (669) (781) (1,524) (969)
Non-accretable................. (7,246) (9,167) (15,384) (22,684) (21,250) (22,917)
-------- -------- -------- --------
(7,695) (9,727) (16,053) (23,465) (22,774) (23,886)
-------- -------- -------- --------
Net nonaccrual loans........ 96,019 75,508 76,319 41,646 38,107 33,826
REO, primarily single family
properties..................... 28,266 24,904 20,684 18,954 17,722 6,677
-------- -------- -------- --------
Total nonperforming
assets............... $124,285 $100,412 $ 97,003 $ 60,600 $ 55,829 $ 40,503
======== ======== ======== ========
</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.

(3) The loan principal amount related to the non-accretable discounts were $32.3
million, $33.7 million, $60.2 million, $41.4 million, $43.1 million and
$45.1 million at March 31, 1996, September 30, 1995, 1994, 1993, 1992 and
1991, respectively.

53
<PAGE> 56

SELECTED ASSET QUALITY RATIOS

<TABLE>
<CAPTION>
AT OR FOR
THE SIX MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
--------------- -----------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ----- ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Allowance for credit losses to
net nonaccrual loans........... 38.00% 48.74% 30.73% 71.71% 74.04% 30.00%
Allowance for credit losses to
nonperforming assets........... 29.36(2) 36.65 24.18 49.28 50.54 25.05
Allowance for credit losses and
non-accretable discounts to net
nonaccrual loans............... 45.55 60.88 50.89 126.18 129.80 97.75
Allowance for credit losses to
total loans.................... 0.46 0.44 0.46 0.61 0.68 0.29
Nonperforming assets to total
assets......................... 1.10(2) 0.84 1.09 0.72 0.89 0.59
Nonaccrual loans to total
loans.......................... 1.21 0.91 1.51 0.85 0.92 0.98
Nonperforming assets to total
loans and REO.................. 1.56 1.21 1.91 1.23 1.35 1.17
Net loan charge-offs to average
loans(1)
Total....................... 0.15 0.16 0.30 0.05 0.07 0.04
Single family............... 0.09 0.08 0.04 0.05 0.07 0.04
</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 % OF
STATE SINGLE FAMILY CONSTRUCTION CONSUMER MULTI-FAMILY ESTATE TOTAL TOTAL
- ----------------------- ------------- ------------- -------- ------------ ---------- ---------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
California............. $ 53,378 $ -- $ 1 $ -- $ -- $ 53,379 51.5%
Texas.................. 10,895 35 730 -- -- 11,660 11.2
Florida................ 8,175 -- -- -- -- 8,175 7.9
New Jersey............. 5,143 -- -- -- -- 5,143 5.0
Illinois............... 5,023 -- -- -- -- 5,023 4.8
New York............... 3,388 -- -- -- -- 3,388 3.3
Connecticut............ 1,802 -- -- 510 488 2,800 2.7
Maryland............... 1,828 -- -- -- -- 1,828 1.8
Pennsylvania........... 1,798 -- -- -- -- 1,798 1.7
Virginia............... 1,352 -- -- -- -- 1,352 1.3
Massachusetts.......... 1,082 -- -- -- -- 1,082 1.0
Louisiana.............. 1,018 -- -- -- -- 1,018 1.0
Other.................. 7,054 -- 14 -- -- 7,068 6.8
------------- ------ -------- ----- ----- ---------- -----
Total.............. $ 101,936 $ 35 $745 $510 $488 $ 103,714 100.0%
============= ============= ========== ============= ============ ========= =====
% of Total............. 98.3% --% 0.7% 0.5% 0.5% 100.0%
============= ============= ========== ============= ============ =========
</TABLE>

The Company's allowance for credit losses to net nonaccrual loans decreased
from a five year high of 74.04% at September 30, 1992 to 48.74% at September 30,
1995. The decrease in the ratio results from the

54
<PAGE> 57

charge-off of $10.1 million in 1994 and $3.4 million in 1995 related to a single
large commercial real estate loan which reduced the amount of the reserve. The
ratio decreased to 38.00% at March 31, 1996 primarily due to loan originations
and purchases in the latter half of 1995.

The Company's allowance for credit losses to net nonaccrual loans was
48.74% at September 30, 1995 and 30.73% at September 30, 1994. This compares to
ratios for peer institutions (thrifts with assets over $5.0 billion) of 75.22%
and 73.39% at December 31, 1995 and 1994. Because 98% of the non-accrual loans
are single family mortgages, the allowance to bring reserves to fair value is
lower. The Company believes that because of the Company's underwriting standards
and purchase discounts, historical charge-offs on its single family loans have
been lower than the corresponding realized REO gains resulting from the sales of
the underlying collateral. The Company believes that the resulting allowance
levels approximate the allowances for future potential losses. At September 30,
1995 and 1994 the Company's single family loan portfolio represented 84.8% and
82.1% of gross loans outstanding compared to 72.22% and 65.80% for peer
institutions. Net loan charge-offs for the Company were .16% and .30% as
compared to .43% and .66% for peer institutions.

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. At March 31, 1995, total non-accretable discount was $11.2 million,
of which $7.2 million related to nonperforming loans. The non-accretable
discount will reduce future REO losses.

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

55
<PAGE> 58

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.

56
<PAGE> 59

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
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Single family................... $28,799 $16,784 $29,594 $15,905 $15,238 $15,575 $ 8,956
Single family residential
construction.................. 483 473 361 399 306 321 186
Consumer........................ 3,339 2,455 3,247 1,822 355 144 81
Multi-family.................... 3,229 2,974 3,054 2,456 1,474 219 144
Commercial real estate and
business credit............... 183 2,112 97 2,112 11,382 11,377 552
Mortgage Banker Finance line of
credit........................ 412 236 410 684 944 -- --
Single family mortgage
warehouse..................... 44 5 38 76 165 578 229
------- ------- ------- ------- ------- ------- -------
Total...................... $36,489 $25,039 $36,801 $23,454 $29,864 $28,214 $10,148
======= ======= ======= ======= ======= ======= =======
</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.

57
<PAGE> 60

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

58
<PAGE> 61

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 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.
In addition, following the consummation of the Offering, the Company intends to
create Holding Co. as a direct subsidiary to hold the Bank Common Stock. Holding
Co.'s ability to pay dividends to the Company will be dependent on the extent to
which it receives dividends on the Bank Common Stock. 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 -- Holding Company Structure; Ability to Pay Dividends." 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 (through Holding Co.)
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 circumstances
which would limit or preclude the declaration of such dividends will not exist
in the future. 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 $148.5
million of dividends on its capital stock without prior approval of the OTS, and
the Company would be able to pay $51.2 million of

59
<PAGE> 62

dividends on its Common Stock under the covenants of the Senior Notes. See
"Dividend Policy", "Regulation -- Safety and Soundness Regulations -- Capital
Requirements -- Capital Distributions" and Notes 11, 15, 16 and 21 to the
Consolidated Financial Statements. If the Company were to undergo an Ownership
Change, these amounts would be significantly reduced. See "-- Limitations on Use
of Tax Losses; Restriction on Transfers of Stock".

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 the Bank 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 FOR THE YEAR ENDED
ENDED MARCH 31, 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 and September 30,
1995 and 1994, these deposits totaled $797.3 million, $911.8 million and $402.5
million, respectively. There were no such deposits at September 30, 1993. 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.

60
<PAGE> 63

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. Substantially simultaneously with the
consummation of the Offering, the Company intends to commence the Exchange Offer
for the Senior Notes. 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" and see "Capitalization" for the pro forma
implications of the Offering and the Restructuring.

61
<PAGE> 64

REGULATORY CAPITAL RATIOS

<TABLE>
<CAPTION>
AT MARCH AT SEPTEMBER 30,
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

Maxxam has 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 approving the Acquisition, which involved substantially all the Bank's
initial assets and liabilities. In its brief to the Court of Appeals, Maxxam has
asserted that the Court of Appeals should order the OTS "to award Bank United to
Maxxam" and that the Company would bear no harm in that event because it is
entitled to full indemnification by the FDIC-FRF pursuant to Section 7(a)(2) of
the Assistance Agreement. Maxxam has also filed a Motion to Intervene and a
Complaint in Intervention in an action pending in the United States District
Court for the Southern District of Texas, also seeking to set aside the order
approving the Acquisition. 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 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".

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.

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 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. The Bank has had asserted against it
one putative class action claim under the TILA, one putative class action claim
under the RESPA and three separate putative class action claims involving the
Bank's loan servicing practices. Management does not expect these claims, in the
aggregate, to have a material adverse effect on the Bank's or the Company's
financial condition, results of operations or liquidity. See "Legal
Proceedings".

62
<PAGE> 65

The Congress has approved legislation which 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. The
legislation is awaiting the President's signature. 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 "Risk Factors -- Limitations on Use of Tax
Losses; Restrictions on Transfers of Stock" and "Regulation -- Taxation -- Net
Operating Loss Limitations".

FEDERAL FINANCIAL ASSISTANCE

Pursuant to the Assistance Agreement and the Settlement Agreement (as
defined herein), the Bank received substantial payments from the FRF as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
PAYMENTS AFFECTING THE RESULTS OF OPERATIONS
FRF Assistance (Guaranteed Yield less Actual Yield)......... $ 23,143 $ 9,289 $ 32,131
OTHER PAYMENTS
Settlement payment.......................................... 195,300 -- --
Reimbursable Goodwill Receivable............................ -- 31,355 31,355
Capital loss coverage....................................... -- 29,381 40,891
Covered Asset writedowns.................................... 1,536 8,827 22,205
Other....................................................... (1,068) (7,985) (4,738)
-------- -------- --------
TOTAL FRF PAYMENTS FOR THE YEAR.......................... $218,911 $ 70,867 $121,844
======== ======== ========
</TABLE>

FRF Assistance on Covered Assets was offset by the interest expense to
carry these assets and certain related operating expenses, neither of which were
reimbursed by the FRF.

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, 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.

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<PAGE> 66

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.

In June 1996, FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". This
statement requires that, after a transfer of financial assets, an entity
recognize the financial and servicing assets it controls and the liabilities it
has incurred, derecognize financial assets when control has been surrendered,
and derecognize liabilities when extinguished. This statement provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. This statement is effective
for transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted.
Implementation of this pronouncement should have no material adverse effect on
the Consolidated Financial Statements.

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<PAGE> 67

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 currently
operates 70 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 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.

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<PAGE> 68

EARNINGS (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST,
AND EXTRAORDINARY LOSS BY BUSINESS SEGMENT

<TABLE>
<CAPTION>
BANKING MORTGAGE BANKING BANK UNITED TOTAL
SEGMENT SEGMENT CORP.(1) ELIMINATIONS(2) EARNINGS
------- ----------------- ----------- --------------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Six months ended March 31,
1996............................ $64.1 $ 3.0 $(1.9) $ (3.8) $ 61.4
1995............................ 37.3 17.0 (0.6) (5.2) 48.5
Years ended September 30,
1995............................ 82.1 19.4 (5.0) (6.4) 90.1
1994............................ 73.8 24.4 (0.7) (11.4) 86.1
1993............................ 106.0 31.5 -- (15.2) 122.3
</TABLE>

OPERATING EARNINGS (LOSS) 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>
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, including net gains (losses) on the
sales of single family servicing rights and single family warehouse loans,
before taxes, minority interest and extraordinary loss, and excludes net
gains (losses) on securities, MBS and other loans. Management believes
operating earnings, as defined, reflects the revenues and expenses of the
Company's business segments and facilitates trend analysis as it excludes
transactions that are typically considered opportunistic and not part of the
routine core business operations of the Company. Operating earnings is
provided as other data and should not be considered an alternative to net
income as an indicator of the Company's operating performance or to cash
flow as a measure of liquidity.

BUSINESS STRATEGY

From its incorporation in December 1988 through the early 1990's, the
Company's 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 crisis. 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 experience in the origination, purchase,
sale, structuring, and securitization of mortgage loans and the purchase and
sale of MSRs.

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 engaged in more aggressive
marketing campaigns and has increased its portfolio of multi-family, residential
construction, consumer, and commercial loans and the level of lower cost
transaction and commercial deposit accounts. While the pursuit of this strategy
may entail risks different than those present in traditional single family
lending lines of business, the Company believes it has taken appropriate
measures to manage these risks adequately. To

66
<PAGE> 69

manage potential credit risk the Company has developed comprehensive credit
approval and underwriting policies and procedures for these lines of business.
To offset operational and competitive risk, the Company has hired experienced
commercial bank professionals, trained other personnel to manage and staff these
businesses, and closely monitors the conduct and performance of the businesses.
In addition to its efforts to increase originations of commercial and consumer
loans, the Company has been increasing the retention of higher yielding single
family and multi-family mortgage loans that, in the past, may have been sold or
securitized. The Company intends to continue to pursue additional expansion
opportunities, including through acquisitions, while maintaining adequate
capitalization.

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, currently operates a 70 branch community banking
network, a 24-hour telephone banking center, and a 64-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 37 branches in the
greater Houston area, 29 branches in the Dallas/Ft. Worth metropolitan area, and
two branches each in Austin and San Antonio. Through its branch network, the
Company maintains more than 400,000 accounts with an estimated 182,000
households and businesses.

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. Home improvement loans are fixed rate loans and
are offered for terms up to 15 years, unsecured loans are open ended maturities
with fixed and adjustable rates and automobile loans are offered for terms up to
six years on a fixed rate basis. These loans are underwritten utilizing credit
scoring and collateral value, and are subject to collection, collateral
valuation and fraud risks. 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 possible 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. Unsecured line of credit loans and credit
card loans have the additional risks of no collateral, greater chance of fraud
and complex consumer protection laws and regulations. In addition, the ease of
credit card availability to the consumer increases risk. Automobile loans carry
the risk of collateral depreciation and mobility. Also, repossession laws make
it difficult to take possession of the collateral to enforce lien rights.

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

67
<PAGE> 70

Business Administration loans. These loans are offered on a term, both fixed and
adjustable, and adjustable revolving basis with maturities up to 10 years for
term loans and one year for revolving loans. These loans are underwritten on the
financial strength of the guarantor, collateral utilized, and projected cashflow
of the business. Small business loan risks are similar to unsecured commercial
loans but tend to be magnified due to the ability of the borrower to manage
through business cycles and the nature of the assets that small businesses tend
to maintain. Additionally, the Company requires borrowers to provide periodic
financial information for review and assessment. 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.
Specifically, the Company is offering a comprehensive line of small business
products and services. It has hired a number of experienced officers, developed
a formal customer calling program, trained Community Banking branch managers to
source small business loans from and in proximity to branches, is utilizing
modern loan application processing and credit scoring technology, and offering a
comprehensive line of cash and treasury management services to small business
customers. Small business lines of credit and working capital loans may be made
on an unsecured basis and therefore may have no secondary source of repayment.
When such loans are secured, the value of the collateral may fluctuate with
local economic conditions. Small business equipment loans are typically made for
longer terms and at higher loan-to-value ratios than other types of equipment
loans, and the collateral may have limited marketability or may become obsolete
during the term of the loan. Small business owner-occupied real estate loans may
be secured by single-use or limited-use real estate. The valuation of these
properties is based, in part, upon their ability to operate successfully as
going concerns. Small Business Administration loans are typically originated at
higher loan-to-value ratios and for longer terms than other commercial loans and
are made to borrowers that might not meet the Bank's underwriting guidelines for
other commercial loans.

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. The loans provided by the MBF are
collateralized by single family mortgages or related servicing rights. The
Company lends based on a percentage of the loan market value. The collateral for
these loans typically is available for the period of time from the origination
of the loan by the borrower until its subsequent sale in the secondary market.
At March 31, 1996, the MBF unit had $100.8 million in unfunded commitments and
$141.8 million of loans

68
<PAGE> 71

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. Mortgage banker finance loans and lines of credit are
subject to the risk of collateral that fluctuates in value with changing
interest rates. The loans are also subject to the risk that the collateral may
be fraudulently or improperly documented. Mortgage banker finance loans are also
generally made to borrowing entities that are more thinly capitalized than other
commercial borrowers.

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. Permanent and construction multi-family loans are offered on a fixed
or adjustable rate basis. Multi-family lending is subject to the risk that the
borrower may not complete the improvements to the real estate collateral in a
timely manner or may fraudulently misrepresent the progress or status of the
project. Additionally, the value of the completed collateral is subject to
market fluctuations and may be adversely affected by the presence of undetected,
environmentally sensitive substances. The Company utilizes certain lending
practices to reduce these risks. These include limiting the loan amount to an
amount less than its appraised value, verifying historical cash flows, assessing
the general economic conditions and the financial condition of the borrower. 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. These loans are made on a commitment term that generally is
for a period of one year. Residential construction loans are subject to the risk
that a general downturn in the builder's local economy could prevent it from
marketing its product profitably. Such loans are also subject to the risk that a
builder might misrepresent the completion status of the homes against which it
has drawn loan funds. The Company seeks to limit these risks by approving
individual builders by reviewing their experience and reputation, general
financial condition and speculative inventory levels. Additionally, construction
status is reviewed by onsite inspections and the builders' ongoing financial
position is monitored. 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.
Commercial real estate loans are typically made to single-purpose business
entities with limited secondary sources of repayment outside the specific
project financed. The value of the collateral for such loans may be adversely
affected by local market conditions and by the presence of environmentally
sensitive substances.

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,

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<PAGE> 72

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 has been in the process of evaluating its strategic alternatives with
respect to its mortgage banking business. As a result of this evaluation, and in
order to attempt to mitigate the negative effect on profitability of increased
competition in the loan origination business of the Mortgage Banking Group, the
Company has initiated a profitability improvement plan. The plan includes the
closure and consolidation of certain mortgage origination branches

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<PAGE> 73

resulting in the group operating 91 branches, the closure and consolidation of
several regional operation centers and related reductions in workforce. In
addition, the plan includes process and operational restructuring, as well as
changes in management structure and compensation, all designed to attempt to
create operational efficiencies and promote profitability. As of June 30, 1996,
15 mortgage origination branches and 2 regional operation centers had been
closed and the workforce was reduced by 129. As a result of the office closures,
workforce reductions, and related actions, the Company recorded a $10.7 million
charge in June 1996 for lease termination expenses, severance payments, and the
write-off of goodwill and other costs. No assurances can be given regarding the
efficacy of the profitability improvement plan or the timing or impact of any
further restructuring (including a possible future sale or liquidation) of the
Company's residential mortgage lending business. The Company is not currently
engaged in active negotiations to sell its mortgage banking business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Discussion of Results of Operations -- Mortgage Banking
Restructure".

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 three years.

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<PAGE> 74

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>

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<PAGE> 75

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 % OF
STATE FAMILY CONSTRUCTION FAMILY ESTATE WAREHOUSE REAL ESTATE LOANS TOTAL TOTAL
- ----- ---------- -------- -------- ---------- --------- ----------- ------------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California... $3,771,710 $ -- $ 21,384 $ -- $ -- $3,793,094 $ -- $ 3,793,094 47.70%
Texas........ 881,324 107,412 220,878 29,113 -- 1,238,727 -- 1,238,727 15.58
Florida...... 421,850 27,013 -- 1,986 -- 450,849 -- 450,849 5.67
Illinois..... 157,986 10,919 -- -- -- 168,905 -- 168,905 2.12
Arizona...... 97,372 14,323 19,008 -- -- 130,703 -- 130,703 1.64
Pennsylvania. 111,273 7,083 2,497 -- -- 120,853 -- 120,853 1.52
New
Jersey....... 107,080 -- -- -- -- 107,080 -- 107,080 1.35
Virginia..... 100,700 -- -- -- -- 100,700 -- 100,700 1.27
Washington... 65,974 -- 19,451 -- -- 85,425 -- 85,425 1.07
Georgia...... 56,331 6,957 20,583 -- -- 83,871 -- 83,871 1.06
Other
states....... 926,785 5,798 91,211 15,765 -- 1,039,559 -- 1,039,559 13.07
Other(1)..... -- -- -- -- 379,720 379,720 252,526 632,246 7.95
---------- -------- --------- ---------- -------- ---------- --------- ----------- ------
Total..... $6,698,385 $179,505 $ 395,012 $ 46,864 $379,720 $7,699,486 $252,526 $ 7,952,012 100.00%
========= ======== ======== ========== ======== ========== ========= =========== ======
% of
Total....... 84.23% 2.26% 4.97% 0.59% 4.77% 96.82% 3.18% 100.00%
========= ======== ======== ========== ======== ========== ========= =========== ======

</TABLE>

- ---------------
(1) Loans that cannot be classified by state.

73
<PAGE> 76

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.

74
<PAGE> 77

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 SEPTEMBER
ENDED MARCH 31, 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

75
<PAGE> 78

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:

<TABLE>
<CAPTION>
STATE PERCENT
------------------------------------------------------------- -------
<S> <C>
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%
=====
</TABLE>

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

76
<PAGE> 79

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.

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994 1993
------------ ---- ---- ----
<S> <C> <C> <C> <C>
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%
==== ==== ==== ====
</TABLE>

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.

77
<PAGE> 80

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
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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

78
<PAGE> 81

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 70 community banking
branches located primarily in the Houston and Dallas/Ft. Worth areas including
three supermarket branches which were opened in June of 1996. 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

<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------
AVERAGE
DEPOSITS
NUMBER OF DEPOSITS PER
LOCATION BRANCHES OUTSTANDING BRANCH
- ----------------------------------------------------------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
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
== ==========
</TABLE>

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.

79
<PAGE> 82

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)
<S> <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>

80
<PAGE> 83

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

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-------------------------------------
NUMBER OF ACCOUNTS DEPOSIT AMOUNT
------------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
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
===== =======
</TABLE>

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.

81
<PAGE> 84

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 Notes 9 and 10 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, cashflow 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

82
<PAGE> 85

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. The Company's one year cumulative interest rate gap position at March
31, 1996 was negative $410.9 million or 3.65% of total assets. At June 30, 1996,
the Company's one year cumulative interest rate gap position was substantially
the same. This is a one-day position which is continually changing and is not
necessarily indicative of the Company's position at any other time.
Additionally, the gap analysis does not consider the many factors accompanying
interest rate moves. 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. During periods of rising interest rates the Company's assets
tend to have prepayments that are slower than those in an interest rate
sensitivity gap and would increase the negative gap position. Conversely, during
a period of falling interest rates the Company's assets would tend to prepay
faster than expected thus decreasing the negative gap.

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 Company has traditionally managed its business to eliminate,
insofar as possible, its overall exposure to changes in interest rates. However,
under the Company Board's current policies, management has been given some
latitude to increase the Company's interest rate sensitivity position within
certain limits if, in management's judgment, that will enhance profitability. 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.

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<PAGE> 86

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
LESS THAN MONTHS SIX MONTHS ONE YEAR AFTER
THREE BUT WITHIN BUT WITHIN BUT WITHIN FIVE NON-
MONTHS SIX MONTHS ONE YEAR FIVE YEARS YEARS REPRICING TOTAL
----------- ---------- ---------- ---------- -------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <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 $ -- $ 779,692
Single family mortgage warehouse... 379,719 -- -- -- -- -- 379,719
Adjustable-rate loans and mortgage-
backed securities................ 3,025,481 2,101,348 1,487,350 1,007,120 26,395 -- 7,647,694
Fixed-rate loans and
mortgage-backed securities....... 47,260 46,311 89,921 555,531 248,791 -- 987,814
Cash and investment securities..... 994,980 -- 52,600 -- 40,009 -- 1,087,589
Other assets....................... 76,470 -- -- -- -- 307,658 384,128
----------- ---------- ---------- ---------- -------- --------- -----------
Total assets................... $ 5,123,833 $2,153,934 $1,642,708 $1,717,054 $321,449 $ 307,658 $11,266,636
=========== ========== ========== ========== ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Certificates of deposit............ $ 465,343 $ 644,399 $1,107,134 $ 902,043 $ 30,043 $ -- $ 3,148,962
Checking and savings(3)............ 1,814,359 -- -- 1,814,359
----------- ---------- ---------- ---------- -------- --------- -----------
Total deposits................. 2,279,702 644,399 1,107,134 902,043 30,043 -- 4,963,321
Senior Notes....................... -- -- -- 115,000 -- -- 115,000
FHLB advances and other
borrowings....................... 3,516,307 653,564 843,202 71,200 5,045 -- 5,089,318
Other liabilities.................. 287,056 -- -- -- -- 100,000 387,056
Minority interest.................. -- -- -- -- -- 185,500 185,500
Stockholders' equity............... -- -- -- -- -- 526,441 526,441
----------- ---------- ---------- ---------- -------- --------- -----------
Total liabilities, minority
interest, and stockholders'
equity....................... $ 6,083,065 $1,297,963 $1,950,336 $1,088,243 $ 35,088 $ 811,941 $11,266,636
=========== ========== ========== ========== ======== ========= ===========
Gap before off-balance-sheet
financial instruments.............. $ (959,232) $ 855,971 $ (307,628) $ 628,811 $286,361 $(504,283)
OFF-BALANCE-SHEET(4)
Interest rate swap
agreements -- pay floating....... (50,000) -- 50,000 -- -- --
Interest rate swap
agreements -- pay fixed.......... -- -- -- -- -- --
----------- ---------- ---------- ---------- -------- ---------
Gap.................................. $(1,009,232) $ 855,971 $ (257,628) $ 628,811 $286,361 $(504,283)
=========== ========== ========== ========== ======== =========
Cumulative gap....................... $(1,009,232) $ (153,261) $ (410,889)
==========
Cumulative gap as a percentage of
total assets....................... (8.96)% (1.36)% (3.65)%
</TABLE>

- ---------------
(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 presented in the earliest repricing period
since amounts in these accounts are subject to withdrawal on demand.

(4) 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.

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<PAGE> 87

COMPETITION

The Company competes primarily with seven commercial banks and five thrift
institutions, all of which have a substantial presence in the same markets as
the Company. Based on consumer deposit balances at December 1995 the Company
ranked third in the Houston and fifth in the Dallas/Ft. Worth metropolitan areas
in terms of deposits. 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. The Company and its peers compete
primarily on price at which products are offered and on customer service.

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 National Association of Securities Dealers, Inc. ("NASD").
This subsidiary commenced operations in late 1992, and its activities have been
expressly approved by the OTS.

85
<PAGE> 88

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
the FSLIC and the FHLBB that was evidenced by several written agreements (the
"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"). 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 other written agreements comprising the overall
agreement were the Acquisition Agreement, dated December 30, 1988, between the
FSLIC and the Bank; the Warrant Agreement, dated December 30, 1988, between the
FSLIC and the Bank; the Regulatory Capital Maintenance Agreement, dated December
30, 1988, among the FSLIC, the Bank, the Company, Hyperion Holdings and Hyperion
Partners; and the Forbearance Agreement, dated February 15, 1989, among the
Federal Home Loan Bank Board, the Bank, the Company, Hyperion Holdings and
Hyperion Partners. The Acquisition Agreement set forth the terms of the Bank's
acquisition of substantially all of the assets of Old USAT and the assumption of
Old USAT's secured, deposit and certain tax liabilities. The Warrant Agreement
granted the FSLIC the Warrant to purchase up to 158,823 shares of Bank Common
Stock at an exercise price of $0.01 per share. The Regulatory Capital
Maintenance Agreement placed certain restrictions on the Bank's payment of
dividends on the Bank Common Stock. The Agreement for Operating Policies
required the Bank to prepare a three year business plan and certain specified
written operating policies. The Forbearance Agreement granted to the Bank, the
Company, Hyperion Holdings and Hyperion Partners forbearances from regulatory
action relating to capital requirements and accounting procedures. All of the
Agreements have terminated except the Warrant Agreement, as amended on December
23, 1993, one provision of the Assistance Agreement granting certain indemnities
to the Bank, the Company, Hyperion Holdings, Hyperion Partners, the Forbearance
Agreement and the Tax Benefits Agreement, dated December 28, 1993, among the
Bank, the Company, Hyperion Holdings and Hyperion Partners, which governs the
sharing of tax benefits with the FDIC-FRF.

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".

86
<PAGE> 89

In connection with the Acquisition, the Bank issued the Warrants, which
enable the FDIC --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.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
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
======== =======
</TABLE>

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 Warrant to purchase up to 158,823 shares of Bank
Common Stock (5.56% of the Bank Common Stock as of December 28, 1993, assuming
exercise in full of the Warrant) at an exercise price of $0.01 per share.
Pursuant to the Settlement Agreement, the Bank and the FDIC-FRF 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 Warrant, 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 Warrant 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 Warrant 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 Warrant or of the Bank Common Stock that has been issued
upon the exercise of the Warrant of a demand for filing of an offering circular
with

87
<PAGE> 90

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 Warrant, 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
Warrant, including the dispute concerning credit to the FDIC-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 Warrant 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 Warrant is no longer outstanding.
In May 1996, the Bank made a payment to the FDIC-FRF of $5.9 million in lieu of
such dividends in connection with the declaration of a $100 million dividend on
the Bank Common Stock. See Note 21 to the Consolidated Financial Statements for
a discussion of subsequent events.

The Warrant Agreement also provides that the Warrant 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
Warrant is exercisable, such value to be derived from the consideration paid in
connection with such merger, liquidation, or change in control.

Warrant Purchase and Exchange Agreement

The FDIC-FRF, the Bank and the Company have entered into the Warrant
Purchase and Exchange Agreement (the "Warrant Exchange Agreement") pursuant to
which, immediately prior to the Offering, the FDIC-FRF surrendered to the Bank a
portion of the Warrant for a cash payment of approximately $5.9 million and
exercised the balance of the Warrant. Immediately thereafter, the FDIC-FRF
exchanged the shares of Bank Common Stock issued upon exercise of the Warrant
for 1,503,560 shares of Class B Common Stock. As part of the Offering, the
FDIC-FRF is selling all of such shares of Class B Common Stock. Following the
consummation of the Offering, all rights and obligations under the Warrant and
the Warrant Agreement will be terminated, and the FDIC-FRF will not own any
shares of Common Stock.

Forbearance

In connection with the original acquisition of the Bank by the Company, the
FHLBB 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.
After the enactment of FIRREA, 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. 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, Plaintiffs filed suit against the United States in the Court of
Federal Claims for alleged failures of the United States (i) to abide by a
capital forbearance, which would have 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 $110 million of subordinated debt as regulatory
capital for all purposes and (iii) to abide by an accounting forbearance, which
would have allowed the Bank to count as capital for regulatory purposes, and to
amortize over a period of twenty-five years, the $30.7 million difference
between certain FSLIC payment obligations to the Bank and the discounted present
value of those future FSLIC payments. The lawsuit is in a

88
<PAGE> 91

preliminary stage. Discovery was stayed pending the United States Supreme
Court's review in Winstar. On July 1, 1996, the Supreme Court upheld lower court
rulings that the United States had breached the contracts involved in the
Winstar cases and remanded the case for further proceedings on the issue of
damages. There is uncertainty about how the Court of Federal Claims will manage
the over 100 lawsuits on its docket that, like Plaintiffs' case, involve issues
similar to those raised in the Winstar cases. On July 8, 1996, the Chief Judge
of the Court of Federal Claims designated Stephen D. Susman, Esq. of Houston,
Texas as "Special Counsel to the Court" to facilitate the adoption of methods
for "rationalizing" the litigation. At a Court of Federal Claims status
conference held on July 30, 1996, Mr. Susman presented a proposed case
management plan and schedule supported by a large number of the plaintiffs in
the FIRREA-related cases, including Plaintiffs. Counsel for the United States
proposed a different plan, but, while asserting objections to a number of the
features of Mr. Susman's plan, expressed a willingness to work with Mr. Susman
and a coordinating committee of plaintiffs' counsel on achieving an agreed
pretrial order for management of the cases. The Chief Judge of the Court of
Federal Claims scheduled another status conference for August 19, 1996 and
directed counsel for the United States and the plaintiffs' counsel coordinating
committee to report to the Chief Judge by August 15 on their efforts to agree on
a proposed case management plan. The Chief Judge also encouraged the FDIC, which
has indicated a desire to participate in or take over certain lawsuits (unlike
Plaintiffs' lawsuit) involving post-FIRREA failed institutions, to become
involved in this process. The Chief Judge indicated that he may enter a case
management order at or shortly after the August 19 status conference. While the
Company expects Plaintiffs' claims for damages to exceed $200 million, the
Company is unable to predict the outcome of Plaintiffs' suit against the United
States and the amount of judgment for damages, if any, that may be awarded.
Consequently, no assurances can be given as to the results of this suit. See
"Legal Proceedings".

The Company and the Bank have entered into an agreement with Hyperion
Partners acknowledging the relative value, as among the parties, of their claims
in the pending litigation. The agreement confirms that the Company and the Bank
are entitled to receive 85% of the amount, if any, recovered as a result of the
settlement of or a judgment on such claims, and that Hyperion Partners is
entitled to receive 15% of such amount. The agreement was approved by the
disinterested directors of the Company. Plaintiffs will continue to cooperate in
good faith and will use their best efforts to maximize the total amount, if any,
that they may recover.

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. See "-- Safety and Soundness
Regulations -- Capital Requirements -- 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.

89
<PAGE> 92

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.

90
<PAGE> 93

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:

<TABLE>
<CAPTION>
SUPERVISORY
SUBGROUP
-------------------
A B C
--- --- ---
<S> <C> <C> <C>
Meets numerical standards for:
Well capitalized.................................................. 23 26 29
Adequately capitalized............................................ 26 29 30
Undercapitalized.................................................. 29 30 31
</TABLE>

For purposes of assessments of FDIC insurance premiums, as of March 31,
1996, and pro forma for the Restructuring and other subsequent events (see Note
21 to the Consolidated Financial Statements), the Company believes that 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 0.04% 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. 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. Recently, the FDIC announced that a
BIF-insured institution that is affiliated with a SAIF-insured institution may
offer more favorable interest rates in order to attract deposits from customers
of the SAIF-insured institution without violating the moratorium on changing
deposit insurance funds which has been in effect since 1989. In addition, such
institutions may operate from the same premises as long as customers are able to
differentiate between the institutions. If the BIF/SAIF premium disparity has
not been resolved by the time the Bank's application to establish a national
bank subsidiary is approved, the Company may pursue this as a long-term strategy
in order to achieve savings on deposit insurance premiums.

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

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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.

If the Bank's application to establish a national bank subsidiary is
approved, the national bank subsidiary also will be eligible for membership in
the FHLB Dallas. Within one year, it must hold at least 10% of its total
domestic assets in residential mortgage loans. If the national bank subsidiary
elects to become a member of the FHLB Dallas, it will be eligible to receive
advances; however, since it will not meet qualified thrift lender ("QTL")
requirements, the amount of such advances will be restricted and the advances
must be dedicated to purchasing or funding new or existing residential housing
finance assets. See "-- Capital Requirements -- QTL Test".

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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. The OTS has broad
discretion to impose capital requirements in excess of minimum applicable
ratios. See "-- Enforcement".

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.

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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 have a
composite CAMEL rating (examination rating) of "1" or "2" and that are not
holding company subsidiaries need not notify the OTS before making a capital
distribution. 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.

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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. An additional amount, not greater
than 10% of the savings association's unimpaired capital and unimpaired surplus,
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

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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.

In June 1996, the OTS proposed substantial revisions to its regulations
governing subsidiaries. If adopted as proposed, the revised regulations would,
among other things, expand the activities in which a service corporation may
engage, reclassify finance subsidiaries as operating subsidiaries, and permit
federal savings associations to invest in pass-through investments, including
limited partnerships and similar vehicles, whose activities are confined to
those the savings association could conduct directly.

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.

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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

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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.

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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".

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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 Federal Reserve Board'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 Federal Reserve Board'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

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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

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(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

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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.

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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

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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.

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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".

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 "Risk
Factors -- Recapitalization of the SAIF and Its Impact on SAIF Premiums; Other
Legislative Proposals" for a discussion of proposed legislation which would,
among other things, affect the bad debt deduction and the bad debt reserve. See
also "Legislation".

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

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<PAGE> 109

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. Legislation, which has been approved
by Congress and is awaiting the President's signature, would generally repeal
the bad debt reserve deduction effective for taxable years beginning after
December 31, 1995. See "Risk Factors -- Recapitalization of the SAIF and its
Impact on SAIF Premiums; Other Legislative Proposals".

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.

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

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<PAGE> 110

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):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30, SAVINGS (COSTS)
- ------------------ ---------------
<S> <C> <C>
1991.................................................. $(1.7)
1992.................................................. (2.8)
1993.................................................. 10.5
1994.................................................. 3.6
1995.................................................. 31.8
</TABLE>

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31,
- ------------------
<S> <C> <C>
1996.................................................. 17.2
</TABLE>

The Company's total NOLs at March 31, 1996 were $808 million of which $745
million are attributable to tax relief discussed above. The remaining NOLs of
$63 million are a result of the Company's taxable losses from business
operations in years prior to fiscal 1993.

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

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<PAGE> 111

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 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
Transfers of Stock", "Selling Stockholders -- Selling Stockholder Letter
Agreements" and "Description of Capital Stock -- Common Stock -- Restrictions on
Transfer of Stock".

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

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<PAGE> 112

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".

Tax Sharing Agreement

The Company and the Bank are parties to a tax sharing agreement pursuant to
which the Bank will pay to the Company amounts equal to the taxes that the Bank
would be required to pay if it were to file a return separately from the
affiliated group of which the Company is the common parent. The tax sharing
agreement will not increase the amounts payable by the Bank over the amounts
that it would have to pay if it were not a member of the Company's affiliated
group.

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

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<PAGE> 113

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.

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<PAGE> 114

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. Following the creation of Holding Co., the
headquarters of the Company will be moved to the Bank's headquarters in Houston,
Texas. 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. In its brief to the Court of Appeals, Maxxam has asserted that the Court
should order the OTS "to award Bank United to Maxxam" and that the Company would
bear no harm in that event because it is entitled to full indemnification by the
FDIC, as manager of the FRF, pursuant to Section 7(a)(2) of the Assistance
Agreement.

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

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<PAGE> 115

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.

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, 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. The Bank has had asserted against it
one putative class action claim under the TILA, one putative class action claim
under the RESPA and three separate putative class action claims involving the
Bank's loan servicing practices. Management does not expect these claims, in the
aggregate, to have a material adverse impact on the Company's financial
condition, results of operation, or liquidity.

On July 25, 1995, Plaintiffs (the Bank, the Company (including its
predecessors) and Hyperion Partners) filed suit against the United States of
America in the United States Court of Federal Claims 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
Plaintiffs of their contractual rights.

In December 1988, the United States, through its agencies, entered into
certain agreements with Plaintiffs that resulted in contractual obligations owed
to Plaintiffs. Plaintiffs contend 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, an agency
of the United States government, of the immense costs and burdens of taking over
and managing or liquidating the institution. The FSLIC 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 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 and the
Bank.

The lawsuit alleges breaches of the United States' contractual obligations
(i) to abide by a capital forbearance, which would have 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 $110 million of subordinated
debt as regulatory capital for all purposes and (iii) to abide by an accounting
forbearance, which would have allowed the Bank to count as capital for
regulatory purposes, and to amortize over a period of twenty-five years, the
$30.7 million difference between certain FSLIC payment obligations to the Bank
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. 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

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<PAGE> 116

States. On July 1, 1996, the United States Supreme Court affirmed the en banc
ruling of the Federal Circuit holding the United States liable for breach of
contract and remanded the case for further proceedings on the issue of damages.

Plaintiffs' lawsuit has been stayed from the outset by a judge of the Court
of Federal Claims pending the Supreme Court's decision in the Winstar cases. The
Company anticipates that the stay will be lifted in the near future, but there
is uncertainty about how Plaintiffs' lawsuit and the over 100 similar cases will
be judicially managed by the Court of Federal Claims. On July 8, 1996, the Chief
Judge of the Court of Federal Claims designated Stephen D. Susman, Esq. of
Houston, Texas as "Special Counsel to the Court" to facilitate the adoption of
methods for "rationalizing" the litigation. At the Court of Federal Claims
status conference held on July 30, 1996, Mr. Susman presented a proposed case
management plan and schedule supported by a large number of the plaintiffs in
the FIRREA-related cases, including Plaintiffs. Counsel for the United States
proposed a different plan, but, while asserting objections to a number of the
features of Mr. Susman's plan, expressed a willingness to work with Mr. Susman
and a coordinating committee of plaintiffs' counsel on achieving an agreed
pretrial order for management of the cases. The Chief Judge of the Court of
Federal Claims scheduled another status conference for August 19, 1996 and
directed counsel for the United States and the plaintiffs' counsel coordinating
committee to report to the Chief Judge by August 15 on their efforts to agree on
a proposed case management plan. The Chief Judge also encouraged the FDIC, which
has indicated a desire to participate in or take over certain lawsuits (unlike
Plaintiffs' lawsuit ) involving post-FIRREA failed institutions, to become
involved in this process. The Chief Judge indicated that he may enter a case
management order at or shortly after the August 19 status conference. It remains
unclear how such an order entered by the Chief Judge will affect the future
course of Plaintiffs' lawsuit.

There have been no decisions determining damages in any of the over 100
similar cases pending in the Court of Federal Claims. While the Company expects
Plaintiffs' claims for damages to exceed $200 million, the Company is unable to
predict the outcome of Plaintiffs' suit against the United States and the amount
of judgment for damages, if any, that may be awarded. Consequently, no
assurances can be given as to the results of this suit.

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.

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<PAGE> 117

MANAGEMENT

DIRECTORS

The Company Board consists of 11 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.

<TABLE>
<CAPTION>
DIRECTOR OF DIRECTOR OF
THE COMPANY THE BANK TERM
NAME AGE SINCE SINCE EXPIRES
----------------------------------- --- -------------- ----------- -------
<S> <C> <C> <C> <C>
Lewis S. Ranieri................... 49 1988 1988 1997
Salvatore A. Ranieri............... 47 1988 1988 1998
Scott A. Shay...................... 38 1988 1988 1999
Barry C. Burkholder................ 56 1996 1991 1997
Lawrence Chimerine................. 55 1996 1990 1997
David M. Golush.................... 51 1996 1988 1998
Paul M. Horvitz.................... 60 1996 1990 1999
Alan E. Master..................... 56 1996 1995 1997
Anthony J. Nocella................. 54 1996 1990 1998
Patricia A. Sloan.................. 52 1996 1988 1999
Kendrick R. Wilson III............. 49 1996 1988 1998
</TABLE>

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 and CEO of the Company and Chairman of the Bank from 1988 until
July 15, 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 July 15, 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

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<PAGE> 118

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 July 15, 1996. Mr. Shay is a founder of Hyperion Partners and
Hyperion Partners II. Mr. Shay is currently a director of Hyperion Capital and
Transworld 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.

BARRY C. BURKHOLDER. Mr. Burkholder has been the President and CEO of the
Company since July 15, 1996, and has held similar positions with the Bank since
joining it on April 10, 1991. Since July 15, 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 a Member of the Thrift Institutions Advisory
Council of the Federal Reserve System. He is President 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. from 1990 to 1995. 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

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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. 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 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 and
Hyperion Partners II, 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. Mr. Nocella's other positions have included
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

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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 ("Lazard Freres"), a New
York-based investment banking firm. Prior to his joining Lazard Freres 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.

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, pursuant to its terms, is terminated upon
consummation of the Offering. There are no existing arrangements or
understandings between a director and any other person pursuant to which such
person was elected a director.

In addition, following the Offering the Company intends to appoint at least
one additional non-employee director to the Company Board.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company Board has established two committees: an Audit Committee and a
Compensation Committee.

The Audit Committee meets with management to consider the adequacy of the
internal controls and the objectivity of financial reporting. The Audit
Committee also meets with the independent auditors and with appropriate
financial personnel and internal auditors of the Company regarding these
matters. The Audit Committee recommends to the Company Board the appointment of
the independent auditors, subject to ratification by the stockholders at the
annual meeting. Both the internal auditors and the independent auditors
periodically will meet alone with the Audit Committee and will have unrestricted
access to the Audit Committee. The Audit Committee will consist of directors who
are not employees of the Company, initially Dr. Chimerine, Dr. Horvitz and Mr.
Master, with Dr. Horvitz serving as Chair.

The Compensation Committee's functions include administering management
incentive compensation plans, including the 1996 Incentive Compensation Plan (as
defined below), and making recommendations to the Company Board with respect to
the compensation of directors and officers of the Company. The Compensation
Committee also supervises the Company's employee benefit plans. The Compensation
Committee will consist of all directors except Mr. Burkholder and Mr. Nocella.

To the extent that any permitted action taken by the Company Board
conflicts with action taken by the Compensation Committee, the Company Board
action shall control. In the past, Mr. Burkholder and Mr. Nocella have recused
themselves from Company Board deliberations regarding their compensation and it
is anticipated that this practice will continue following the Offering.

COMPENSATION OF DIRECTORS

Each non-employee director will receive a single annual retainer of $25,000
for service on the boards of directors of Company and the Bank. All non-employee
directors also will receive a fee of $1,000 for each in person meeting of the
Company Board that they attend and a fee of $500 for each telephonic meeting of
the Company Board and each meeting of any Committee of the Company Board that
they attend. The chair of the Audit Committee will receive an additional annual
retainer of $2,000. Directors who are employees of the

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Company or any subsidiary do not receive additional compensation for service as
directors, including participation in the Director Stock Plan. See also
"-- Certain Relationships and Related Transactions".

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.

PRINCIPAL OCCUPATION DURING LAST FIVE YEARS

<TABLE>
<CAPTION>
NAME AGE POSITION AND OCCUPATION
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Jonathon K. Heffron........... 43 Executive Vice President and General Counsel of the
Company since July 15, 1996 and of the Bank since May
1990. 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 as 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 and he is a member of the FHLB System Committee
of America's Community Bankers.
George R. Bender.............. 56 Executive Vice President -- Mortgage Banking of the
Company since July 15, 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.
</TABLE>

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<TABLE>
<CAPTION>
NAME AGE POSITION AND OCCUPATION
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Ronald D. Coben............... 38 Executive Vice President -- Community Banking of the
Company since July 15, 1996 and of the Bank since July
1996. Previously, Mr. Coben served as Regional Retail
Director and Marketing Director since joining the Bank
in October 1989. Prior to joining the Bank, Mr. Coben
was employed by Texas Commerce Bancshares (Chemical
Bank) since 1986 as Vice President and Manager of the
Relationship Banking Division of the Retail Bank. Prior
to joining Texas Commence Bancshares, Mr. Coben served
as the Director of Market Research for ComputerCraft,
Inc. and Foley's Department Stores. Mr. Coben received a
B.A. degree from the University of Texas at Austin. He
has provided marketing skills to various organizations
including the Houston Symphony and the Houston Holocaust
Museum. Mr. Coben also received the MS Leadership Award
in 1996 and a Gold Effie for the nation's most effective
financial advertising campaign of 1989.
Leslie H. Green............... 58 Senior Vice President -- Operations and Technology of
the Company since July 15, 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 July 15, 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,
and she served 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 B. Lyles................ 51 Senior Vice President and Chief Credit Officer of the
Company since July 15, 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>

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

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officers of the Company and the Bank. The individuals listed below became
executive officers of the Company in June and July 1996. Prior to that time,
Lewis S. Ranieri served as President and CEO of the Company, Salvatore A.
Ranieri served as Vice President, Secretary and General Counsel of the Company,
Scott A. Shay served as Vice President of the Company and Robert A. Perro served
as Chief Financial Officer of the Company. None of the former executive officers
received any compensation from the Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- -----------------------
OTHER SECURITIES PAYOUTS ALL
ANNUAL UNDERLYING ------- OTHER
COMPEN- RESTRICTED OPTIONS/ LTIP COMPEN-
SALARY BONUS(1) SATION(2)(3) STOCK SAR PAYOUTS SATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) (#) ($) ($)
- ------------------------------------ ---- ------- -------- ------------ ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry C. Burkholder................. 1995 375,000 594,000 -- -- -- -- 9,240
President and 1994 375,000 607,500 -- -- -- -- 9,240
Chief Executive Officer 1993 375,000 500,000 1,328 -- -- -- 8,994
Anthony J. Nocella.................. 1995 315,000 235,000 -- -- -- -- 9,402
Executive Vice President and 1994 315,000 200,000 -- -- -- -- 8,878
Chief Financial Officer 1993 315,000 210,000 1,323 -- -- -- 9,069
Financial Markets/Treasury
Commercial Banking
Jonathon K. Heffron................. 1995 225,000 200,000 -- -- -- -- 9,402
Executive Vice President, 1994 225,000 175,000 -- -- -- -- 8,984
General Counsel, and 1993 225,000 185,000 118 -- -- -- 5,386
Chief Operating Officer
George R. Bender.................... 1995 200,000 75,000 -- -- -- -- 13,980
Executive Vice President 1994 200,000 408,900 -- -- -- -- 4,500
Mortgage Banking 1993 200,000 703,601 1,341 -- -- -- 8,994
Leslie H. Green..................... 1995 175,000 75,000 -- -- -- -- 4,620
Senior Vice President 1994 175,000 70,000 -- -- -- -- 4,615
Operations & Technology 1993 167,500 70,000 -- -- -- -- 6,320
</TABLE>

- ---------------
(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.

EXECUTIVE MANAGEMENT COMPENSATION PROGRAM

In June 1996, the Company Board approved an Executive Management
Compensation Program (the "Compensation Program") providing for the following:
(i) a cash bonus of $4.0 million; (ii) the award of 318,342 shares of Class B
Common Stock pursuant to management stock grant agreements (the "Management
Stock Grant Agreements") providing that (I) such shares may not be transferred
for three years from the date of issuance and (II) such shares may be converted
into shares of Class A Common Stock only if the holder of such stock would not,
after such conversion, own more than 9.9% of the outstanding shares of Class

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A Common Stock; and (iii) the issuance of 1,154,520 options upon consummation of
the Offering pursuant to management option agreements (the "Management Option
Agreements") for purchase of an equivalent number of shares of common stock
providing that (I) such options have an exercise price approximating the fair
market value of such stock on the date of grant; (II) such options vest ratably
over three years; (III) such options may not be exercised prior to the third
anniversary of the date of grant; and (IV) such options expire if not exercised
by the tenth anniversary of the date of grant. Twenty-three individuals,
including the eight executive officers -- Ms. Hartnett and Messrs. Burkholder,
Nocella, Heffron, Bender, Green, Lyles and Coben -- and three directors -- Drs.
Chimerine and Horvitz and Mr. Master -- are participating in the executive
management compensation program. The remaining twelve individuals participating
are other key officers and employees of the Bank. Mr. Burkholder will receive
$1,702,000 of the cash bonus and 491,327 of the stock options; he has received
135,455 of the shares of Class B Common Stock. Messrs. Nocella and Heffron will
each receive $549,000 of the cash bonus and 157,959 of the stock options; each
one received 43,614 of the shares of Class B Common Stock. Messrs. Bender and
Green will each receive $85,000 of the cash bonus and 24,534 of the stock
options; each one received 6,791 shares of the Class B Common Stock. Drs.
Chimerine and Horvitz will each receive $52,000 of the cash bonus and 15,087 of
the stock options; each one received 4,138 shares of the Class B Common Stock.
Mr. Master will receive $17,000 of the cash bonus and 4,854 of the stock
options; he has received 1,380 shares of the Class B Common Stock.
Implementation of this program replaced an equity based bonus program previously
contemplated in the case of all participants except Mr. Burkholder, whose
participation satisfies the terms of his former employment agreement.

THE 1996 STOCK INCENTIVE PLAN

The Company has adopted the Bank United 1996 Stock Incentive Plan (the
"1996 Stock Incentive Plan"). The 1996 Stock Incentive 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 Stock Incentive 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 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 Stock
Incentive Plan. Non-employee directors are not eligible to participate in the
1996 Stock Incentive Plan. The Company Board has provided for the 1996 Stock
Incentive Plan to remain in effect for 10 years, to 2006. The description below
is intended as a summary of material terms only.

General

The 1996 Stock Incentive Plan will be administered by the Compensation
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 Stock
Incentive Plan: (i) stock options (both non-qualified and incentive)
("Options"), (ii) stock appreciation rights ("SARs"), (iii) restricted Common
Stock ("Restricted Stock") and (iv) performance units ("Performance Units", and
together with the Options, SARs and Restricted Stock, the "Awards").

Any authority granted to the Compensation Committee may also be exercised
by the full Company Board, except to the extent that the grant or exercise of
such authority would cause any Award or transaction to become subject to (or
lose an exemption under) the short-swing recovery profit recovery provisions of
Section 16 of the Exchange Act or cause an award designated as a qualified
performance-based award not to qualify for, or to cease to qualify for, the
Section 162(m) exemption. To the extent that any permitted action taken by the
Company Board conflicts with action taken by the Committee, the Company Board
action shall control.

The 1996 Stock Incentive Plan provides that the total number of shares of
Class A Common Stock available for grant under the 1996 Stock Incentive Plan may
not exceed 1,600,000 shares. No Participant may be granted Awards covering in
excess of 50% of the shares of Class A Common Stock Awards granted in any fiscal
year or 25% of the shares of Class A Common Stock available for issuance over
the life of the 1996

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Stock Incentive 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 Committee may condition the grant of Restricted Stock and Performance
Units upon the attainment of one or more of the following performance goals:
earnings per share, sales, net profit after tax, gross profit, operations
profit, cash generation, unit volume, return on equity, change in working
capital, return on capital or shareholder return. Such performance goals shall
be set by the Committee within the time period prescribed by Section 162(m) of
the Code.

The 1996 Stock Incentive 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.

Options

The term of Options granted under the 1996 Stock Incentive 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 Stock Incentive 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"). 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 in connection with incentive stock options under
the 1996 Stock Incentive Plan may not exceed 10 years. 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.

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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 (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. 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.

Performance Units

The Committee may from time to time grant Performance Units, either alone
or in addition to other Awards. The Committee will set the performance goals and
restrictions applicable to each Performance Unit, including establishing the
applicable performance period and the value of the Performance Unit. After the
applicable performance period has ended, the holder of a Performance Unit will
be entitled to receive the payout earned to the extent to which the
corresponding performance goals were satisfied.

A holder may elect to defer receipt of cash or stock in settlement of
Performance Units for a specified period or until a specified event, subject in
each case to the Committee's approval. Generally, upon a holder's termination of
employment for any reason during a performance period or before the applicable
performance goals are satisfied, the holder shall forfeit his right to receive
cash or stock in settlement of his Performance Units.

Change of Control

In the event of a Change of Control (as defined below), (i) any Option or
SAR that is not then exercisable and vested will become fully exercisable and
vested, (ii) the restrictions on any Restricted Stock will lapse and (iii) all
Performance Units will be deemed earned. The 1996 Stock Incentive Plan defines a
change of control ("Change of Control") as (i) the acquisition of 25% or more of
the common stock of the Company, (ii) a change in a majority of the Board of
Directors, unless approved by the incumbent directors (other than as a result of
a contested election) and (iii) certain reorganizations, mergers,
consolidations, liquidations or dissolutions.

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 highest reported
sales price of a share of Common Stock on a national exchange or on NASDAQ
during the 60-day period prior to and including the date of a Change of Control
(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 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.

Amendments

The Company Board may at any time terminate, amend, or modify the 1996
Stock Incentive Plan; provided that no amendment, alteration or discontinuation
will be made which will impair the rights of Award

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holders or will disqualify the 1996 Stock Incentive Plan from the exemption
provided by Rule 16b-3 promulgated under the Exchange Act, and, to 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 Stock Incentive Plan.

Two types of stock options may be granted under the 1996 Stock Incentive
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.

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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 250,000 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.

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 and Class
A Common Stock under the Director Stock 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 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

On the first Tuesday following his or her election and thereafter on the
day after each annual meeting of stockholders during such director's term, each
Eligible Director shall be granted options ("Director Options") on 1,000 shares
of Class A Common Stock. The exercise price for the options will be 115% of the
fair market value of Class A Common Stock on the date of the grant of such
option. Each Director Option will become vested and exercisable, if at all, when
and if, during the 30-day period commencing on the first anniversary of the date
of grant of such Director Option, a share of Class A Common Stock has a fair
market value equal to or greater than the exercise price of such Director
Option. If such stock does not attain such fair market value during such 30-day
period, then such Director Option shall terminate and be cancelled as of the
close of business on the last business day during such 30-day period. Each
Director Option terminates no later than the tenth anniversary of the date of
grant. Any unvested Director Options terminate and are cancelled as of the date
the optionee's service as a Director ceases for any reason (including death,
disability, retirement, removal from office or otherwise). All Director Options
become fully vested and exercisable upon a Change of Control (as defined above
under "The 1996 Stock Incentive Plan -- Change of Control").

Transferability

Grants and awards under the Director Stock Plan are nontransferable other
than by will or laws of descent and distribution, or pursuant to domestic
relations order or qualified 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 Eligible Director's lifetime, may be
exercised only by the Eligible Director.

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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 by 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 will be taxed upon their exercise of the options. The amount
of income recognized is measured by the differences 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.

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MANAGEMENT EMPLOYMENT ARRANGEMENTS

New Employment Agreements

Effective as of the date of the consummation of the Offering, the Company
will enter into new employment agreements with the following four executives
which supersede all prior employment arrangements.

Mr. Burkholder's agreement with the Company will provide for his employment
for three years at an annual base salary of not less than $375,000 and a
discretionary bonus. Mr. Coben's agreement with the Company will provide for his
employment for three years at an annual base salary of not less than $200,000
and a discretionary bonus. Mr. Nocella's agreement with the Company will provide
for his employment for three years at an annual base salary of not less than
$315,000 and a discretionary bonus. Mr. Heffron's agreement with the Company
will provide for his employment for three years at an annual base salary of not
less than $225,000 and a discretionary bonus. These agreements provide that the
period of employment is automatically extended on the first day of each month so
that the period of employment terminates three years from such date, unless the
executive or the Company gives notice to terminate the agreement at least sixty
days before such monthly renewal date. In addition, upon a change of control, if
the executive is still employed by the Company, the period of employment will be
extended until the third anniversary of the effective date of the change of
control or if the period of employment has terminated prior to the change of
control, a new three year employment period shall commence upon a change of
control. If for any reason other than cause the Company elects to terminate the
employment of any of the above executives before the scheduled expiration date
of his agreement, the executive's employment will be deemed to have been
terminated by the Company without cause for purpose of the severance and
retirement benefits described below.

Under the terms of Mr. Burkholder's employment agreement, the amount of the
discretionary bonus paid to Mr. Burkholder is in the sole discretion of the
Company Board, which will take into account such matters as (i) the Company's
actual financial performance as compared to its budgeted financial performance,
(ii) Mr. Burkholder's performance in implementing new business initiatives
approved by the Company Board, (iii) Mr. Burkholder's performance in improving
the financial performance of any division or unit of the Company or the Bank, or
any of their respective subsidiaries as determined by the Company Board in its
sole discretion, (iv) the Company's actual financial performance compared to its
peers', and (v) Mr. Burkholder's total compensation as compared to the total
compensation of CEOs at comparable financial institutions. The discretionary
bonuses to be paid to the other executive officers are at the discretion of the
CEO and the Company Board.

Under each agreement described above, if the executive's employment is
terminated (i) by the Company other than for cause or disability or (ii) by the
executive for good reason or within a 30-day period following the first
anniversary of a change of control, he is generally entitled to (a) receive a
lump sum equal to three times (for Mr. Burkholder) or two times (for Messrs.
Coben, Nocella and Heffron) (I) his annual base salary and (II) the higher of
his most recent bonus under the Company's annual incentive plans and the highest
bonus under such annual incentive plans for the last three full fiscal years
prior to the effective date of the change of control, (b) continue in the
Company's welfare benefit plans for three years (for Mr. Burkholder) or two
years (for Messrs. Coben, Nocella and Heffron), and (c) receive in a lump sum a
supplemental pension amount based on three years (for Mr. Burkholder) or two
years (for Messrs. Coben, Nocella and Heffron) of deemed employment after
termination, (d) have all stock options, restricted stock and other stock-based
compensation become immediately exercisable or vested, (e) receive outplacement
services, at the Company's sole expense, as incurred, up to a maximum of $45,000
(for Messrs. Burkholder, Nocella and Heffron), and $25,000 (for Mr. Coben). A
change of control ("Change of Control") is generally defined for purposes of
these agreements as (i) the acquisition of 25% or more of the common stock of
the Company, (ii) a change in a majority of the Board of Directors, unless
approved by the incumbent directors (other than as a result of a contested
election) and (iii) certain reorganizations, mergers, consolidations,
liquidations or dissolutions. If any payment or distribution by the Company to
an executive is determined to be subject to the excise tax imposed by Section
4999 of the Code, the amount of payment or distribution may be reduced so that
the excise tax liability of the executive is minimized.

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In addition Mr. Burkholder will receive 42.5% of the executive management
compensation program, which satisfies the terms of his former employment
agreement.

Mr. Bender has an employment letter from the Bank. It 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.

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 all of the directors of the Company other than Barry C. Burkholder and
Anthony J. Nocella. 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
and are also members of various boards of directors and compensation committees
of various companies which are subsidiaries of Hyperion Partners and, in the
case of Lewis S. Ranieri and Scott A. Shay, of subsidiaries of Hyperion Partners
II as well. No other member of the Bank Compensation Committee is an officer or
employee of the Company or the Bank.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

As of the date hereof, 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 30,302,977 shares of Class B Common Stock (including
1,503,560 shares of Class B Common Stock held by the FDIC-FRF), which have no
voting 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, including 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. See "Description of Capital
Stock -- Common Stock -- Conversion". The Company anticipates, following the
Offering, that most of the remaining holders of Class B Common Stock will
convert their shares of Class B Common Stock into shares of Class A Common
Stock. 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 increasing the voting
power of such holder commensurately.

The following table sets forth information concerning the persons who own,
as of the date hereof, more than 5% of the Company's currently outstanding
voting stock assuming no conversion of the currently outstanding shares of Class
B Common Stock into Class A Common Stock.

OWNERSHIP OF THE CURRENTLY OUTSTANDING SHARES OF CLASS A COMMON STOCK

<TABLE>
<CAPTION>
NAME AND
ADDRESS
TITLE OF OF BENEFICIAL NUMBER PERCENT OF
CLASS OWNER OF SHARES CLASS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Common LSR Hyperion Corp.(1) 188,747 49.4%
Stock 50 Charles Lindbergh Blvd.
Uniondale, NY 11553
Class A Common SAR Hyperion Corp.(2) 93,906 24.6%
Stock 50 Charles Lindbergh Blvd.
Uniondale, NY 11553
Class A Common SAS Hyperion Corp.(3) 93,906 24.6%
Stock 50 Charles Lindbergh Blvd.
Uniondale, NY 11553
Class A Common Hyperion Funding Corp.(4) 5,366 1.4%
Stock 50 Charles Lindbergh Blvd.
Uniondale, NY 11553
</TABLE>

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

(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) The shareholders of Hyperion Funding Corp. are Lewis S. Ranieri, Salvatore
A. Ranieri, Scott A. Shay and Kendrick R. Wilson III, all of whom are
directors of the Company.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information, as of the date of this
Prospectus, about certain persons who own more than 5% of the Company's voting
stock assuming all currently outstanding shares of Class B Common Stock
(including 1,503,560 shares of Class B Common Stock held by the FDIC-FRF), were
converted into Class A Common Stock. As discussed under "Description of Capital
Stock -- Common Stock -- Conversion," the Certificate, the Letter Agreements and
the Management Stock Grant Agreements impose certain restrictions on the ability
of holders to convert their shares of Class B Common Stock into Class A Common
Stock which generally prohibit any holder, other than the holders of the
currently outstanding shares of Class A Common Stock, from converting shares of
Class B Common Stock into Class A Common Stock if after giving effect to such
conversion such holder would become the beneficial owner of more than 9.9% of
the then outstanding shares of Class A Common Stock. In addition, under the
terms of the Charter and the Letter Agreements, the shares of Class B Common
Stock owned by The Equitable Life Assurance Society of the United States,
Equitable Variable Life Insurance Company and The Prudential Insurance Company
of America are subject to additional conversion restrictions. For further
information concerning the ownership of shares of Class A Common Stock and Class
B Common Stock before and following the Offering, see "Selling Stockholders" and
"-- Security Ownership of Management."

<TABLE>
<CAPTION>
COMMON STOCK
SHARES OF CLASS A SHARES OF CLASS B TOTAL SHARES PERCENTAGE
COMMON STOCK COMMON STOCK OF COMMON OWNED
OWNED BEFORE OWNED BEFORE STOCK OWNED BEFORE
NAME OF BENEFICIAL OWNER OFFERING OFFERING BEFORE OFFERING OFFERING
- -------------------------------------- ----------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C>
The Prudential Insurance Company of
America............................. 0 5,279,895 5,279,895 17.2%
Ameritech Pension Trust............... 0 2,817,209 2,817,209 9.2%
American Home Assurance Co. .......... 0 2,790,772 2,790,772 9.1%
LW-SP1, L.P. and LW-SP2, L.P. ........ 0 2,146,748 2,146,748 7.0%
Lewis S. Ranieri...................... 194,113 1,782,542 1,976,655 6.4%
The Equitable Life Assurance Society
of the United States and Equitable
Variable Life Insurance Company..... 0 1,730,705 1,730,705 5.6%
</TABLE>

131
<PAGE> 134

Security Ownership of Management

The following table sets forth information, as of the date of this
Prospectus, 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 and all of the directors and executive
officers of the Company as a group.

SECURITY OWNERSHIP OF MANAGEMENT(3)

<TABLE>
<CAPTION>
SHARES OF SHARES OF TOTAL PERCENTAGE
CLASS A CLASS B SHARES OF OF TOTAL
COMMON PERCENTAGE COMMON PERCENTAGE COMMON COMMON
STOCK OF CURRENTLY STOCK OF CURRENTLY STOCK STOCK
OWNED OUTSTANDING OWNED OUTSTANDING OWNED OWNED
BEFORE THE CLASS A BEFORE THE CLASS B BEFORE THE BEFORE THE
NAME OF BENEFICIAL OWNER OFFERING COMMON STOCK OFFERING COMMON STOCK OFFERING OFFERING
- -------------------------------- ---------- ------------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry C. Burkholder, President 135,455 0.4% 135,455 0.4%
and Chief Executive Officer
Anthony J. Nocella, Executive 43,614 0.1% 43,614 0.1%
Vice President and Chief
Financial Officer
Jonathon K. Heffron, Executive 43,614 0.1% 43,614 0.1%
Vice President, General
Counsel, and Chief Operation
Officer
George R. Bender, Executive Vice 6,791 * 6,791 *
President
Leslie H. Green, Senior Vice 6,791 * 6,791 *
President Operations &
Technology
Lewis S. Ranieri, Director 194,113 50.8% 1,782,542(1) 5.9%(1) 1,976,655(1) 6.4%(1)
Salvatore A. Ranieri, Director 93,906 24.6% 845,153(2) 2.8%(2) 939,059(2) 3.1%(2)
Scott A. Shay, Director 93,906 24.6% 850,520 2.8% 944,426 3.1%
Lawrence Chimerine, Director 4,138 * 4,138 *
Paul M. Horvitz, Director 4,138 * 4,138 *
Alan E. Master, Director 1,380 * 1,380 *
David M. Golush, Director 423,251 1.4% 423,251 1.4%
Patricia A. Sloan, Director 193,792 0.6% 193,792 0.6%
Kendrick R. Wilson III, Director 281,036 0.9% 281,036 0.9%
Directors and Executive Officers 381,925 100% 4,641,262 15.3% 5,023,187 16.4%
as a Group
</TABLE>

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

(1) Excludes 752 shares held as custodian for two minors as to which Lewis S.
Ranieri disclaims beneficial ownership.

(2) Excludes 7,513 shares held as custodian for a minor as to which Salvatore A.
Ranieri disclaims beneficial ownership.

(3) This table includes shares of Class B Common Stock issued pursuant to the
executive management compensation program but does not include any shares
issuable upon exercise of management stock options. For purposes of
calculating percentages, the 1,503,560 shares of Class B Common Stock held
by the FDIC-FRF are included in the outstanding shares of Common Stock.

132
<PAGE> 135

Principal Stockholders, Bank Preferred Stock

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

Preferred Stock, Series A

<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
----------------------------------------------------------- ---------------- --------
<S> <C> <C>
Lewis S. Ranieri........................................... -- *
Salvatore A. Ranieri....................................... -- *
Scott A. Shay.............................................. -- *
Lawrence Chimerine......................................... 1,000 *
David M. Golush............................................ 2,100 *
Paul M. Horvitz............................................ 400(2) *
Alan E. Master............................................. 600 *
Patricia A. Sloan.......................................... -- *
Kendrick R. Wilson III..................................... -- *
Barry C. Burkholder........................................ 8,000 *
George R. Bender........................................... 4,000 *
Anthony J. Nocella......................................... 1,000 *
Jonathon K. Heffron........................................ 1,400(3) *
Leslie H. Green............................................ 1,000 *
Directors and Executive Officers as a Group................ 20,070 *
</TABLE>

Preferred Stock, Series B

<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
----------------------------------------------------------- ---------------- --------
<S> <C> <C>
Lewis S. Ranieri........................................... -- *
Salvatore A. Ranieri....................................... -- *
Scott A. Shay.............................................. -- *
Lawrence Chimerine......................................... 1,000 *
David M. Golush............................................ -- *
Paul M. Horwitz............................................ -- *
Alan E. Master............................................. 2,000 *
Patricia A. Sloan.......................................... -- *
Kendrick R. Wilson III..................................... -- *
Barry C. Burkholder........................................ -- *
George R. Bender........................................... -- *
Anthony J. Nocella......................................... 2,000 *
Jonathon K. Heffron........................................ -- *
Leslie H. Green............................................ 1,000 *
Directors and Executive Officers as a Group................ 6,000 *
</TABLE>

- ---------------
* 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) 200 shares direct, 200 shares owned by spouse.

(3) 1,000 shares direct, 400 shares held as custodian for minor children.

133
<PAGE> 136

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 disinterested directors of the Bank have approved entering into an
agreement with a subsidiary of Hyperion Partners II, whereby Cardholder
Management Services L.P. ("CMS"), a subsidiary of Hyperion Partners II, CMS
would act as the servicer for a debit card offered to customers of the Bank and
a credit card portfolio originated by the Bank. Lewis S. Ranieri, Scott A. Shay,
David M. Golush and Patricia A. Sloan, who are directors of the Company, have a
material interest in Hyperion Partners II. The Company believes that the terms
and conditions of this agreement are as favorable to the Bank as those that
could have been arranged with an independent third party.

Effective as of the date of the consummation of the Offering, the Company
will enter into a consulting agreement pursuant to which Lewis S. Ranieri will
serve as a consultant to the Company providing strategic and managerial advice
to the Company in exchange for an annual consulting fee of $250,000. The
consulting agreement will be in effect until the earliest of (i) the third
anniversary of the agreement, (ii) the date that is 180 days after the date on
which either Mr. Ranieri or the Company delivers written notice to the other
party terminating the agreement, and (iii) the date on which Mr. Ranieri becomes
disabled or dies. The consulting agreement does not prevent Mr. Ranieri from
engaging in business endeavors which may be competitive with the businesses of
the Company.

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. The Company believes that the terms and conditions of this
agreement are as favorable to the Bank as those that could have been arranged
with an independent third party.

Prior to January 1993, Hyperion Holdings, as a subsidiary of Hyperion
Partners, held a majority interest in a number of closely-held corporations,
including Hyperion Capital, Centeq Holdings Inc., which held the Centeq
Companies, which were real estate service companies, and general partners in
limited partnerships that held real estate investments. See "Selling
Stockholders". In January 1993, Hyperion Holdings transferred all of its
holdings to Hyperion Partners in exchange for a note of approximately $25
million which was paid out to Hyperion Partners in April 1996 in connection with
the Restructuring. See "Summary -- Background of the Offering".

134
<PAGE> 137

SELLING STOCKHOLDERS

The Selling Stockholders consist of the general partners and certain of the
limited of Hyperion Partners, three other entities with which an affiliate of
Hyperion Partners has a fiduciary relationship, and the FDIC-FRF. LW-SP1 and
LW-SP2 are limited partners of Hyperion Partners but are not Selling
Stockholders. See "Underwriting". The limited and general partners of Hyperion
Partners received Class A Common Stock and Class B Common Stock in the
Restructuring which was effected in June 18, 1996. See "Prospectus
Summary -- Background of the Offering".

The following table sets forth information with respect to the beneficial
ownership of Common Stock by the Selling Stockholders 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)
and assuming all shares of Class B Common Stock are converted into Class A
Common Stock following the Offering. As discussed under "Description of Capital
Stock -- Common Stock -- Conversion", the ability of the Selling Stockholders to
convert their shares of Class B Common Stock into Class A Common Stock is
subject to certain restrictions. It is not anticipated that these restrictions
will have a significant continuing effect following the Offering other than with
respect to the shares of Class B Common Stock owned by The Equitable Life
Assurance Society of the United States, Equitable Variable Life Insurance
Company and The Prudential Insurance Company of America. Accordingly, the
Company anticipates that following the Offering, most of the holders of the
Class B Common Stock will be able to convert their shares of Class B Common
Stock into shares of Class A Common Stock following the Offering.

<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS B CLASS A
CLASS A COMMON CLASS B COMMON SHARES OF COMMON
COMMON STOCK-- COMMON STOCK-- SHARES OF COMMON STOCK--
STOCK-- PERCENT STOCK-- PERCENT COMMON STOCK-- PERCENT
OWNED OWNED OWNED OWNED STOCK OWNED OWNED
BEFORE BEFORE BEFORE BEFORE OFFERED AFTER AFTER
OFFERING OFFERING OFFERING OFFERING HEREBY(8) OFFERING(9) OFFERING(10)
-------- -------- --------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Federal Deposit Insurance
Corporation-FRF........................ 0 0 1,503,560(7) 5.0% 1,503,560 0 0
LSR Hyperion Corp.(1)................... 188,747 49.4% 1,698,725 5.6% 566,242 1,321,230 4.2%
Hyperion Funding Corp.(2)............... 5,366 1.4% 48,295 0.2% 8,586 45,075 0.1%
SAR Hyperion Corp.(3)................... 93,906 24.6% 845,153 2.8% 150,249 788,810 2.5%
SAS Hyperion Corp.(4)................... 93,906 24.6% 845,153 2.8% 150,249 788,810 2.5%
KRW Hyperion Corp.(5)................... 0 0 281,036 0.9% 44,966 236,070 0.7%
CJK Hyperion Corp.(6)................... 0 0 226,676 0.7% 36,268 190,408 0.6%
David M. Golush......................... 0 0 423,251 1.4% 67,720 355,531 1.1%
Patricia A. Sloan....................... 0 0 193,792 0.6% 31,007 162,785 0.5%
David W. Marcus......................... 0 0 176,630 0.6% 28,261 148,369 0.5%
Jeffrey P. Cheesman..................... 0 0 152,709 0.5% 20,000 132,709 0.4%
Robert A. Perro......................... 0 0 98,149 0.3% 15,704 82,445 0.3%
The Prudential Insurance Company of
America............................... 0 0 5,279,895 17.4% 2,375,953 2,903,942 9.2%
American Home Assurance Company......... 0 0 2,790,772 9.2% 1,255,847 1,534,925 4.9%
Ameritech Pension Trust................. 0 0 2,817,209 9.3% 1,267,744 1,549,465 4.9%
The Equitable Life Assurance Society of
the United States..................... 0 0 1,623,368 5.4% 730,516 892,852 2.8%
Equitable Variable Life Insurance
Company............................... 0 0 107,337 0.4% 48,302 59,035 0.2%
Equitable Deal Flow Fund LP............. 0 0 907,200 3.0% 145,152 762,048 2.4%
Equitable Capital Partners LP........... 0 0 1,085,400 3.6% 173,664 911,736 2.9%
Equitable Capital Partners (Retirement
Fund) LP.............................. 0 0 534,600 1.8% 85,536 449,064 1.4%
Lewis S. Ranieri........................ 0 0 11,405 * 1,825 9,580 *
Salvatore A. Ranieri Cust for Margaret
Ranieri NY UGMA-AGE 21................ 0 0 7,514 * 1,202 6,312 *
Lewis S. Ranieri A/C/F Eric Jimenez NJ
UTMA-21............................... 0 0 376 * 60 316 *
Lewis S. Ranieri A/C/F Jason Jimenez NJ
UTMA-21............................... 0 0 376 * 60 316 *
Ranieri Family Trust F/B/O Claudia L.
Ranieri U/A 7/1/93.................... 0 0 4,938 * 790 4,148 *
Ranieri Family Trust F/B/O Angela S.
Ranieri U/A 7/1/93.................... 0 0 4,938 * 790 4,148 *
Trust F/B/O Dara Jen
Golush U/A 12/20/84................... 0 0 3,086 * 494 2,592 *
Trust F/B/O Jason Reid Golush U/A
12/20/84.............................. 0 0 2,683 * 429 2,254 *
Gail W. Marcus.......................... 0 0 2,281 * 365 1,916 *
Janet L. Perro.......................... 0 0 1,073 * 172 901 *
Ranieri Bros. Shay & Co., Inc. ......... 0 0 24,117 0.1% 3,859 20,258 0.1%
</TABLE>

135
<PAGE> 138

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

(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) FDIC - FRF acquired shares of Class B Common Stock as a result of the
Warrant Exchange Agreement.

(8) Represents shares of Class B Common Stock converted into shares of Class A
Common Stock upon sale in the Offering.

(9) Represents shares of both Class A Common Stock and Class B Common Stock
owned after the Offering.

(10) The total outstanding shares for purposes of this column include shares of
Class A Common Stock sold by the Company in the Offering and assumes that
following the Offering all shares of Class B Common Stock are converted to
shares of Class A Common Stock. The total does not include any shares
issuable upon exercise of Management Stock Options. As discussed under
"Description of Capital Stock -- Common Stock -- Conversion", The Equitable
Life Assurance Society of the United States, Equitable Variable Life
Insurance Company and The Prudential Insurance Company of America, as well
as the Company's other stockholders, will continue to be subject to certain
restrictions on their ability to convert their shares of Class B Common
Stock following the Offering.

* Less than 0.1%.

136
<PAGE> 139

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, most of the assets of which were sold to Camden
Property Trust, a real estate investment trust, (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.
Hyperion Partners has sold or liquidated the majority of its investments.

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 Boards of Directors of the
Company and the Bank. See "Risk Factors -- Concentration of Ownership".

Prior to the Restructuring, Hyperion Partners held all of the 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.

The FDIC is a government-controlled corporation and an instrumentality of
the United States. Under the provisions of FIRREA, all of the assets and
liabilities of the FSLIC were transferred to the FRF, which is managed by the
FDIC.

In connection with the Acquisition, the Bank issued the Warrant, which
entitled the FDIC-FRF to acquire 158,823 shares Bank Common Stock at $0.01 per
share.

On July 24, 1996, the FDIC-FRF, the Bank and the Company entered into the
Warrant Exchange Agreement pursuant to which the FDIC-FRF surrendered to the
Bank a portion of the Warrant for a cash payment of $5.9 million and exercised
the balance of the Warrant. Immediately thereafter, the FDIC-FRF exchanged the
shares of Bank Common Stock issued upon exercise of the Warrant for 1,503,560
shares of Class B Common Stock. As part of the Offering, the FDIC-FRF is selling
all of such shares of Class B Common Stock owned by it. Following the
consummation of the Offering, all rights and obligations under the Warrant and
the Warrant Agreement will be terminated.

In its capacity as manager of the FRF or otherwise, the FDIC has not held
any position, office or other material relationship with the Company or any of
its affiliates within the past three years. Following the consummation of the
Offering, the FDIC will not own, in any capacity, any other securities of the
Company and will not have any contractual right to acquire any such securities.

As a government-controlled corporation, the FDIC benefits from certain
governmental immunities from actions under the federal securities laws.

The FDIC has regulatory authority over the Bank. A primary purpose of the
FDIC's regulatory powers is to safeguard the BIF and the SAIF. All depository
institutions which are insured by the BIF or the SAIF are also subject to
regulation by the FDIC. The FDIC is authorized to set standards for the
operations of insured depository institutions, examine such institutions to
ensure compliance with the standards, take action to

137
<PAGE> 140

prevent troubled institutions from failing and to pay depositors, in accordance
with the FDI Act and applicable regulations, if any institution fails. The FDIC
has substantial enforcement authority with respect to insured depository
institutions and, under certain circumstances, is authorized to appoint a
conservator or receiver for an insured depository institution. The FDIC may
terminate the deposit insurance of an insured depository institution if it
determines that the institution is engaging in unsafe or unsound practices, has
violated any applicable law, regulation, order or any condition imposed in
writing by the FDIC, or if the institution is in an unsafe and unsound condition
such that it should not continue operations.

SELLING STOCKHOLDER LETTER AGREEMENT

The following summary of the material provisions of the Letter Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Letter Agreement which is an exhibit to the Registration Statement of which
this Prospectus forms a part.

Each of the Selling Stockholders (other than the FDIC-FRF), and the
Non-selling Stockholders including LW-SP1 and LW-SP2 (which are subject to each
of the provisions described herein as applicable to Selling Stockholders, except
as otherwise indicated) has entered into a Letter Agreement with each of
Hyperion Partners and the Company (the "Letter Agreement"). Pursuant to the
Letter Agreement, each Selling Stockholder and Non-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 and Non-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 and Non-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 Offering, such stockholder
would not effect any Transfer of shares of capital stock of the Company (a) in
the case of Selling Stockholders who received shares in respect of Class C
Common Stock in the Merger, except as such stockholder would have been permitted
to transfer such Class C Common Stock under the Stockholders' Agreement, dated
as of January 5, 1990, by and among the Company and the other parties specified
therein (the "Stockholders Agreement"), and (b) in the case of any other Selling
Stockholders, 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 initial public offering ("IPO") or October
31, 1996, to transfer any such shares owned by such 5% Stockholder (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 Letter Agreement, the Company is obligated to provide each
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 and the Stockholders'
Agreement. Under the Letter Agreements, each Selling Stockholder and Non-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.

Each Selling Stockholder and Non-selling Stockholder retaining shares of
Common Stock may not sell such shares for (1) one year after the Offering, if
such stock was received in respect of general partnership interests in Hyperion
Partners or (2) six months after the Offering (although a regulated New Jersey
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 Offering, each 5% Stockholder may sell up to 45% of such holder's
shares of Common Stock in the Offering, except for LW-SP1 and LW-SP2, affiliates
of Lehman Brothers Inc., which are prohibited from

138
<PAGE> 141

selling any shares until August 8, 1998, and any other Selling Stockholder may
sell up to 16% of its shares in the 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 Offering).
Each Selling Stockholder and Non-selling Stockholder acknowledged that, except
for shares that could have been sold pursuant to the 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 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.

The Company Board has approved sales of shares of Class A Common Stock in
excess of the 45% and 16% limitations as necessary to satisfy the Underwriters'
over-allotment options.

Pursuant to the Letter Agreement, as soon as practicable after the
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 or Non-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 first to
occur of (i) the date on which all shares of Common Stock registered thereunder
have been sold pursuant thereto, (ii) December 31, 1999, and (iii) the date on
which 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. See "Description of Capital Stock -- Common Stock --
Conversion".

In connection with the Letter Agreement, each of the Selling Stockholders
and Non-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
Offering or on October 31, 1996 (except for certain provisions restricting
transfers and pertaining to registration rights and conversion of Class B Common
Stock).

139
<PAGE> 142

DESCRIPTION OF CAPITAL STOCK

The following summary of the material provisions of the Certificate and
By-Laws and the Letter Agreements and does not purport to be complete and is
qualified in its entirety by reference to the Certificate and By-Laws and the
Letter Agreements which are exhibits to the Registration Statement of which this
Prospectus forms a part.

AUTHORIZED CAPITAL STOCK

Immediately following the Offering, the Company's authorized capital stock
will consist of 10 million shares of preferred stock, par value $0.01 per share
("Preferred Stock"), 40 million shares of Class A Common Stock and, 40 million
shares of Class B Common Stock. Immediately following the Offering, 10,881,925
shares of Class A Common Stock will be outstanding and 20,713,671 shares of
Class B Common Stock will be outstanding (assuming no conversion of shares of
Class B Common Stock into Class A Common Stock other than those shares that are
converted as a result of sale in the Offering and no exercise of the
Underwriters' over-allotment option). All of the shares of Class A Common Stock
that will be outstanding immediately following the Offering, including the
shares of Class A Common Stock sold in the Offering, will be validly issued,
fully paid and nonassessable. As of the date hereof, there were four holders of
Class A Common Stock and 53 holders of Class B Common Stock.

COMMON STOCK

Dividends

The holders of each class of Common Stock, to the exclusion of the holders
of Preferred Stock, share equally, share for share, in all dividends or other
distributions. The Company's ability to pay dividends is limited by certain
restrictions generally imposed on Delaware corporations. Under these
restrictions, dividends may be paid only out of "surplus," as defined by
Delaware law, or, if there should be no surplus, out of the corporation's net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. See "Dividend Policy".

Liquidation Rights

In the event of a liquidation, dissolution or winding up of the affairs of
the Company, after payment has been made to the holders of Preferred Stock of
the full amount to which they are entitled, the holders of Common Stock share
ratably according to the number of shares of Common Stock held by them, in all
remaining assets of the Company available for distribution to its stockholders.

Voting Rights

The holders of Class A Common Stock are entitled to vote on each matter on
which the stockholders of the Company are entitled to vote, and each holder of
Class A Common Stock is entitled to one vote for each share held. The holders of
Class B Common Stock do not have any voting rights except as otherwise required
by applicable law.

Conversion

Each share of Class B Common Stock is convertible into one share of Class A
Common Stock (a) automatically, upon the sale or other transfer of such share of
Class B Common Stock to a person other than an Affiliate (as defined in the
Certificate) of the holder or (b) at the election of the holder of such share of
Class B Common Stock, subject to the terms, conditions and restrictions set
forth in the Letter Agreements, except that clause (b) does not apply to shares
of Class B Common Stock held by The Equitable Life Assurance Society of the
United States or Equitable Variable Life Insurance Company. An "Affiliate" of a
person is defined in the Certificate as any other person directly or indirectly
controlling, controlled by or under common control with such person, and
"control" with respect to any person means the possession, directly or
indirectly, of the power to direct the management and policies of such person,
whether through the ownership

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of voting securities, by contract or otherwise. Elective conversion of Class B
Common Stock pursuant to clause (b) of the first sentence of this paragraph may
not be effected by a Selling Stockholder prior to the earlier to occur of the
consummation of an initial public offering of shares of capital stock of the
Company (including the Offering) or October 31, 1996, unless the Company Board
agrees to such conversion or unless such holder is subject to Title I of ERISA.
Pursuant to the Letter Agreement no holder of Class B Common Stock may convert
such Class B Common Stock to Class A Common Stock if after the conversion the
holder would beneficially own (within the meaning of applicable federal banking
and thrift regulations) more than 9.9% of the outstanding shares of Class A
Common Stock (or such lower percentage as may apply to such holder under
regulatory restrictions). In addition, based upon certain federal bank
regulations requirements, the shares of Class B Common Stock held by The
Prudential Insurance Company of America are currently treated as being
non-convertible into shares of Class A Common Stock under the restrictions
contained in the Letter Agreement. The Management Stock Grant Agreements contain
restrictions on the ability to convert shares of Class B Common Stock into Class
A Common Stock that are substantially similar to the restrictions contained in
the Letter Agreements.

Restrictions on Transfers of Stock

The Certificate prohibits and renders void any transfer of legal or
beneficial ownership of the capital stock of the Company, including warrants,
options and other arrangements that would be treated as options or as stock of
the Company under the Code and applicable Internal Revenue Service regulations,
prior to the earlier of (i) three years following the consummation of an
offering of the Company's capital stock, and (ii) October 31, 1996, if the
trading of Common Stock on the New York Stock Exchange or NASDAQ has not
occurred prior to October 31, 1996, in either case if such transfer would either
(a) cause any person or group of persons to become a 5% Stockholder or (b)
increase the percentage ownership of a 5% Stockholder. The Certificate's
prohibition will not, however, preclude the settlement of any transaction on the
NASDAQ, and will not apply to any transaction approved in advance by the Company
Board or made in compliance with exceptions adopted by the Company Board. This
restriction is intended to prevent transfers of stock of the Company from
triggering an Ownership Change which would result in the limitation of certain
potential tax benefits available to the Company. See "Regulation -- Taxation".

Also, pursuant to the Letter Agreements, the holders of shares of Class B
Common Stock may not transfer such shares of Class B Common Stock other than (i)
to an affiliate, (ii) in a widely-dispersed offering of shares of the Company's
capital stock under an effective registration statement filed under the
Securities Act, or (iii) to any single person, entity or group acting in concert
if the number of shares of Class B Common Stock, if converted into shares of
Class A Common Stock, would entitle the holder to exercise more than 2% of the
voting power of all of the shares of Class A Common Stock that would be
outstanding upon conversion of such shares of Class B Common Stock.

PREFERRED STOCK

The Certificate authorizes the Company Board to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the terms and rights of such series, including (i) the
designation of the series, (ii) the number of shares of the series, which number
the Company Board may thereafter (except where otherwise provided in the
applicable certificate of designation) increase or decrease (but not below the
number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative, and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series shall be
cumulative, (iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any conditions
upon which such dividends will be paid and the date or dates or the method for
determining the date or dates upon which such dividends will be payable; (v) the
redemption rights and price or prices, if any, for shares of the series, (vi)
the terms and amounts of any sinking funds provided for the purchase or
redemption of shares of the series, (vii) the amounts payable on and the
preferences, if any, of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible or

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exchangeable into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates as of
which such shares will be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made, (ix) restrictions
on the issuance of shares of the same series or of any other class or series,
(x) the voting rights, if any, of the holders of the shares of the series, and
(xi) any other relative rights, preferences and limitations of such series.

The Company believes that the ability of the Company Board to issue one or
more series of Preferred Stock, while providing the Company with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs which might arise, could make it more difficult for a third
party to acquire a majority of the outstanding voting stock. The authorized
shares of Preferred Stock, as well as shares of Common Stock, will be available
for issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. If the approval of the Company's stockholders is not required for the
issuance of shares of Preferred Stock or Common Stock, the Company Board may
determine not to seek stockholder approval. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the Company's stockholders.

Although the Company Board has no intention at the present time of doing
so, it could issue a series of Preferred Stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. The Company Board will make any determination to issue such
shares based on its judgment as to the best interests of the Company and its
stockholders. The Company Board, in so acting, could issue Preferred Stock
having terms that could discourage an acquisition attempt through which an
acquirer may be able to change the composition of the Company Board, including a
tender offer or other transaction that some, or a majority, of the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.

CERTAIN PROVISIONS OF THE CERTIFICATE AND BY-LAWS; ANTI-TAKEOVER EFFECTS

Board of Directors

The Certificate provides that, except as otherwise fixed by or pursuant to
the provisions of a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, the number of the directors
of the Company will be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the total number of directors which the
Company would have if there were no vacancies (the "Whole Board") (but shall not
be less than three). The directors, other than those who may be elected by the
holders of Preferred Stock, will be classified with respect to the time for
which they severally hold office into three classes, as nearly equal in number
as possible, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1996, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1997 and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1998, with each director to
hold office until its successor is duly elected and qualified. Commencing with
the 1996 annual meeting of stockholders, directors elected to succeed directors
whose terms then expire will be elected for a term of office to expire at the
third succeeding annual meeting of stockholders after their election, with each
director to hold office until such person's successor is duly elected and
qualified.

The Certificate provides that, except as otherwise provided for or fixed by
or pursuant to a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Company Board resulting from death, resignation, disqualification, removal or
other cause will be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Company Board, and not by the stockholders. Any director elected in accordance
with the preceding sentence will hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the

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vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
Company Board will shorten the term of any incumbent director. Subject to the
rights of holders of Preferred Stock, any director may be removed from office
only for cause by the affirmative vote of the holders of at least a majority of
the voting power of all Voting Stock then outstanding, voting together as a
single class.

These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of the Company Board by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of the Company Board. Accordingly,
these provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of the Company.

Stockholder Action by Unanimous Written Consent; Special Meetings

Except as otherwise required by law and subject to the rights of the
holders of any Preferred Stock, special meetings of stockholders of the Company
for any purpose or purposes may be called only by the Company Board pursuant to
a resolution stating the purpose or purposes thereof approved by a majority of
the Whole Board or by the Chairman of the Board. Any power of stockholders to
call a special meeting is specifically denied. No business other than that
stated in the notice shall be transacted at any special meeting. Stockholders
entitled to vote at an annual or special meeting may act by written consent in
lieu of such meeting only if such consent is unanimous. These provisions may
have the effect of delaying consideration of a stockholder proposal until the
next annual meeting unless a special meeting is called by the Company Board or
the Chairman of the Board.

Advance Notice Procedures

The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure"). The Stockholder Notice Procedure provides that only individuals who
are nominated by, or at the direction of, the Chairman of the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Chairman of the
Board or the Company Board, or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. Under the Stockholder Notice Procedure, for
notice of stockholder nominations to be made at an annual meeting to be timely,
such notice must be received by the Company not later than the close of business
on the 90th calendar day nor earlier than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting (except that, in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th calendar day prior to such
annual meeting and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting or the 10th calendar day following the
day on which public announcement of a meeting date is first made by the
Company).

Notwithstanding the foregoing, in the event that the number of directors to
be elected to the Company Board is increased and there is no public announcement
by the Company naming all of the nominees for director or specifying the size of
the increased Company Board at least 100 calendar days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice also
will be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered not later than the
close of business on the 10th calendar day following the day on which such
public announcement is first made by the Company. Under the Stockholder Notice
Procedure, for notice of a stockholder nomination to be made at a special
meeting at which directors are to be elected to be timely, such notice must be
received by the Company not earlier than the close of business on the 120th
calendar day prior to such special meeting

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and not later than the close of business on the 90th calendar day prior to such
special meeting or the 10th calendar day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Company Board to be elected at such meeting.

In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate an individual for election as a director or
relating to the conduct of business other than the nomination of directors must
contain certain specified information. If the chairman of a meeting determines
that an individual was not nominated, or other business was not brought before
the meeting, in accordance with the Stockholder Notice Procedure, such
individual will not be eligible for election as a director, or such business
will not be conducted at such meeting, as the case may be.

Amendment

The Certificate provides that the affirmative vote of the holders of at
least 80% of the Voting Stock, voting together as a single class, is required to
amend provisions of the Certificate relating to stockholder action without a
meeting; the calling of special meetings; the number, election and term of the
Company's directors; the filling of vacancies; and the removal of directors. The
Certificate further provides that the related By-Laws described above (including
the Stockholder Notice Procedure) may be amended only by the Company Board or by
the affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of Voting Stock, voting together as a single class.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the time that such stockholder becomes an interested
stockholder unless (i) prior to such time, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) at or subsequent to such time,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as otherwise specified in
Section 203, an interested stockholder is defined to include any person that is
(x) the owner of 15% or more of the outstanding voting stock of the corporation,
or (y) is an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date of determination; and the
affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring the
Company to negotiate in advance with the Company Board, since the stockholder
approval requirement would be avoided if a majority of the directors then in
office approves either the business combination or the transaction which results
in any such person becoming an interested shareholder. Such provisions also may
have the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which the Company's stockholders may otherwise deem to be in their
best interests.

LIABILITY OF DIRECTORS; INDEMNIFICATION

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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.

While the Certificate provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate such
duty. Accordingly, the Certificate will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.

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.

TRANSFER AGENT AND REGISTRAR

The Bank of New York will be the transfer agent and registrar for the Class
A Common Stock.

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UNDERWRITING

Subject to the terms and conditions set forth in the purchase agreement
(the "Purchase Agreement") among the Selling Stockholders, the Company, the Bank
and each of the underwriters named below (the "Underwriters"), the Company and
the Selling Stockholders have agreed to sell to each of the Underwriters, and
each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, is acting as representative (the "Representative"), has severally
agreed to purchase from the Company and the Selling Stockholders the aggregate
number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Lehman Brothers Inc. .............................................
Smith Barney Inc. ................................................
-------
Total...................................................
=======
</TABLE>

The shares of Common Stock to be sold by the Selling Stockholders to the
Underwriters include shares of Class B Common Stock which upon sale to the
Underwriters pursuant to the Purchase Agreement will be automatically converted
share for share into shares of Class A Common Stock in accordance with Section
3(b)(iv) of Article IV of the Certificate. References herein to the Class A
Common Stock to be sold and delivered to the Underwriters pursuant to the
Purchase Agreement and to shares of Class A Common Stock offered hereby include
shares of Class A Common Stock issuable as a result of such conversions.

In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Class A
Common Stock being sold pursuant to such Purchase Agreement if any of the shares
of Class A Common Stock being sold pursuant to such Purchase Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased.

The Underwriters have advised the Company and the Selling Stockholders that
the Underwriters propose to offer the shares of Class A Common Stock offered
hereby to the public initially at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price, less a
concession not in excess of $ per share of Class A Common Stock. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Class A Common Stock on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed. None of the Underwriters will confirm sales to any
account over which it exercises discretionary authority.

The Selling Stockholders (other than the FDIC-FRF) have granted to the
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to an aggregate of an additional 1,575,000
shares of Class A Common Stock at the initial public offering price set forth on
the cover page of this Prospectus, less the underwriting discount. The
Underwriters may exercise the option only to cover over-allotments, if any, made
on the sale of shares of Class A Common Stock offered hereby. To the extent that
the Underwriters exercise the option, each Underwriter will be obligated,
subject to certain conditions, to purchase the same percentage of such
additional shares of Class A Common Stock as the number of shares of Class A
Common Stock to be purchased by it bears to the total number of shares of Class
A Common Stock initially offered by the Underwriters.

The Selling Stockholders and the Non-selling Stockholders have agreed with
the Underwriters not to directly or indirectly offer, sell, contract to sell or
otherwise dispose of any shares of Class A Common Stock of the Company or any
interests therein or securities convertible into or exchangeable or exercisable
for shares of Class A Common Stock of the Company (except for the shares of
Class A Common Stock offered hereby), for a period of 180 days after the date of
this Prospectus, without the prior written consent of the Representative. In
addition, pursuant to the Letter Agreement, the Selling Stockholders retaining
shares of Common Stock following completion of the Offering and the Non-selling
Stockholders have agreed not to sell any of such shares for a period of six
months after the Offering in the case of former limited partners of

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Hyperion Partners and one year after the Offering in the case of former general
partners of Hyperion Partners, provided, that the foregoing restriction does not
restrict The Prudential Insurance Company of America from selling shares not
sold in the Offering in a private off-market transaction not involving a public
offering, subject to such reasonable representations as the Underwriters may
request, subject to the other restrictions contained in the Letter Agreement,
Charter and By-Laws. Pursuant to the Certificate, following the Offering, each
5% Stockholder is subject to restrictions on the acquisition and transfer of
capital stock of the Company, including shares of Common Stock, for a period of
three years. See "Description of Capital Stock -- Common Stock -- Restrictions
on Transfers of Stock".

At the request of the Company, the Underwriters have initially reserved up
to ten percent of the shares of Class A Common Stock for sale (at the initial
public offering price) to certain employees of the Company and its affiliates
who have expressed an interest in purchasing such shares. The number of shares
of Class A Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the Underwriters to the general public on
the same basis as other shares offered hereby.

The Company and the Bank jointly and severally, and the Selling
Stockholders severally, have agreed to indemnify the Underwriters and any person
who controls any Underwriter, against certain liabilities, including liabilities
under the Securities Act with respect to certain untrue statements contained in
or omissions from any preliminary prospectus, this Prospectus or the
Registration Statement of which it is a part, or any amendment thereof or
supplement thereto, or to contribute to payments the Underwriters may be
required to make in respect thereof.

Certain of the Underwriters or their affiliates have provided from time to
time, and may provide in the future, investment banking services to the Company
and its affiliates, for which such Underwriters or their affiliates have
received or will receive fees and commissions.

LW-SP1 and LW-SP2 are limited partnerships of which LW Real Estate
Investments, L.P. is general partner and of which it owns a 99% interest. Lehman
Brothers Inc. owns an approximately 75% partnership interest in LW Real Estate
Investments, L.P. LW-SP1 and LW-SP2 hold a limited partnership interest in
Hyperion Partners. Accordingly, as a result of the Restructuring, LW-SP1 and
LW-SP2 became owners of Class B Common Stock. Although LW-SP1 and LW-SP2 have
indicated their intention not to participate in the Offering and, accordingly,
are not among the Selling Stockholders, they have entered into the Letter
Agreement pursuant to which, among other things, they have agreed not to
transfer their Common Stock until August 8, 1998. In addition, The Prudential
Insurance Company of America ("Prudential"), a limited partner of Hyperion
Partners, became the holder of 17.4% of the Class B Common Stock as a result of
the Restructuring. Prudential is a Selling Stockholder offering 24.8% of the
Class A Common Stock being offered by the Selling Stockholders pursuant hereto.
Prudential Securities Incorporated, an affiliate of Prudential, is one of the
Underwriters. See "Selling Stockholders". In light of the indirect beneficial
ownership interest of Lehman Brothers Inc. in the Company and Prudential's
relationship to Prudential Securities Incorporated, the Offering is being made
pursuant to the provisions of Rule 2720 ("Schedule E") of the NASD Conduct
Rules. Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as qualified
independent underwriter as defined in Schedule E and in accordance with Schedule
E will conduct due diligence and recommend the initial public offering price of
the shares of Class A Common Stock offered hereby. The Company and the Bank
jointly and severally have agreed to indemnify Merrill Lynch, Pierce, Fenner &
Smith Incorporated and each person who controls it against any losses, claims,
damages, liabilities and judgments incurred as a result of its participation as
a qualified independent underwriter.

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock was
determined by negotiations between the Company and the Underwriters. Among the
factors considered in determining the initial public offering price were the
sales, earnings and certain other pro forma financial and operating information
of the Company in recent periods, the future prospects of the Company and its
industry in general, and certain ratios and market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company.

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LEGAL MATTERS

Certain legal matters with respect to the validity of the Class A Common
Stock offered hereby have been passed upon for the Company by Wachtell, Lipton,
Rosen & Katz, New York, New York. Certain legal matters will be passed upon for
the Underwriters by Cleary, Gottlieb, Steen and Hamilton, New York, New York.

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.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock offered
hereby (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement"). This Prospectus, which forms a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract, agreement or other document
are not necessarily complete, and, in each instance, reference is made to the
copy of the document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and 7
World Trade Center (13th Floor), New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the Offering, the Company will become subject
to the informational requirements of the Exchange Act. The Company will fulfill
its obligations with respect to such requirements by filing periodic reports and
other information with the Commission. In addition, the Company intends to
furnish to its stockholders annual reports containing consolidated financial
statements examined by an independent public accounting firm.

148
<PAGE> 151

INDEX OF DEFINED TERMS

<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------- ---
<S> <C>
1988 Act............................... 104
1995 Amendments........................ 100
1996 Stock Incentive Plan.............. 122
15.75% Notes........................... 61
5% Stockholders........................ 19
Acquisition............................ 6
ACE.................................... 107
ADA.................................... 105
adequately capitalized................. 90
affiliate.............................. 98
Agreements............................. 86
ALCO................................... 5
American Marine........................ 115
AMT.................................... 107
AMTI................................... 107
Annual Retainer........................ 126
APY.................................... 105
Assistance Agreement................... 86
Awards................................. 122
Bank................................... 3
Bank Common Stock...................... 3
Bank Preferred Stock................... 10
Barnett................................ 117
BHCA................................... 20
BIF.................................... 20
BSA.................................... 103
By-Laws................................ 7
capital distributions.................. 94
CDs.................................... 52
CEO.................................... 5
Certificate............................ 7
CGSA................................... 85
Change of Control...................... 124
Change of Control Price................ 124
Class A Common Stock................... 1
Class B Common Stock................... 1
Class C Common Stock................... 6
CMOs................................... 78
CMS.................................... 134
Code................................... 19
Commission............................. 1
Committee.............................. 122
Common Stock........................... 1
Company................................ 1
Company Board.......................... 7
Compensation Program................... 121
Consolidated Financial Statements...... 9
core capital........................... 93
Covered Assets......................... 86
Covered Transactions................... 98

<CAPTION>
TERM PAGE
- --------------------------------------- ---
<S> <C>
CRA.................................... 97
DBL.................................... 106
DGCL................................... 22
Director Options....................... 126
Director Stock Plan.................... 125
Distribution........................... 6
DSSP................................... 129
ECOA................................... 24
EFTA................................... 104
electronic fund transfer systems....... 104
Eligible Director...................... 126
employment taxes....................... 125
ERISA.................................. 123
Exchange Act........................... 15
Exchange Offer......................... 8
Expedited Funds Act.................... 104
FASB................................... 49
FDI Act................................ 23
FDIA................................... 97
FDIC................................... 1
FDIC-FRF............................... 1
Federal Reserve Board.................. 16
Federal Tort Claims Act................ 23
federally related mortgage loan........ 101
FH Act................................. 24
FHA.................................... 22
FHLB Dallas............................ 18
FHLBB.................................. 7
FHLMC.................................. 21
FIRREA................................. 7
First Amendment to Warrant Agreement... 87
FNMA................................... 21
Forbearance Agreement.................. 7
FRA.................................... 98
FRF.................................... 1
FSLIC.................................. 1
GAAP................................... 93
gap.................................... 38
GNMA................................... 22
HELOCs................................. 67
HMDA................................... 102
HOLA................................... 89
Holding Co............................. 3
HUD.................................... 101
Hyperion Capital....................... 115
Hyperion Holdings...................... 5
Hyperion Partners...................... 1
Hyperion Partners II................... 23
Hyperion Ventures...................... 137
institution-affiliated parties......... 99
</TABLE>

149
<PAGE> 152

<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------- ---
<S> <C>
interest rate sensitivity gap.......... 82
IPO.................................... 138
IRR.................................... 94
ISOs................................... 125
Lazard Freres.......................... 118
Letter Agreement....................... 138
leverage capital....................... 90
liquid assets.......................... 97
LW-SP1................................. 15
LW-SP2................................. 15
Management Option Agreements........... 122
Management Stock Grant Agreements...... 121
Maxxam................................. 24
MBF.................................... 5
MBS.................................... 3
Merger................................. 6
Merger Agreement....................... 138
Meritor................................ 117
MSRs................................... 3
NASD................................... 85
NASDAQ................................. 1
Net Tax Benefits....................... 108
NOLs................................... 5
non-agency securities.................. 78
non-qualifying loans................... 107
nonconforming subsidiaries............. 93
Non-selling stockholders............... 15
NQOs................................... 125
Offering............................... 1
Old USAT............................... 6
operating subsidiary................... 96
Options................................ 122
Order.................................. 112
OTS.................................... 1
Ownership Change....................... 19
Participants........................... 122
Performance Units...................... 122
Plaintiffs............................. 7
portfolio assets....................... 96
Preferred Stock........................ 140
Principal Shareholder.................. 97
Prudential............................. 147
Purchase Agreement..................... 146
QTL.................................... 92
qualified investments.................. 103
qualifying real property loans......... 107
Registration Statement................. 148

<CAPTION>
TERM PAGE
- --------------------------------------- ---
<S> <C>
REMICs................................. 106
REO.................................... 14
Representative......................... 146
repurchase agreements.................. 49
RESPA.................................. 24
Restricted Period...................... 124
Restricted Stock....................... 122
reverse repurchase agreement........... 18
Restructuring.......................... 6
RTC.................................... 3
SAIF................................... 3
Salomon................................ 115
SARs................................... 122
Schedule E............................. 147
Section 203............................ 22
Securities Act......................... 1
Selling Stockholders................... 1
Senior Notes........................... 8
SESP................................... 129
Settlement Agreement................... 87
SFAS................................... 34
Spread................................. 124
Stockholder Notice Procedure........... 143
Stockholders Agreement................. 138
Tandem SARs............................ 123
tangible capital....................... 93
Tax Benefits Agreement................. 106
Tier 1 association..................... 94
Tier 2 association..................... 94
Tier 3 association..................... 94
Tier 1 risk-based capital.............. 90
TILA................................... 24
TISA................................... 104
total capital.......................... 93
total risk-based capital............... 90
Transfers.............................. 19
UFM.................................... 85
undercapitalized....................... 90
Underwriters........................... 146
VA..................................... 22
Voting Stock........................... 22
Warrant Agreement...................... 87
Warrant Exchange Agreement............. 88
Warrant................................ 6
well-capitalized....................... 90
Whole Board............................ 142
Winstar cases.......................... 7
</TABLE>

150
<PAGE> 153

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
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
</TABLE>

All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or
Notes thereto.

F-1
<PAGE> 154

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 July 24, 1996

F-2
<PAGE> 155

BANK UNITED CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31,
----------- SEPTEMBER 30,
1996 ------------------------
NOTES ----------- 1995 1994
--------- (UNAUDITED) ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
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.............................................. 21 289 289 289
Paid-in capital........................................... 117,722 117,722 121,480
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
<PAGE> 156

BANK UNITED CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, SEPTEMBER 30,
------------------- ------------------------------
NOTES 1996 1995 1995 1994 1993
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
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
<PAGE> 157

BANK UNITED CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------
CLASS A CLASS C UNREALIZED TOTAL
------------------- ------------------ PAID-IN RETAINED GAINS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS (LOSSES) EQUITY
---------- ------ --------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30,
1992......................... 23,828,400 $239 5,034,600 $ 50 $125,404 $106,680 $ -- $232,373
Net income................. -- -- -- -- -- 127,370 -- 127,370
Cost of subsidiary's
preferred stock issu-
ance..................... -- -- -- -- (3,924) -- -- (3,924)
Change in unrealized gains
(losses)................. -- -- -- -- -- -- 33,384 33,384
---------- ------ --------- ------ ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30,
1993......................... 23,828,400 239 5,034,600 50 121,480 234,050 33,384 389,203
Net income................. -- -- -- -- -- 108,970 -- 108,970
Change in unrealized gains
(losses)................. -- -- -- -- -- -- (46,811) (46,811)
---------- ------ --------- ------ ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30,
1994......................... 23,828,400 239 5,034,600 50 121,480 343,020 (13,427) 451,362
Net income................. -- -- -- -- -- 41,719 -- 41,719
Cost of subsidiary's
preferred stock issu-
ance..................... -- -- -- -- (3,758) -- -- (3,758)
Change in unrealized gains
(losses)................. -- -- -- -- -- -- 6,780 6,780
---------- ------ --------- ------ ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30,
1995......................... 23,828,400 $239 5,034,600 $ 50 $117,722 $384,739 $ (6,647) $496,103
========= ======= ======== ======= ============ ============ ============ ============
(UNAUDITED)
BALANCE AT SEPTEMBER 30,
1994......................... 23,828,400 $239 5,034,600 $ 50 $121,480 $343,020 $(13,427) $451,362
Net income................. -- -- -- -- -- 23,659 -- 23,659
Change in unrealized gains
(losses)................. -- -- -- -- -- -- 1,672 1,672
---------- ------ --------- ------ ------------ ------------ ------------ ------------
BALANCE AT MARCH 31, 1995...... 23,828,400 $239 5,034,600 $ 50 $121,480 $366,679 $(11,755) $476,693
========= ======= ======== ======= ============ ============ ============ ============
(UNAUDITED)
BALANCE AT SEPTEMBER 30,
1995......................... 23,828,400 $239 5,034,600 $ 50 $117,722 $384,739 $ (6,647) $496,103
Net income................. -- -- -- -- -- 26,759 -- 26,759
Change in unrealized gains
(losses)................. -- -- -- -- -- -- 3,579 3,579
---------- ------ --------- ------ ------------ ------------ ------------ ------------
BALANCE AT MARCH 31, 1996...... 23,828,400 $239 5,034,600 $ 50 $117,722 $411,498 $ (3,068) $526,441
========= ======= ======== ======= ============ ============ ============ ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE> 158

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
<PAGE> 159

BANK UNITED CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
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
<PAGE> 160

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
<PAGE> 161

BANK UNITED CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
MARCH 31,
-----------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
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
<PAGE> 162

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

F-10
<PAGE> 163

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 for all loans having a servicing fee rate greater than the
"normal" servicing fee rate. 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 classification of the securitized loans is based
on the Company's intent with respect to the newly formed security.

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

F-11
<PAGE> 164

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 the Bank's single family
residential construction, multi-family, commercial real estate, business credit,
and mortgage banker finance line of credit loan categories. See Note 5. 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

F-12
<PAGE> 165

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 Statement 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 the Federal Housing Administration
(the "FHA") insured and the Department of Veteran Affairs (the "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.

F-13
<PAGE> 166

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 five
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 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.

F-14
<PAGE> 167

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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

F-15
<PAGE> 168

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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>

F-16
<PAGE> 169

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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:

<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
1996 1995
------------- -----------------
CARRYING VALUE
-----------------------------------
(IN THOUSANDS)
<S> <C> <C>
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
============= ================
</TABLE>

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
========= ========
</TABLE>

<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
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
========= ========
</TABLE>

F-17
<PAGE> 170

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1994
------------------------------------------------------------
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.................. $ 1,894 $ 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
======== ========
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.

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
====== ======= ======= ========
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
----------------------------------------------------
<S> <C> <C> <C> <C>
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
<PAGE> 171

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
<PAGE> 172

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
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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
======== ========
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
<PAGE> 173

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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. The Bank implemented SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", effective September 30, 1993.

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.

F-21
<PAGE> 174

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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
--------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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>

F-22
<PAGE> 175

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During fiscal 1994 and 1993, the Banking Segment securitized single family
loans from its own portfolio as follows:

SECURITIZATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-----------------------
1994 1993
---------- --------
<S> <C> <C>
(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
</TABLE>

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
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
--------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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 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.

<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>
(IN THOUSANDS)
Proceeds from sales................... $201,523 $77,651 $77,626 $186,190 $403,129
Gross gains on sales.................. 3,472 206 217 16,300 43,712
Gross losses on sales................. 702 201 201 4,812 --
</TABLE>

F-23
<PAGE> 176

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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-24
<PAGE> 177

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
- ------------------------------- ---------- ----- ------------ ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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-25
<PAGE> 178

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
-------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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
======== ======== ======== ======== ======== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1999- 2001- 2006- 2011 AND
1996 1997 1998 2000 2005 2010 THEREAFTER TOTAL
-------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(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-26
<PAGE> 179

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PRINCIPAL BALANCE OF NONACCRUAL LOANS

<TABLE>
<CAPTION>
AT MARCH AT SEPTEMBER 30,
31, ---------------------------------
1996 1995 1994 1993
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
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-27
<PAGE> 180

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 TOTAL
------- ------------ -------- ------ ---------- -------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at
September 30, 1990.......... $ 6,729 $ 38 $ -- $ 53 $ -- $ -- $ -- $ -- $ 6,820
Provision................. 3,133 148 -- 60 552 -- 229 -- 4,122
Charge-offs............... (775) -- (19) -- -- -- -- -- (794)
Recoveries................ -- -- -- -- -- -- -- -- --
Other..................... (131) -- 100 31 -- -- -- -- --
------- ---- ------ ------ -------- ------ ----- ------ -------
Balance at
September 30, 1991.......... 8,956 186 81 144 552 -- 229 -- 10,148
Provision................. 14,156 135 39 75 6,261 -- 467 -- 21,133
Charge-offs............... (2,835) -- (76) -- -- -- (118) -- (3,029)
Recoveries................ 8 -- -- -- -- -- -- -- 8
Other..................... (6,817) -- 100 -- 4,564 -- -- 2,107 (46)
------- ---- ------ ------ -------- ------ ----- ------ -------
Balance at
September 30, 1992.......... 13,468 321 144 219 11,377 -- 578 2,107 28,214
Provision................. 1,824 56 264 1,285 (25) 944 (265) -- 4,083
Charge-offs............... (2,167) (71) (72) -- -- -- (148) -- (2,458)
Recoveries................ 6 -- 19 -- -- -- -- -- 25
Other..................... 378 -- -- (30) 30 -- -- (378) --
------- ---- ------ ------ -------- ------ ----- ------ -------
Balance at
September 30, 1993.......... 13,509 306 355 1,474 11,382 944 165 1,729 29,864
Provision................. 2,369 93 2,794 1,215 875 (260) (89) -- 6,997
Charge-offs............... (1,722) -- (1,365) (233) (10,145) -- -- -- (13,465)
Recoveries................ 20 -- 38 -- -- -- -- -- 58
Other..................... 1,729 -- -- -- -- -- -- (1,729) --
------- ---- ------ ------ -------- ------ ----- ------ -------
Balance at
September 30, 1994.......... 15,905 399 1,822 2,456 2,112 684 76 -- 23,454
Provision................. 18,493 (38) 4,178 596 1,374 (274) (36) -- 24,293
Charge-offs............... (4,840) -- (2,847) 0 (3,389) -- (2) -- (11,078)
Recoveries................ 36 -- 94 2 -- -- -- -- 132
------- ---- ------ ------ -------- ------ ----- ------ -------
Balance at
September 30, 1995.......... $29,594 $361 $3,247 $3,054 $ 97 $ 410 $ 38 $ -- $36,801
======= ==== ====== ====== ======== ====== ===== ====== =======
Balance at
September 30, 1994.......... $15,905 $399 $1,822 $2,456 $ 2,112 $ 684 $ 76 $ -- $23,454
Provision................. 2,293 74 1,791 516 -- (448) (69) -- 4,157
Charge-offs............... (1,441) -- (1,190) 0 -- -- (2) -- (2,633)
Recoveries................ 27 -- 32 2 -- -- -- -- 61
------- ---- ------ ----- -------- ------ ----- ------ -------
Balance at
March 31, 1995.............. $16,784 $473 $2,455 $2,974 $ 2,112 $ 236 $ 5 $ -- $25,039
======= ==== ====== ====== ======== ====== ===== ====== =======
Balance at
September 30, 1995.......... $29,594 $361 $3,247 $3,054 $ 97 $ 410 $ 38 $ -- $36,801
Provision................. 2,429 122 3,030 175 86 2 6 -- 5,850
Charge-offs............... (3,242) -- (3,008) -- -- -- -- -- (6,250)
Recoveries................ 18 -- 70 -- -- -- -- -- 88
------- ---- ------ ----- -------- ------ ----- ------ -------
Balance at
March 31, 1996.............. $28,799 $483 $3,339 $3,229 $ 183 $ 412 $ 44 $ -- $36,489
======= ==== ====== ====== ======== ====== ===== ====== =======
</TABLE>

F-28
<PAGE> 181

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LOAN SERVICING

SINGLE FAMILY SERVICING PORTFOLIO

PRINCIPAL BALANCES

<TABLE>
<CAPTION>
AT MARCH AT SEPTEMBER 30,
31, --------------------
1996 1995 1994
----------- ------- ------
<S> <C> <C> <C>
(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
====== ====== ======
</TABLE>

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

<TABLE>
<CAPTION>
AT MARCH AT SEPTEMBER 30,
31, -----------------------
1996 1995 1994
----------- -------- --------
<S> <C> <C> <C>
(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
====== ====== ======
</TABLE>

F-29
<PAGE> 182

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MORTGAGE SERVICING RIGHTS

<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> <C> <C> <C>
OMSRS PMSRS OMSRS PMSRS OMSRS PMSRS PMSRS PMSRS
(IN THOUSANDS)
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
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 (the "Assistance Agreement") with the
Federal Savings and Loan Insurance Corporation (the "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-30
<PAGE> 183

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.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
----------------------
1994 1993
-------- -------
<S> <C> <C>
(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
======== =======
</TABLE>

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
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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-31
<PAGE> 184

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
--------- --------- -------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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
--------- --------- -------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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 SEPTEMBER 30,
AT MARCH 31, 1996 1995
-------------------- --------------------
NUMBER OF DEPOSIT NUMBER OF DEPOSIT
ACCOUNTS AMOUNT ACCOUNTS AMOUNT
--------- -------- --------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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-32
<PAGE> 185

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
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Transaction and insured money fund
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
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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-33
<PAGE> 186

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:

<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT SEPTEMBER 30, 1995
----------------- ---------------------
(IN THOUSANDS)
<S> <C> <C>
October 1995................................ $ -- $ 627,533
April 1996.................................. 589,936 185,000
July 1996................................... 360,000 360,000
---------- ----------
$ 949,936 $1,172,533
========== ==========
</TABLE>

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:
<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT SEPTEMBER 30, 1995
----------------- ---------------------
CARRYING VALUE
-----------------------------------------
<S> <C> <C>

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
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
========== ==========
</TABLE>

F-34
<PAGE> 187

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
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 consummated, 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.

F-35
<PAGE> 188

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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.

F-36
<PAGE> 189

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
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
====== ======
</TABLE>

F-37
<PAGE> 190

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS NO. 107 FAIR VALUES, CONTINUED

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 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>

F-38
<PAGE> 191

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
========== ======== ======= ======== ==========
</TABLE>

<TABLE>
<CAPTION>
MATURING IN THE YEAR ENDING SEPTEMBER 30,
-------------------------------------------
1996 1997 1998 THEREAFTER TOTAL
---------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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-39
<PAGE> 192

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.

<TABLE>
<CAPTION>
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
Reverse repurchase
340,000 6.50 5.86 (1) 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
Reverse repurchase
280,000 5.76 4.90 (1) 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.

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.

<TABLE>
<CAPTION>
NOTIONAL INDEX CONTRACTED
AMOUNT RATE RATE
-------- ---- -----------
<S> <C> <C> <C> <C>
(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
</TABLE>

(1) Based on the six month LIBOR as of the last reset prior to the date
reported.

F-40
<PAGE> 193

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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.

<TABLE>
<CAPTION>
AVERAGE
NOTIONAL INDEX FLOOR HEDGED
AMOUNT RATE RATE ITEM
-------- ---- ----- ------------------
<S> <C> <C> <C> <C>
(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
--------
--------
</TABLE>

(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 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").

F-41
<PAGE> 194

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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").

FORWARD DELIVERY CONTRACTS

<TABLE>
<CAPTION>
AT MARCH AT SEPTEMBER 30,
31, ----------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
(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
========== ========== ==========
</TABLE>

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

F-42
<PAGE> 195

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, --------------------------
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
(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
============= ============ ============
</TABLE>

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.

13. INCOME TAXES

<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>
(IN THOUSANDS)
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>

F-43
<PAGE> 196

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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:

<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------------------------------
REGULAR ALTERNATIVE EXPIRATION
YEAR GENERATED TAX MINIMUM TAX DATE
---------------------------------- ---------- ----------- -------
<S> <C> <C> <C>
(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
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
------------------------------------------
<S> <C> <C> <C>
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
</TABLE>

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.

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 the 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.

F-44
<PAGE> 197

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 due to limitations of NOLs if an ownership
change had occurred. 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
Parent Company did not generate taxable income on a stand-alone basis and no
federal tax sharing agreement was entered into between the Parent Company and
the Bank. See Note 21 for a discussion of subsequent events.

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
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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-45
<PAGE> 198

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED TAX ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(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
============ ========= =========
</TABLE>

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. At September 30, 1995, the Bank has approximately $101
million of Post-1987 tax bad debt reserves. 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. The
current tax liability resulting from recapture of these reserves would be
reduced by NOLs available to offset this income. See Note 17.

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 percent 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

F-46
<PAGE> 199

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Company, and Hyperion Partners (collectively, "Plaintiffs") filed suit
against the United States in the Court of Federal Claims for alleged failures of
the United States (i) to abide by a capital forbearance which would have 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 $110 million of
subordinated debt as regulatory capital for all purposes and (iii) to abide by
an accounting forbearance, which would have allowed the Bank to count as capital
for regulatory purposes, and to amortize over a period of twenty-five years, the
$30.7 million difference between certain FSLIC payment obligations to the Bank
and the discounted present value of those future FSLIC payments. The lawsuit is
in a preliminary stage. Discovery was stayed pending the United States Supreme
Court's review of United States v. Winstar Corp., an action by three other
thrifts raising similar issues (the "Winstar cases"). See Note 21 for a
discussion of subsequent events.

F-47
<PAGE> 200

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:

<TABLE>
<CAPTION>
SERIES B
SERIES A BEGINNING SEPTEMBER DOLLAR EQUIVALENT
BEGINNING DECEMBER 31, 30, REDEMPTION PRICE PER SHARE
- -------------------------------- --------------------- ---------------- -----------------
<S> <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. See Note 21 for a discussion of subsequent
events.

F-48
<PAGE> 201

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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. See Note 21 for a
discussion of subsequent events.

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 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 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 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

F-49
<PAGE> 202

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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.

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

The United States Congress has passed legislation 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.
See Note 21 for a discussion of subsequent events.

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 has approximately $101 million of post-1987 tax bad
debt

F-50
<PAGE> 203

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reserves. The current tax liability resulting from recapture of these reserves
would be reduced by NOLs available to offset this income.

FACILITIES OPERATIONS

Future minimum payments on data processing agreements and significant
operating leases in effect at September 30, 1995 were as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING
SEPTEMBER 30, AMOUNT
--------------------------------------------------------------------------- ---------
<S> <C>
1996.................................................................... $19,884
1997.................................................................... 11,671
1998.................................................................... 8,937
1999.................................................................... 5,072
2000.................................................................... 1,495
Thereafter.............................................................. 8,678
-------
$55,737
=======
</TABLE>

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
--------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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-51
<PAGE> 204

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
--------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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. 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.

F-52
<PAGE> 205

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

F-53
<PAGE> 206

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 (dollars in
thousands, except earnings per share).

<TABLE>
<CAPTION>
1996 1995 1994
------------------- ----------------------------------------- -----------------------------------------
SECOND FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <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 $118,333 $123,674
Interest expense.... 148,548 160,741 166,580 146,220 129,915 110,045 93,118 76,998 73,617 77,191
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net interest
income........ 54,888 57,044 57,728 48,645 43,077 44,549 40,445 42,138 44,716 46,483
Provision for credit
losses............ 3,181 2,669 9,663 10,473 3,223 934 3,421 798 1,298 1,480
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net interest income
after provision
for credit
losses............ 51,707 54,375 48,065 38,172 39,854 43,615 37,024 41,340 43,418 45,003
Non-interest
income............ 27,687 26,922 25,201 23,127 30,641 36,012 28,479 26,453 27,909 36,048
Non-interest
expense........... 50,012 49,292 52,466 40,465 51,553 50,092 50,607 53,723 45,133 50,130
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes and minority
interest.......... 29,382 32,005 20,800 20,834 18,942 29,535 14,896 14,070 26,194 30,921
Income tax expense
(benefit)......... 12,144 13,134 8,169 9,060 8,062 12,124 681 (38,551) 5,751 220
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net income before
minority
interest.......... 17,238 18,871 12,631 11,774 10,880 17,411 14,215 52,621 20,443 30,701
Less minority
interest:
Subsidiary
preferred
stock
dividends..... 4,563 4,563 4,111 2,163 2,163 2,163 2,164 2,163 2,163 2,163
Payments in lieu
of
dividends..... -- 224 -- 71 -- 306 -- 298 59 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income...... $ 12,675 $ 14,084 $ 8,520 $ 9,540 $ 8,717 $ 14,942 $ 12,051 $ 50,160 $ 18,221 $ 28,538
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Net income
applicable to
common stock...... $ 11,824 $ 13,144 $ 7,936 $ 8,851 $ 8,086 $ 13,951 $ 11,531 $ 47,199 $ 17,038 $ 26,751
Earnings per common
share............. $ 0.41 $ 0.46 $ 0.28 $ 0.31 $ 0.28 $ 0.48 $ 0.40 $ 1.63 $ 0.59 $ 0.93
Average common
shares and common
stock equivalents
outstanding....... 28,863 28,863 28,863 28,863 28,863 28,863 28,863 28,863 28,863 28,863
</TABLE>

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-54
<PAGE> 207

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)

<TABLE>
<CAPTION>
AT
MARCH AT SEPTEMBER 30,
31, --------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>

These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.

F-55
<PAGE> 208

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-56
<PAGE> 209

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED SEPTEMBER
ENDED MARCH 31, 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-57
<PAGE> 210

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 in lieu of dividends to the FDIC-FRF 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 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 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 non-voting 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) -- 381,925 shares, Class B Common Stock
(non-voting) -- 28,481,075 shares, and no shares of Class C Common Stock (which
were cancelled at the time of the Restructuring and the 1,800 to one
conversion). The Company also filed a registration statement in June 1996 with
the Securities and Exchange Commission to offer 10,500,000 shares of the Class A
Common Stock to the public, including 910,694 shares being sold by the Company
and 9,589,306 shares being sold by certain shareholders of the Company.

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 Program. In June 1996, the Company Board
approved an Executive Management Compensation Program (the "Compensation Plan")
containing the following provisions: (i) a cash bonus of $4.0 million; (ii) the
award of 318,342 shares of Company Class B Common Stock with restrictions on its
transferability for a period of three years from its issuance; and (iii)
issuance of 1,154,520 options for purchase of an equivalent number of shares of
Company common stock at the time of the Offering; such options vest ratably over
three years from the date of grant. The options' exercise price will

F-58
<PAGE> 211

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

be set at an amount not less than the fair market value at the date of the grant
and will expire if not exercised within ten years of the date of the grant.

Compensation expense totaling $7.8 million, $4.8 million net of tax, was
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.

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.

Mortgage Banking Restructuring Charge. In June 1996, the Company recorded
a restructuring charge of $10.7 million before tax, or $6.6 million after tax.
Pro forma earnings per common share was reduced by $0.21 as a result of this
charge. The restructuring of the origination business of the mortgage banking
segment will eliminate unprofitable operations in markets that the Company chose
to exit. The restructuring plan focuses primarily on closing or consolidating
production offices and several regional operations centers. These closures and
consolidations will result in personnel reductions of approximately 265 people,
including both salaried and commissioned employees. The restructuring charge
includes estimated costs for severance and other benefits of $800 thousand,
asset write-downs of $5.3 million, lease termination costs of $3.4 million and
other costs of $1.2 million. The non-cash write-off of $5.3 million reflects
$3.5 million of goodwill and $1.8 million of fixed assets and leasehold
improvements written off in connection with the closed production offices. At
June 30, 1996, the unpaid liability relating to the restructuring charge was
$5.4 million and is expected to be paid in full during fiscal 1999. As of June
30, 1996, 15 mortgage origination branches and 2 regional operation centers had
been closed and the workforce was reduced by 129.

Warrants. In July 1996, the Company and the FDIC agreed that the FDIC
would surrender to the Bank a portion of the warrant for a $5.9 million cash
payment and exercise the remainder of the Warrant. Immediately thereafter, the
FDIC exchanged all of the shares of Bank Common Stock issued upon exercise of
the Warrant for 1,503,560 shares of Class B Common Stock. The FDIC has agreed to
sell all of such shares of Class B Common Stock in the Offering and, following
the consummation of the Offering, the FDIC will not own any shares of Common
Stock.

Insurance Assessment. Subsequent to September 30, 1995, legislation the
United States Congress had passed to increase the SAIF Fund reserve ratio to
1.25% was vetoed by President Clinton. See Note 17. The United States Congress
continues to consider measures aimed at fully recapitalizing the SAIF, which
include a one-time assessment that could result in an amount payable by the
Bank, net of tax, of as much as $23.7 million to $28.5 million. Management
believes that the Bank will be able to maintain its status as a "well-
capitalized" institution after payment of any such assessment. At this time no
assurance can be given as to whether any such measures will become law.

Recently Issued Accounting Standards. In June 1996, the FASB issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This statement requires that, after a transfer
of financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
This statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings. This
statement is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996,

F-59
<PAGE> 212

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and is to be applied prospectively. Earlier or retroactive application is not
permitted. Implementation of this pronouncement should have no material adverse
effect on the Consolidated Financial Statements.

Claims Related to Forbearance Agreement

On July 1, 1996, the Supreme Court upheld lower court rulings that the
United States had breached the contracts involved in the Winstar case and
remanded the case for further proceedings on the issue of damages. There is
uncertainty about how the Court of Federal Claims will manage the over 100
lawsuits on its docket that, like Plaintiffs' case, involve issues similar to
those raised in the Winstar case. On July 8, 1996, the Chief Judge of the Court
of Federal Claims designated Stephen D. Susman, Esq. of Houston, Texas as
"Special Counsel to the Court" to facilitate the adoption of methods for
"rationalizing" the litigation. At a Court of Federal Claims status conference
held in July 1996, Mr. Susman presented a proposed case management plan and
schedule supported by a large number of the plaintiffs in the FIRREA-related
cases, including Plaintiffs. Counsel for the United States proposed a different
plan, but, while asserting objections to a number of the features of Mr.
Susman's plan, expressed a willingness to work with Mr. Susman and a
coordinating committee of plaintiffs' counsel on achieving an agreed pretrial
order for management of the cases. The Chief Judge of the Court of Federal
Claims scheduled another status conference for August 19, 1996 and directed
counsel for the United States and the plaintiffs' counsel coordinating committee
to report to the Chief Judge by August 15 on their efforts to agree on a
proposed case management plan. The Chief Judge also encouraged the FDIC, which
has indicated a desire to participate in or take over certain lawsuits (unlike
Plaintiffs' lawsuit) involving post-FIRREA failed institutions, to become
involved in this process. The Chief Judge indicated that he may enter a case
management order at or shortly after the August 19 status conference. While the
Company expects Plaintiffs' claims for damages to exceed $200 million, the
Company is unable to predict the outcome of Plaintiffs' suit against the United
States and the amount of judgment for damages, if any, that may be awarded.
Consequently, no assurances can be given as to the results of this suit. The
Company and the Bank have entered into an agreement with Hyperion Partners
acknowledging the relative value, as among the parties, of their claims in the
pending litigation. The agreement confirms that the Company and the Bank are
entitled to receive 85% of the amount, if any, recovered as a result of the
settlement of or a judgment on such claims, and that Hyperion Partners is
entitled to receive 15% of such amount. The agreement was approved by the
disinterested directors of the Company. Plaintiffs will continue to cooperate in
good faith and will use their best efforts to maximize the total amount, if any,
that they may recover.

F-60
<PAGE> 213

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
PRO FORMA ADJUSTMENTS
HISTORICAL ---------------------------------------------------------------------------- PRO FORMA
AT MARCH 31, DIVIDEND TAX ISSUANCE COMPENSATION RESTRUCTURING WARRANT AT MARCH 31,
1996 PAYMENT BENEFIT COSTS PLAN CHARGE EXCHANGE 1996
------------ --------- -------- ------- ---------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Cash and cash
equivalents..... $ 135,691 $ -- $ -- $ -- $ -- $ -- $ -- $ 135,691
Securities
purchased under
agreements to
resell and
federal funds
sold............ 659,279 (105,900) -- (3,000) (4,112) -- (5,900) 540,367
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 -- 1,799 (509) -- 682,888
------------ --------- -------- ------- ---------- ------------- --------- ------------
Total
assets...... $11,266,636 $(105,900) $101,700 $(3,000) $ (2,313) $ (509) $(5,900) $11,250,714
============ ========= ======== ======= ========== ============ ========= ============
LIABILITIES,
MINORITY INTEREST,
AND STOCKHOLDERS'
EQUITY
LIABILITIES
Deposits.......... $ 4,963,321 $ -- $ -- $ -- $ -- $ -- $ -- $ 4,963,321
Borrowings........ 5,088,959 -- -- -- -- -- -- 5,088,959
Senior Notes...... 115,000 -- -- -- -- -- -- 115,000
Other
liabilities..... 387,415 -- -- -- (1,205) 6,069 -- 392,279
------------ --------- -------- ------- ---------- ------------- --------- ------------
Total
liabilities... 10,554,695 -- -- -- (1,205) 6,069 -- 10,559,559
MINORITY INTEREST
Preferred stock
issued by
consolidated
subsidiary...... 185,500 -- -- -- -- -- -- 185,500
STOCKHOLDERS'
EQUITY............ 526,441 (105,900) 101,700 (3,000) (1,108) (6,578) (5,900) 505,655
------------ --------- -------- ------- ---------- ------------- --------- ------------
TOTAL LIABILITIES,
MINORITY INTEREST,
AND STOCKHOLDERS'
EQUITY............ $11,266,636 $(105,900) $101,700 $(3,000) $ (2,313) $ (509) $(5,900) $11,250,714
============ ========= ======== ======= ========== ============ ========= ============
</TABLE>

F-61
<PAGE> 214

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 RESTRUCTURING WARRANT MARCH 31,
1996 PAYMENT BENEFIT COSTS PLAN CHARGE EXCHANGE 1996
-------------- --------- -------- ------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
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 income..... 6,997 -- -- -- -- -- -- 6,997
-------------- --------- -------- ------- ----------- ------------ ----------- --------------
Total
non-interest
income....... 54,609 -- -- -- -- -- -- 54,609
NON-INTEREST EXPENSE
Compensation and
benefits......... 39,898 -- -- -- 7,820 -- -- 47,718
Occupancy.......... 9,439 -- -- -- -- -- -- 9,439
Data processing.... 8,120 -- -- -- -- -- -- 8,120
Amortization of
intangibles...... 9,801 -- -- -- -- -- -- 9,801
Restructuring
charge........... -- -- -- -- -- 10,681 -- 10,681
Other.............. 32,046 -- -- -- -- -- -- 32,046
-------------- --------- -------- ------- ----------- ------------ ----------- --------------
Total
non-interest
expense...... 99,304 -- -- -- 7,820 10,681 -- 117,805
-------------- --------- -------- ------- ----------- ------------ ----------- --------------
INCOME BEFORE TAXES
AND MINORITY
INTEREST........... 61,387 -- -- -- (7,820) (10,681) -- 42,886
Income tax expense
(benefit).......... 25,278 -- (101,700) -- (3,004) (4,103) -- (83,529)
-------------- --------- -------- ------- ----------- ------------ ----------- --------------
NET INCOME BEFORE
MINORITY
INTEREST........... 36,109 -- 101,700 -- (4,816) (6,578) -- 126,415
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 $ -- $(4,816) $ (6,578) $ -- $ 111,165
============== ========= ======== ======= =========== ============ =========== ==============
EARNINGS PER COMMON
SHARE.............. $ 0.87 $ 3.62
============== ==============
</TABLE>

F-62
<PAGE> 215

BANK UNITED CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The average number of common shares outstanding used in computing earnings
per common share for the six months ended March 31, 1996 was 28,863,000 and
reflects the 1,800 to one stock conversion in June 1996. The pro forma average
number of common shares outstanding for the six months ended March 31, 1996 was
30,684,902 and has been adjusted to give effect to the shares of restricted
stock issued in accordance with the Compensation Plan and the shares issued in
conjunction with the Warrant, as though these shares were issued on October 1,
1995.

The following table shows the Bank's regulatory capital ratios on a
historical and a pro forma basis:

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Tangible Capital.......................................... 6.88% 5.79%
Core Capital.............................................. 6.96 5.87
Total Capital............................................. 14.20 11.93
</TABLE>

The Parent Company's and the Bank's dividend restrictions on a historical
and a pro forma basis follows:

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Parent Company
Dividend Limitation-Senior Note Indenture............ $ 123,746 $ 51,225
Bank
Dividend Limitation-OTS Regulations.................. $ 186,460 $ 148,483
</TABLE>

F-63
<PAGE> 216

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

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 16
The Company........................... 25
Use of Proceeds....................... 29
Dividend Policy....................... 29
Capitalization........................ 30
Selected Consolidated Financial and
Other Data.......................... 32
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 36
Business.............................. 65
Regulation............................ 89
Description of Properties............. 112
Legal Proceedings..................... 112
Management............................ 115
Selling Stockholders.................. 135
Description of Capital Stock.......... 140
Underwriting.......................... 146
Legal Matters......................... 148
Experts............................... 148
Available Information................. 148
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

10,500,000 SHARES

LOGO
CLASS A COMMON STOCK
------------------------

PROSPECTUS
------------------------

MERRILL LYNCH & CO.

LEHMAN BROTHERS

SMITH BARNEY INC.
, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 217

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission (the "Commission") registration fee, the
National Association of Securities Dealers, Inc. ("NASD") filing fee and the
NASDAQ listing fee.

<TABLE>
<CAPTION>
PAYABLE BY
THE REGISTRANT
--------------
<S> <C>
SEC registration fee............................................ $ 83,276
NASD filing fee................................................. 10,500
NASDAQ listing fee.............................................. 50,000
Blue Sky fees and expenses...................................... 10,000
Accounting fees and expenses.................................... 250,000
Legal fees and expenses......................................... 1,000,000
Printing and engraving expenses................................. 950,000
Miscellaneous fees and expenses................................. 646,224
--------------
Total................................................. $3,000,000
==========
</TABLE>

ITEM 14. 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

II-1
<PAGE> 218

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.

The Purchase Agreement provides for indemnification by the Underwriters of
the registrant, its Directors and officers, and by the registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act, and affords certain rights of contribution with respect thereto.

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 15. RECENT SALES OF UNREGISTERED SECURITIES

During June 1996, the following actions were taken in the order indicated:
(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 non-voting common stock received shares of Class A Common Stock and Class B
Common Stock and the holders of the Company's Class C common stock, par value
$0.01 per share ("Class C Common Stock") received shares of Class B Common Stock
as set forth under "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. Subsequent to the Restructuring, there were no shares of Class C
Common Stock outstanding. See Note 21 to the Consolidated Financial Statements
for a discussion of subsequent events and see "Capitalization". In addition,
immediately prior to the Offering, the FDIC-FRF surrendered to the Bank a
portion of its Warrant (the "Warrant") to purchase 158,823 shares of Bank Common
Stock for a cash payment of approximately $5.9 million and exercised the
remainder of the Warrant. Immediately thereafter, the FDIC-FRF exchanged the
shares of Bank Common Stock for 1,503,560 shares of Class B Common Stock, all of
which are being sold in the Offering. See "Business -- The Assistance Agreement"
and "Selling Stockholders". The Offering is intended to establish a public
market for the Class A Common Stock while providing the Company with funds for
general corporate purposes and providing the Selling Stockholders with liquidity
for their current holdings in the Company. In June 1996, the Company granted
318,342 shares of Class B Common Stock to certain executive officers of the
Company pursuant to the executive management compensation program. See
"Management -- Executive Management Compensation Program".

II-2
<PAGE> 219

ITEM 16. 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>
1.1* -- Form of Purchase Agreement.
2.1 -- Form of Letter Agreement, by and among the general and limited partners of
Hyperion Partners, L.P., dated as of June 17, 1996, relating to certain
transactions consummated prior to the Offering.
2.2* -- Merger Agreement, dated as of June 17, 1996, by and between the Company and
Hyperion Holdings relating to the Merger.
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.
4.5 -- Form of Class A Common Stock Certificate.
5.1* -- Opinion and consent of Wachtell, Lipton, Rosen & Katz.
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.
</TABLE>

II-3
<PAGE> 220

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION
- -------------- -------------------------------------------------------------------------------
<S> <C>
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.
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.
10.24 -- Warrant Purchase and Exchange Agreement, dated July 23, 1996, by and among
the Company, the Bank and the Federal Deposit Insurance Corporation.
10.25 -- Form of Tax Sharing Agreement dated as of , 1996, by and between
the Company and the Bank.
10.26 -- Form of The Company's 1996 Stock Incentive Plan.
10.27 -- Form of The Company's Director Stock Plan.
10.28 -- Form of Employment Agreement, dated August , 1996, between the Company and
Barry C. Burkholder.
10.29 -- Form of Employment Agreement, dated August , 1996, between the Company and
Anthony J. Nocella.
10.30 -- Form of Employment Agreement, dated August , 1996, between the Company and
Jonathon K. Heffron.
10.31 -- Form of Employment Agreement, dated August , 1996, between the Company and
Ronald D. Coben.
10.32 -- Form of Nontransferable Stock Agreement.
10.33 -- Form of Stock Option Agreement.
10.34 -- Form of Consulting Agreement.
10.35 -- Form of Recovery Agreement.
</TABLE>

II-4
<PAGE> 221

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION
- -------------- -------------------------------------------------------------------------------
<S> <C>
10.36 -- Stock Purchase Agreement, dated January 15, 1993, between Hyperion Partners
and Hyperion Holdings.
21* -- Subsidiaries of the Registrant.
23.1 -- Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).
23.2* -- Consent of Deloitte & Touche LLP, independent auditors.
24 -- Powers of Attorney.
27* -- Financial Data Schedule.
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>

- ---------------
* Filed herewith.

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 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing of the Offering specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities 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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
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 Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and

II-5
<PAGE> 222

contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.

II-6
<PAGE> 223

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 6TH DAY OF AUGUST,
1996.

BANK UNITED CORP.

By /s/ BARRY C. BURKHOLDER

------------------------------------
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.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<S> <C> <C>
(1) Principal Executive Officer:
/s/ BARRY C. BURKHOLDER President and August 6, 1996
- --------------------------------------------- Chief Executive Officer
Barry C. Burkholder

(2) Principal Financial and Accounting
Officer:
/s/ ANTHONY J. NOCELLA Chief Financial Officer August 6, 1996
- ---------------------------------------------
Anthony J. Nocella

(3) Directors:
* Director August 6, 1996
- ---------------------------------------------
Lewis S. Ranieri

/s/ SALVATORE A. RANIERI Director August 6, 1996
- ---------------------------------------------
Salvatore A. Ranieri
* Director August 6, 1996
- ---------------------------------------------
Scott A. Shay
* Director August 6, 1996
- ---------------------------------------------
Barry C. Burkholder
* Director August 6, 1996
- ---------------------------------------------
Lawrence Chimerine, Ph.D.
* Director August 6, 1996
- ---------------------------------------------
David M. Golush
* Director August 6, 1996
- ---------------------------------------------
Paul M. Horvitz, Ph.D.
* Director August 6, 1996
- ---------------------------------------------
Alan E. Master
</TABLE>

II-7
<PAGE> 224

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<S> <C> <C>
* Director August 6, 1996
- ---------------------------------------------
Anthony J. Nocella
* Director August 6, 1996
- ---------------------------------------------
Patricia A. Sloan
* Director August 6, 1996
- ---------------------------------------------
Kendrick R. Wilson III
</TABLE>

*Signed through a Power of Attorney executed by Salvatore A. Ranieri.

II-8
<PAGE> 225

EXHIBIT INDEX

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION PAGE
- -------------- ------------------------------------------------------------------------- ----
<S> <C> <C>
1.1* -- Form of Purchase Agreement............................................
2.1 -- Form of Letter Agreement, by and among the general and limited
partners of Hyperion Partners, L.P., dated as of June 17, 1996,
relating to certain transactions consummated prior to the Offering....
2.2* -- Merger Agreement, dated as of June 17, 1996, by and between the
Company and Hyperion Holdings relating to the Merger..................
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......................
4.5 -- Form of Class A Common Stock Certificate..............................
5.1* -- Opinion and consent of Wachtell, Lipton, Rosen & Katz.................
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...........................................................
</TABLE>

<PAGE> 226

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION PAGE
- -------------- ------------------------------------------------------------------------- ----
<S> <C> <C>
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.........................................................
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.......................
10.24 -- Form of Warrant Purchase and Exchange Agreement, dated July 23, 1996,
by and among the Company, the Bank and the Federal Deposit Insurance
Corporation...........................................................
10.25 -- Form of Tax Sharing Agreement dated as of , 1996, by and
between the Company and the Bank......................................
10.26 -- Form of The Company's 1996 Stock Incentive Plan.......................
10.27 -- Form of The Company's Director Stock Plan.............................
10.28 -- Form of Employment Agreement, dated August , 1996, between the
Company and Barry C. Burkholder.......................................
</TABLE>

<PAGE> 227

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION PAGE
- -------------- ------------------------------------------------------------------------- ----
<S> <C> <C>
10.29 -- Form of Employment Agreement, dated August , 1996, between the
Company and Anthony J. Nocella........................................
10.30 -- Form of Employment Agreement, dated August , 1996, between the
Company and Jonathon K. Heffron.......................................
10.31 -- Form of Employment Agreement, dated August , 1996, between the
Company and Ronald D. Coben...........................................
10.32 -- Form of Nontransferable Stock Agreement...............................
10.33 -- Form of Stock Option Agreement........................................
10.34 -- Form of Consulting Agreement..........................................
10.35 -- Form of Recovery Agreement............................................
10.36 -- Stock Purchase Agreement, dated January 15, 1993, between Hyperion
Partners and Hyperion Holdings........................................
21* -- Subsidiaries of the Registrant........................................
23.1 -- Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).
23.2* -- Consent of Deloitte & Touche LLP, independent auditors................
24 -- Powers of Attorney....................................................
27* -- Financial Data Schedule...............................................
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>

- ---------------
* Filed herewith.

All other Exhibits listed have been filed previously.

<PAGE> 1

EXHIBIT 1.1
===============================================================================

BANK UNITED CORP.

(a Delaware corporation)

10,500,000 Shares of Class A Common Stock

PURCHASE AGREEMENT

Dated: August __, 1996

===============================================================================
<PAGE> 2
TABLE OF CONTENTS

PURCHASE AGREEMENT

<TABLE>
<S> <C>
SECTION 1. Representations and Warranties............................................................... 3

(a) Representations and Warranties by the Company and the Bank........................ 3
(i) Compliance with Registration Requirements................................ 3
(ii) Independent Accountants................................................. 4
(iii) Financial Statements................................................... 4
(iv) No Material Adverse Change in Business.................................. 5
(v) Good Standing of the Company............................................. 5
(vi) The Bank; Other Subsidiaries............................................ 5
(vii) Capitalization......................................................... 6
(viii) Authorization of Agreement............................................ 6
(ix) Authorization and Description of Securities............................. 6
(x) Absence of Defaults and Conflicts........................................ 7
(xi) Absence of Labor Dispute................................................ 8
(xii) Absence of Proceedings................................................. 8
(xiii) Accuracy of Exhibits.................................................. 8
(xiv) Possession of Intellectual Property.................................... 8
(xv) Absence of Further Requirements......................................... 9
(xvi) Possession of Licenses and Permits..................................... 9
(xvii) Title to Property..................................................... 9
(xviii) Compliance with Cuba Act............................................. 10
(xix) Investment Company Act................................................. 10
(xx) Environmental Laws...................................................... 10
(xxi) Registration Rights.................................................... 10
(xxii) Accounting............................................................ 11
(xxiii) Payments............................................................. 11
(xiv) Taxes.................................................................. 11
(xv) Bank Holding Company.................................................... 11

(b) Representations and Warranties by the Selling Stockholders
other than the FDIC - FRF.................................................... 11
(i) Accuracy of Information Regarding Selling
Stockholder........................................................... 11
(ii) Authorization of Agreements............................................. 12
(iii) Good and Marketable Title.............................................. 12
(iv) Due Execution of Power of Attorney and Custody
Agreement............................................................. 13
(v) Absence of Manipulation.................................................. 13
(vi) Absence of Further Requirements......................................... 13
</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C>
(vii) Restriction on Sale of Securities...................................... 13
(viii) Certificates Suitable for Transfer.................................... 14
(ix) No Association with NASD................................................ 14

(c) Representations and Warranties by the FDIC - FRF.................................. 14
(i) Accuracy of Information Regarding the FDIC -
FRF and FDIC.......................................................... 14
(ii) Authorization of Agreement and the Share
Exchange Agreement.................................................... 15
(iii) The Warrants and the Share Exchange; Good
and Marketable Title.................................................. 15
(iv) Absence of Violations................................................... 15
(v) Absence of Proceedings................................................... 15
(vi) Absence of Manipulation................................................. 16
(vii) Absence of Further Requirements........................................ 16

(d) Officer's Certificates............................................................ 16

SECTION 2. Sale and Delivery to Underwriters; Closing................................................... 16

(a) Initial Securities................................................................ 16

(b) Option Securities................................................................. 16

(d) Denominations; Registration....................................................... 18

SECTION 3. Covenants of the Company and the Bank........................................................ 18

(a) Compliance with Securities Regulations and Commission
Requests..................................................................... 18

(b) Filing of Amendments.............................................................. 18

(d) Delivery of Prospectuses.......................................................... 19

(e) Continued Compliance with Securities Laws......................................... 19

(f) Blue Sky Qualifications........................................................... 19

(g) Earnings Statements............................................................... 20

(h) Use of Proceeds................................................................... 20
</TABLE>

ii
<PAGE> 4
<TABLE>
<S> <C>
(i) Listing........................................................................... 20

(j) Restriction on Sale of Securities................................................. 20

(k) Reporting Requirements............................................................ 21

(l) Compliance with Rule 463.......................................................... 21

(m) Compliance with NASD Rules........................................................ 21

SECTION 4. Payment of Expenses......................................................................... 21

(a) Expenses.......................................................................... 21

(b) Expenses of the Selling Stockholders.............................................. 22

SECTION 5. Conditions of Underwriters' Obligations...................................................... 22

(a) Effectiveness of Registration Statement........................................... 22

(b) Opinion of Counsel for the Company, Bank and the Selling Stockholders............. 22

(d) Opinion of Counsel for Underwriters............................................... 23

(e) Officers' Certificate............................................................. 23

(f) Certificates of Selling Stockholders.............................................. 24

(g) Accountant's Comfort Letter....................................................... 24

(h) Bring-down Comfort Letter......................................................... 24

(i) Approval of Listing............................................................... 24

(j) No Objection...................................................................... 24

(k) Lock-up Agreements................................................................ 24

(l) Conditions to Purchase of Option Securities....................................... 25

(m) Additional Documents.............................................................. 26

(n) Termination of Agreement.......................................................... 26
</TABLE>

iii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 6. Indemnification.............................................................................. 26

(a) Indemnification of Underwriters and Selling Stockholders by
the Company and the Bank..................................................... 26

(b) Indemnification of Underwriters by the Selling Stockholders....................... 28

(d) Actions against Parties; Notification............................................. 28

(e) Settlement without Consent if Failure to Reimburse................................ 29

(f) Agreements Between the Company and the Selling Stockholder Unaffected............. 29

(g) Indemnification for Reserved Securities........................................... 29

(h) Registration Statement Undertaking................................................ 30

SECTION 7. Contribution................................................................................. 30

SECTION 8. Representations, Warranties and Agreements to Survive Delivery............................... 31

SECTION 9. Termination of Agreement..................................................................... 32

(a) Termination; General.............................................................. 32

(b) Liabilities....................................................................... 32

SECTION 10. Default by One or More of the Underwriters.................................................. 32

SECTION 11. Default by One or More of the Selling Stockholders or the Company........................... 33

SECTION 12. Notices..................................................................................... 34

SECTION 13. Parties..................................................................................... 34

SECTION 14. GOVERNING LAW AND TIME...................................................................... 34

SECTION 15. Effect of Headings.......................................................................... 34

SECTION 16. Representative.............................................................................. 34
</TABLE>

SCHEDULE A 1

iv
<PAGE> 6
SCHEDULE B 1
SCHEDULE C 1
SCHEDULE D 1
SCHEDULE E 1
SCHEDULE F 1
EXHIBIT A-1 1
EXHIBIT A-2 1
EXHIBIT A-3 1
EXHIBIT B-1 1
EXHIBIT B-2 1
EXHIBIT B-3 1
EXHIBIT C 1

v
<PAGE> 7
BANK UNITED CORP.
(a Delaware Corporation)

10,500,000 Shares of Class A Common Stock

(Par Value $0.01 Per Share)

PURCHASE AGREEMENT

August __, 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Representative of the several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

Bank United Corp., a Delaware corporation (the "Company"), Bank United,
a federal stock savings bank (the "Bank") and the persons listed in Schedule B
hereto (each a "Selling Stockholder" and collectively the "Selling
Stockholders"), including the Federal Deposit Insurance Corporation (the
"FDIC"), a corporation duly organized and existing under the laws of the United
States in its capacity as the manager of the FSLIC Resolution Fund (the "FRF";
the FDIC as manager of the FRF as a Selling Stockholder hereinafter in such
capacity sometimes referred to for the sake of clarity as the "FDIC - FRF"),
confirm their respective agreements with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch is acting as representative (in such
capacity, the "Representative"), with respect to (i) the sale by the Company and
the Selling Stockholders, acting severally and not jointly, and the purchase by
the Underwriters, acting severally and not jointly, of the respective numbers of
shares of Class A common stock, par value $0.01 per share, of the Company
("Class A Common Stock") and Class B common stock, par value $0.01 per share, of
the Company ("Class B Common Stock" and together with the Class A Common Stock,
the "Common Stock") set forth in Schedules A and B hereto aggregating 10,500,000
shares of Common Stock, 910,694 of which are being sold by the Company and
9,589,306 of which are being sold by the Selling Stockholders and (ii) the grant
by the Selling Stockholders (other than the FDIC-FRF) to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of 1,575,000 additional shares of Common Stock to
cover over-allotments, if any. The aforesaid 10,500,000 shares of Common Stock
(the "Initial Securities") to be purchased by the

1
<PAGE> 8
Underwriters and all or any part of the 1,575,000 shares of Common Stock subject
to the option as more fully described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities." The
Securities to be sold by the FDIC as a Selling Stockholder include shares of
Class B Common Stock issuable on or before the Closing Time to the FDIC - FRF in
exchange for shares of common stock of the Bank pursuant to a Warrant Purchase
and Exchange Agreement dated July 23, 1996 between the Company, the Bank and the
FDIC in its capacity as manager of the FRF (the "Share Exchange Agreement"). The
Securities to be sold by the Selling Stockholders, including those to be sold by
the FDIC - FRF, include shares of Class B Common Stock, which upon sale to the
Underwriters pursuant to this Purchase Agreement will be automatically converted
share for share into shares of Class A Common Stock in accordance with Section
3(b)(iv) of Article IV of the Restated Certificate of Incorporation of the
Company (the "Conversion"). References herein to the Securities and to Class A
Common Stock to be sold and delivered to the Underwriters pursuant to this
Purchase Agreement include shares of Class A Common Stock issuable as a result
of the Conversion.

The Company, the Bank and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representative deems advisable after this Agreement has been executed and
delivered.

The Company hereby confirms its engagement of Merrill Lynch as, and
Merrill Lynch hereby confirms its agreement with the Company to render services
as, a "qualified independent underwriter" within the meaning of Section 2720 of
the Conduct Rules of the National Association of Securities Dealers, Inc. (the
"NASD") with respect to the offering and sale of the Securities. Merrill Lynch,
solely in its capacity as qualified independent underwriter within the meaning
of Section 2720 of the NASD Conduct Rules and not otherwise is referred to
herein as the "Independent Underwriter."

The Company, the Selling Stockholders and the Underwriters agree that
up to 1,050,000 shares of the Securities to be purchased by the Underwriters
(the "Reserved Securities") shall be reserved for sale by the Underwriters to
certain eligible employees and persons having business relationships with the
Company, as part of the distribution of the Securities by the Underwriters,
subject to the terms of this Agreement, the applicable rules, regulations and
interpretations of the NASD and all other applicable laws, rules and regulations
(the "Reserved Share Program"). To the extent that such Reserved Securities are
not orally confirmed for purchase by such eligible employees and persons having
business relationships with the Company by the end of the first business day
after the date of this Agreement, such Reserved Securities will be offered to
the public as part of the public offering contemplated hereby.

The Company has filed with the Securities and Exchange Commission (the
"Commission") on June 18, 1996 a registration statement on Form S-1 (No.
333-06229) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus or prospectuses. Promptly after execution and delivery of this
Agreement, the Company will either (i) prepare and file a prospectus in
accordance with the provisions of Rule 430A ("Rule 430A") of the rules and

2
<PAGE> 9
regulations of the Commission under the 1933 Act (the "1933 Act Regulations")
and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or
(ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933
Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance
with the provisions of Rule 434 and Rule 424(b). The information included in
such prospectus or in such Term Sheet, as the case may be, that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective (a)
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information"
or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto, if any, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." The final prospectus in the form
first furnished to the Underwriters for use in connection with the offering of
the Securities is herein called the "Prospectus". If Rule 434 is relied on, the
term "Prospectus" shall refer to the preliminary prospectus dated July 25, 1996
together with the Term Sheet and all references in this Agreement to the date of
the Prospectus shall mean the date of the Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company and the Bank. Each of
the Company and the Bank, represents and warrants to each Underwriter and each
Selling Stockholder as of the date hereof, as of the Closing Time referred to in
Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in
Section 2(b) hereof, and agrees with each Underwriter, as follows:

(i) Compliance with Registration Requirements. The
Registration Statement has become effective under the 1933 Act and no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the Company
or the Bank, as the case may be, are contemplated by the Commission,
and any request on the part of the Commission for additional
information has been complied with.

At the respective times the Registration Statement and any
post-effective amendments thereto became effective and at the Closing
Time (and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects

3
<PAGE> 10
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not 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. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was filed and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.

Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.

(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.

(iii) Financial Statements. The consolidated financial
statements included in the Registration Statement and the Prospectus,
together with the related schedules and notes, present fairly in all
material respects the consolidated financial position of the Company
and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified;
said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved, except as may be
noted therein. The supporting schedules, if any, included in the
Registration Statement present fairly in all material respects in
accordance with GAAP, except as may be noted therein, the information
required to be stated therein. The selected financial data and the
summary financial information included in the Prospectus present fairly
in all material respects the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The pro forma
financial information and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro

4
<PAGE> 11
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.

(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, stockholders' equity, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business (a "Material Adverse Effect"), (B) there have been
no transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the Bank
Preferred Stock (as defined in the Prospectus) in amounts per share
that are consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Bank or the
Company on any class of its capital stock.

(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement and the Share Exchange Agreement;
and the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.

(vi) The Bank; Other Subsidiaries.

(A) The Bank is the only "significant subsidiary" of
the Company (as such term is defined in Rule 1-02 of
Regulation S-X). The only subsidiaries of the Company other
than the Bank are the wholly-owned subsidiaries of the Bank
listed on Schedule E hereto which, considered in the aggregate
as a single subsidiary, do not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X. The
activities of all of the Bank's subsidiaries are permitted to
subsidiaries of a federally chartered savings bank, the
deposits of which are insured by the Savings Association
Insurance Fund ("SAIF"), which is administered by the FDIC.

(B) The Bank has been duly organized and is validly
existing as a federally chartered savings bank in good
standing under the laws of the United States, and has
corporate power and authority to own, lease and operate its

5
<PAGE> 12
properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under
this Agreement and the Share Exchange Agreement. Each
subsidiary of the Bank has been duly organized and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation and has the power and
authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus. The Bank
and each of its subsidiaries is duly qualified as a foreign
corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure
so to qualify or to be in good standing would not result in a
Material Adverse Effect.

(C) All of the issued and outstanding capital stock
of the Bank and each subsidiary of the Bank has been duly
authorized and validly issued, is fully paid and
non-assessable and, except as otherwise disclosed in the
Registration Statement, is owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any subsidiary was
issued in violation of the preemptive or similar rights of any
securityholder of such subsidiary.

(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Pro Forma" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant
to reservations, agreements or employee benefit plans referred to in
the Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock, including the Securities to be purchased by
the Underwriters from the Selling Stockholders, have been duly
authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Stockholders, was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.

(viii) Authorization of Agreement. Each of this Agreement and
the Share Exchange Agreement has been duly authorized, executed and
delivered by each of the Company and the Bank.

(ix) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement, and when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable;
the shares of Class A Common Stock to be sold to the Underwriters by
the Selling

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<PAGE> 13
Stockholders pursuant to the Purchase Agreement, including those
issuable as a result of the Conversion, upon delivery to the
Underwriters as contemplated by the Purchase Agreement will be duly
authorized, validly issued, fully paid and non-assessable; no holder of
the Securities will be subject to personal liability by reason of being
such a holder; the issuance of the Securities to be purchased by the
Underwriters is not subject to preemptive or other similar rights of
any securityholder of the Company and the Class A Common Stock conforms
to all statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments
defining the same.

(x) Absence of Defaults and Conflicts. Neither the Company,
the Bank, nor any of their respective subsidiaries is in violation of
its charter or by-laws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company, the
Bank, or any of their respective subsidiaries is a party or by which it
or any of them may be bound, or to which any of the property or assets
of the Company, the Bank, or any of their respective subsidiaries is
subject (collectively, "Agreements and Instruments"), except for such
defaults that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the Share
Exchange Agreement and the consummation of the transactions
contemplated herein, therein and in the Registration Statement,
including the transactions described in the Registration Statement
under the caption "The Company -- Background of the Offering --
Dividend Distribution and Restructuring", (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds") and compliance by each of the Company and the Bank with its
respective obligations hereunder and thereunder have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of or default or Repayment
Event (as defined below) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company, the Bank or any of their respective subsidiaries pursuant to
the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company, the Bank,
or any of their respective subsidiaries or any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, the Bank, or any of their respective
subsidiaries or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or the Bank, or any of their respective
subsidiaries.

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<PAGE> 14
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, or the Bank, as the case may be,
threatened, against or affecting the Company, the Bank, or any of their
respective subsidiaries, which individually or in the aggregate for all
such actions, suits, proceedings, inquiries or investigations is
required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in
a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the consummation of the transactions
contemplated in this Agreement or in the Share Exchange Agreement or
the other transactions described in the Registration Statement under
the caption "The Company -- Background of the Offering -- Dividend
Distribution and Restructuring", or the performance by the Company or
the Bank of its obligations hereunder or thereunder; the aggregate of
all pending legal or governmental proceedings to which the Company, the
Bank, or any of their respective subsidiaries is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected
to result in a Material Adverse Effect. No cease and desist order has
been entered by the Office of Thrift Supervision (the "OTS") or the
FDIC against the Company, the Bank or any of their respective
subsidiaries.

(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.

(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.

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<PAGE> 15
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency, including, without limitation, the OTS and the FDIC, is
necessary or required for the performance by the Company of its
obligations hereunder in connection with the offering, issuance or sale
of the Securities hereunder, for the consummation of the transactions
contemplated by this Agreement or the Share Exchange Agreement or for
the other transactions described in the Registration Statement under
the caption "The Company -- Background of the Offering", including the
Senior Note Exchange, except such as have been already obtained or will
have been obtained or made prior to the Closing Time or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.

(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

(xvii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real, tangible and intangible
property reflected in the most recent balance sheet included in the
Prospectus as owned by the Company and its subsidiaries and good title
to all other properties reflected in the most recent balance sheet
included in the Prospectus as owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or
any of its subsidiaries; or, with respect to any such real property,
render title unmarketable as to a material part thereof and all of the
leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company
or any of its subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor
any subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any
subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary
to the continued possession of the leased or subleased premises under
any such lease or sublease.

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<PAGE> 16
(xviii) Compliance with Cuba Act. The Company and its
subsidiaries have complied with, and are and will be in compliance
with, the provisions of that certain Florida act relating to disclosure
of doing business with Cuba, codified as Section 517.075 of the Florida
statutes, and the rules and regulations thereunder (collectively, the
"Cuba Act") or are exempt therefrom.

(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").

(xx) Environmental Laws. Except as described in the
Registration Statement or except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) the Company, the
Bank and each of their respective subsidiaries is not in violation of
any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company, the Bank and each of their respective
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or, to the knowledge of
the Company, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against the Company, the Bank or any of their
respective subsidiaries and (D) to the knowledge of the Company there
are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or agency,
against or affecting the Company, the Bank or any of their respective
subsidiaries relating to Hazardous Materials or any Environmental Laws.

(xxi) Registration Rights. Except as described in the
Registration Statement or as set forth in any document or agreement
described in the Registration Statement as containing such rights,
there are no persons with registration rights or other similar rights
to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company or the Bank, under the
1933 Act or otherwise.

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<PAGE> 17
(xxii) Accounting. Each of the Company and the Bank maintains
a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.

(xxiii) Payments To the knowledge of each of the Company and
the Bank, neither the Company, the Bank nor any employee or agent of
the Company or the Bank has made any payment of funds of the Company or
the Bank or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of
a character required to be disclosed in the Prospectus.

(xiv) Taxes Each of the Company and the Bank has filed all
tax returns required to be filed, which returns are complete and correct
in all material respects, and each of the Company and the Bank is not in
default in the payment of any taxes which were payable pursuant to said
returns or any assessments with respect thereto.

(xv) Bank Holding Company. In the event the Company shall
become either directly or indirectly a bank holding company for
purposes of the Bank Holding Company Act of 1956, as amended (the "BHC
Act") and the rules and regulations of the Board of Governors of the
Federal Reserve System thereunder (the "BHC Rules"), the current
activities of the Company and its subsidiaries (as defined in the BHC
Rules) would be activities permissible for a bank holding company under
the BHC Act and the BHC Rules.

(b) Representations and Warranties by the Selling Stockholders other
than the FDIC - FRF. Each Selling Stockholder other than the FDIC as manager of
the FRF severally represents and warrants (on behalf of itself and not as to any
other Selling Stockholder or person) to each Underwriter and the Company as of
the date hereof, as of the Closing Time, and as of each Date of Delivery, and
agrees with each Underwriter, as set forth below except that each of The
Prudential Insurance Company of America ("Prudential"), The Equitable Life
Assurance Society of the United States, Equitable Variable Life Insurance
Company, Equitable Deal Flow Fund LP, Equitable Capital Partners LP and
Equitable Capital Partners (Retirement Fund) LP (together, the "Equitable
Group") is not a party to the Power of Attorney and Custody Agreement (as
defined below) and accordingly does not make the following representations and
warranties to the extent they relate to the Power of Attorney and Custody
Agreement:

(i) Accuracy of Information Regarding Selling
Stockholder. The information set forth in the Registration
Statement under the caption "Selling Stockholders" which
specifically relates to such Selling Stockholder will not, at

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<PAGE> 18
the date the Registration Statement becomes effective, contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein not misleading and at the date of the Prospectus and
at the Closing Time and on each Date of Delivery will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

(ii) Authorization of Agreements. Such Selling
Stockholder has the full right, power and authority to enter
into this Agreement and a Power of Attorney and Custody
Agreement (the "Power of Attorney and Custody Agreement") and
to sell, transfer and deliver the Securities to be sold by
such Selling Stockholder hereunder. The execution and delivery
of this Agreement and the Power of Attorney and Custody
Agreement and the sale and delivery of the Securities to be
sold by such Selling Stockholder and the consummation of the
transactions contemplated herein and compliance by such
Selling Stockholder with its obligations hereunder have been
duly authorized by such Selling Stockholder and do not and
will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach
of, or default under, or result in the creation or imposition
of any tax, lien, charge or encumbrance upon the Securities to
be sold by such Selling Stockholder pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement,
note, license, lease or other agreement or instrument to which
such Selling Stockholder is a party or by which such Selling
Stockholder may be bound, nor will such action result in any
violation of the provisions of the charter or by-laws or other
organizational instrument of such Selling Stockholder, if
applicable, or (assuming the Offering is conducted in
accordance with the 1933 Act and applicable state securities
laws) any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government,
governmental instrumentality or court, domestic or foreign,
having jurisdiction over such Selling Stockholder or any of
its properties.

(iii) Good and Marketable Title. Such Selling
Stockholder has and will at the Closing Time and, if any
Option Securities are purchased, on each Date of Delivery,
have good and marketable title to the Securities to be sold by
such Selling Stockholder hereunder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement and the Letter Agreement (as defined in the
Prospectus); and upon delivery of such Securities and payment
of the purchase price therefor as herein contemplated,
assuming each such Underwriter has no notice of any adverse
claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from such
Selling Stockholder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance
of any kind.

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<PAGE> 19
(iv) Due Execution of Power of Attorney and Custody
Agreement. Such Selling Stockholder has duly executed and
delivered, in the form heretofore furnished to the
Representative, the Custody Agreement and the Irrevocable
Power of Attorney with The Bank of New York as custodian (the
"Custodian"), and Salvatore A. Ranieri, Patricia A. Sloan and
David W. Marcus, or any of them, as attorney(s)-in-fact (the
"Attorney(s)-in-Fact"), respectively, and the Custodian is
authorized to deliver the Securities to be sold by such
Selling Stockholder hereunder and to accept payment therefor;
and each Attorney-in-Fact is authorized to execute and deliver
this Agreement and the certificate referred to in Section 5(f)
or that may be required pursuant to Section(s) 5(1) and 5(m)
on behalf of such Selling Stockholder, to sell, assign and
transfer to the Underwriters the Securities to be sold by such
Selling Stockholder hereunder, to determine the purchase price
to be paid by the Underwriters to such Selling Stockholder, as
provided in Section 2(a) hereof, to authorize the delivery of
the Securities to be sold by such Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on
behalf of such Selling Stockholder in connection with this
Agreement.

(v) Absence of Manipulation. Such Selling Stockholder
has not taken, and will not take, directly or indirectly, any
action which is designed to or which has constituted or which
might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the
Securities.

(vi) Absence of Further Requirements. No filing with,
or consent, approval, authorization, order, registration,
qualification or decree of any court or governmental authority
or agency, domestic or foreign, is necessary or required for
the performance by each Selling Stockholder of its obligations
hereunder or in the Power of Attorney and Custody Agreement,
or in connection with the sale and delivery of the Securities
hereunder or the consummation of the transactions contemplated
by this Agreement, except such as may have previously been
made or obtained or will have been obtained or made prior to
the Closing Time or as may be required under the 1933 Act or
the 1933 Act Regulations or state securities laws.

(vii) Restriction on Sale of Securities. During a
period of 180 days from the date of the Prospectus, such
Selling Stockholder will not, without the prior written
consent of Merrill Lynch, (x) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or
dispose of, any share of Class A Common Stock or any
securities convertible into or exercisable or exchangeable for
Class A Common Stock or file or cause to be filed any
registration statement under the 1933 Act with respect to any
of the foregoing or (y) enter into any swap or any other
agreement or any transaction that transfers, in whole or in
part, directly or

13
<PAGE> 20
indirectly, the economic consequence of ownership of the Class
A Common Stock, whether any such swap or transaction described
in clause (x) or (y) above is to be settled by delivery of
Class A Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to the
Securities to be sold hereunder nor shall it (i) restrict any
Selling Stockholder which is a regulated insurance company
that is headquartered in and governed by the insurance laws of
the State of New Jersey, from selling any of the Class A
Common Stock held by it following completion of the Offering
in a private off-market transaction not involving a public
offering as contemplated by Section 5(b) of the Letter
Agreement (as defined in the Prospectus) or (ii) preclude the
filing by the Company of a registration statement under the
1933 Act covering the shares of Common Stock held by the
Selling Stockholder following the sale of Common Stock
pursuant hereto or such registration statement being declared
effective, but the offer or sale of any shares of Common Stock
pursuant to such registration statement by the Selling
Stockholder shall be subject to the foregoing sentence.

(viii) Certificates Suitable for Transfer.
Certificates for all of the Securities to be sold by such
Selling Stockholder pursuant to this Agreement, in suitable
form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian
with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.

(ix) No Association with NASD. Except as disclosed by
such Selling Stockholder in writing to the Representative,
neither such Selling Stockholder nor any of his, her or its
affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within
the meaning of Article I, (q) of the By-laws of the NASD), any
member firm of the NASD.

(c) Representations and Warranties by the FDIC - FRF. The FDIC - FRF
represents and warrants (on behalf of itself and not as to any other Selling
Stockholder or person) to each Underwriter and the Company as of the date
hereof, as of the Closing Time, and as of each Date of Delivery, and agrees with
each Underwriter, as follows:

(i) Accuracy of Information Regarding the FDIC - FRF and FDIC.
The information set forth in the Registration Statement under the
caption "Selling Stockholder" which specifically relates to the FDIC -
FRF and to the FDIC will not, at the date the Registration Statement
becomes effective, contain any 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 the date
of the Prospectus, at the Closing Time and on each Date of Delivery
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary

14
<PAGE> 21
to make the statements therein, in light of the circumstances under
which they are made, not misleading.

(ii) Authorization of Agreement and the Share Exchange
Agreement. The FDIC has statutory authority pursuant to 12 U.S.C. 1821a
on behalf of the FDIC-FRF to execute this Agreement and the Share
Exchange Agreement, to sell, assign, transfer and deliver the
Securities being sold by the FDIC - FRF hereunder in the manner
provided herein, to perform the obligations of the FDIC-FRF under this
Agreement and the Share Exchange Agreement and to take all other
actions taken or to be taken by it on behalf of the FDIC - FRF in
connection herewith and therewith. Each of this Agreement and the Share
Exchange Agreement has been duly authorized, executed and delivered by
the FDIC - FRF and is the legal, valid and binding agreement of the
FDIC - FRF, enforceable in accordance with its terms.

(iii) The Warrants and the Share Exchange; Good and Marketable
Title. The FDIC - FRF has as of the date of this Agreement, good and
valid title to warrants (the "Warrants") for the purchase of 158,823
shares of common stock, par value $0.01, of the Bank (the "Bank Common
Stock"), free and clear of all liens, encumbrances, security interests
and claims whatsoever; and at or prior to the Closing Time, provided
the Bank has first redeemed a portion of the Warrants as contemplated
by the Share Exchange Agreement, the FDIC - FRF will have duly
exercised the balance of the Warrants and complied with all of the
conditions applicable for such exercise, including payment of the
exercise price specified therein, and exchanged the shares of Bank
Common Stock issuable upon such exercise for shares of Class B Common
Stock, all as contemplated by the Share Exchange Agreement, so that, at
the Closing Time and on each Date of Delivery, the FDIC - FRF shall
have good and marketable title to the Securities to be sold by the FDIC
- FRF hereunder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind, other
than pursuant to this Agreement; and upon delivery of such Securities
and payment of the purchase price therefor as herein contemplated,
assuming each such Underwriter has no notice of any adverse claim, each
of the Underwriters will receive good and marketable title to the
Securities purchased by it from the FDIC - FRF, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.

(iv) Absence of Violations. Neither the execution and delivery
of this Agreement or the Share Exchange Agreement, nor the sale of the
Securities by the FDIC-FRF, nor the consummation of any of the other
transactions contemplated herein or therein, nor the fulfillment of the
terms hereof or thereof, has violated or will violate any provision of
Federal law as administered by the FDIC or to which the FDIC - FRF is
subject.

(v) Absence of Proceedings. No actions, suits or proceedings
before or by any court or governmental agency, body or authority, or
arbitrator are pending or, to the best of the FDIC - FRF's knowledge,
threatened or contemplated, seeking to prevent the

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<PAGE> 22
sale of the Securities or the consummation of the Share Exchange
Agreement or this Agreement.

(vi) Absence of Manipulation. The FDIC and the Selling
Stockholder have not taken and will not take, directly or indirectly,
any action designed to or which has constituted or which might
reasonably be expected to cause or result under the 1934 Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.

(vii) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of any court or governmental authority or agency is necessary or
required for the performance by the FDIC - FRF of its obligations
hereunder or under the Share Exchange Agreement or the consummation of
the transactions contemplated by this Agreement or the Share Exchange
Agreement, except such as may have previously been made or obtained or
will have been obtained or made prior to the Closing Time or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.

(d) Officer's Certificates. Any certificate signed by any officer of
the Company or the Bank, or any of their respective subsidiaries, delivered to
the Representative or to counsel for the Underwriters shall be deemed a
representation and warranty by each of the Company and the Bank to each
Underwriter and to each Selling Stockholder as to the matters covered thereby;
and any certificate signed by or on behalf of a Selling Stockholder as such and
delivered to the Representative or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling to the Underwriters as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholder, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or such Selling Stockholder, which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter, plus
any additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof bears to
the total number of Initial Securities, subject, in each case, to such
adjustments among the Underwriters as the Representative in its sole discretion
shall make to eliminate any sales or purchases of fractional securities.

(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, each Selling Stockholder (other than the FDIC-FRF), severally and not
jointly, hereby grants an

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<PAGE> 23
option to the Underwriters, severally and not jointly, to purchase up to an
additional 1,575,000 shares of Class A Common Stock, as set forth in Schedule B,
at the price per share set forth in Schedule C, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representative to the Selling Stockholders
setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (a "Date
of Delivery") shall be determined by the Representative, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase pro rata from the
several Selling Stockholders that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set forth
in Schedule A opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as the
Representative in its discretion shall make to eliminate any sales or purchases
of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006 or at
such other place as shall be agreed upon by the Representative and the Company
and the Selling Stockholders, at 10:00 A.M. Eastern time on the third (fourth,
if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business
day after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representative and the Company and the Selling
Stockholders (such time and date of payment and delivery being herein called the
"Closing Time").

In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representative,
the Company and the Selling Stockholders, on each Date of Delivery as specified
in the notice from the Representative to the Company and the Selling
Stockholders.

Payment shall be made to the Company and the Selling Stockholders by
wire transfer of immediately available funds to bank accounts designated by the
Company and by the Custodian pursuant to each Selling Stockholder's Custody
Agreement and Irrevocable Power of Attorney, against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as

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<PAGE> 24
representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case may
be, but such payment shall not relieve such Underwriter from its obligations
hereunder.

(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representative may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representative in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.

SECTION 3. Covenants of the Company and the Bank. The Company and the
Bank, jointly and severally, covenant with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Representative and the Selling
Stockholders immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the Representative and
the Selling Stockholders notice of its intention to file or prepare any
amendment to the Registration Statement, any Term Sheet or any amendment,
supplement or revision to either the prospectus included in the Registration
Statement at the time it became effective or to the Prospectus, will furnish the
Representative and the Selling Stockholders with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Representative or
counsel for the Underwriters shall object.

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<PAGE> 25
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representative, any Selling Stockholder who so requests and
counsel for the Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including exhibits
filed therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representative, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the Underwriters. If applicable, the copies of the Registration Statement and
each amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. If
applicable, the Prospectus and any amendments or supplements thereto furnished
to the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement and in the
Prospectus. If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectus in order that the Prospectus
will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.

(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representative may designate and to maintain such
qualifications in effect for a period of not less than one year from the
effective date of the Registration Statement; provided, however, that the

19
<PAGE> 26
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so qualified,
the Company will file such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration Statement.

(g) Earnings Statements. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.

(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".

(i) Listing. The Company will use its reasonable best efforts to effect
and maintain the quotation of the Class A Common Stock, including the
Securities, on the NASDAQ Stock Market and will file with the NASDAQ Stock
Market all documents and notices required by the NASDAQ Stock Market of
companies that have securities that are traded in the over-the-counter market
and quotations for which are reported by the NASDAQ Stock Market.

(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Class A Common Stock or any securities
convertible into or exercisable or exchangeable for Class A Common Stock or file
any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Class A Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Class A Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold hereunder,
(B) any shares of Class A Common Stock issued by the Company upon the exercise
of an option or warrant or the conversion of a security outstanding on the date
hereof and referred to in the Prospectus, (C) any shares of Class A Common Stock
issued or options to purchase Class A Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectus or (D) any
shares of Class A Common Stock issued pursuant to any non-employee director
stock plan or dividend reinvestment plan. The foregoing sentence shall not
preclude the Company from filing a registration statement under the 1933 Act
covering the shares of Common Stock held by the Selling Stockholders following
the sale of Common Stock by the Selling Stockholders pursuant hereto or such
registration statement being declared effective, but the offer or sale of any
shares of Common Stock pursuant to such registration statement shall be subject
to the foregoing sentence and the restrictions contained in Section 1(b)(vii).

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<PAGE> 27
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder and the Company will cause the Bank and
any other subsidiary to file all documents required to be filed with any
supervisory, regulatory, administrative or governmental agency, body or
authority, whether pursuant to the 1934 Act and the 1934 Act Regulations, or
otherwise (except reports to any bank or thrift regulatory agency prepared on a
confidential basis).

(l) Compliance with Rule 463. The Company will file with the Commission
such reports on Form SR as may be required pursuant to Rule 463 of the 1933 Act
Regulations.

(m) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the NASD
or the NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of the effectiveness of the
Registration Statement. The Underwriters will notify the Company as to which
persons will need to be so restricted. At the request of the Underwriters, the
Company will direct the transfer agent to place a stop transfer restriction upon
such securities for such period of time. Should the Company release, or seek to
release, from the shares of Class A Common Stock held by persons who are so
restricted any of the Reserved Securities, the Company agrees to reimburse the
Underwriters for any reasonable expenses including, without limitation, legal
fees and expenses, they incur in connection with such release or attempted
release.

SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities,
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with,

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<PAGE> 28
the review by the NASD of the terms of the sale of the Securities, (x) the fees
and expenses incurred in connection with the inclusion of the Securities in the
NASDAQ Stock Market, (xi) all costs and expenses of the Underwriters, including
the reasonable fees and disbursements of counsel for the Underwriters, in
connection with matters related to the Reserved Securities which are designated
by the Company for sale to employees and others having a business relationship
with the Company and stamp duties or similar taxes or duties, if any, incurred
by the Underwriters in connection with the Reserved Share Program and (xii) the
fees and expenses of the Independent Underwriter.

(b) Expenses of the Selling Stockholders. Each Selling Stockholder will
pay all costs and expenses incident to the performance of its obligations under
and the consummation of the transactions contemplated by this Agreement,
including (i) any stamp duties, capital duties and stock transfer taxes, if any,
payable upon the sale of the Securities of such Selling Stockholder to the
Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, and (ii) the fees and disbursements of its
counsel and accountants.

(c) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.

SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy, as of the
Closing Time, of the representations and warranties of the Company, the Bank and
the Selling Stockholders contained in Section 1 hereof or in certificates of any
officer of the Company or any subsidiary of the Company (including the Bank), or
on behalf of any Selling Stockholder delivered pursuant to the provisions
hereof, to the performance by the Company, the Bank and any of their respective
subsidiaries of its covenants and other obligations hereunder, and to the
following further conditions:

(a) Effectiveness of Registration Statement. The Registration Statement
has become effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing
such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 424(b).

(b) Opinion of Counsel for the Company, Bank and the Selling
Stockholders. At Closing Time, the Representative shall have received
the favorable opinions, dated as

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<PAGE> 29
of Closing Time, of (i) Wachtell, Lipton, Rosen & Katz, special counsel
for the Company, the Bank and the Selling Stockholders, (ii) Bryan Cave
LLP, special counsel for the Company and the Bank, and (iii) Jonathon
K. Heffron, Executive Vice President and General Counsel of the Company
and the Bank, each in form and substance satisfactory to counsel for
the Underwriters, together with signed or reproduced copies of each
such letter for each of the other Underwriters to the effect set forth
in Exhibits A-1, A-2 and A-3, respectively hereto, and to such further
effect as counsel to the Underwriters may reasonably request.

(c) Opinion of Counsel for the Selling Stockholders. At Closing Time,
the Representative shall have received the favorable opinions, dated as
of Closing Time, of (i) counsel to non-individual Selling Stockholders
other than the FDIC-FRF, Prudential and the Equitable Group, (ii)
counsel to Prudential and to the Equitable Group, and (iii) the Deputy
General Counsel for the FDIC-FRF, in each case, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibits B-1, B-2 and B-3, respectively hereto,
and to such further effect as counsel to the Underwriters may
reasonably request.

(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of
Closing Time, of Cleary, Gottlieb, Steen & Hamilton, counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters with respect to such matters as they
may reasonably request. In giving such opinion, such counsel may rely,
as to all matters governed by the laws of jurisdictions other than the
law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions
of counsel satisfactory to the Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public
officials.

(e) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings,
stockholders' equity, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and the Representative
shall have received a certificate of the President or a Vice President
of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties of each of the Company and the Bank in Section 1(a) hereof
are true and correct in all material respects with the same force and
effect as though expressly made at and as of Closing Time, (iii) each
of the Company and the Bank has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the

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<PAGE> 30
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.

(f) Certificates of Selling Stockholders. At Closing Time, the
Representative shall have received (i) for each Selling Stockholder
other than the FDIC-FRF a certificate of (x) the President or a Vice
President of such Selling Stockholder in the case of each Selling
Stockholder that did not execute a Power of Attorney and Custody
Agreement or (y) an Attorney-in-Fact on behalf of each other Selling
Stockholder, dated as of Closing Time, in each case to the effect that
(1) the representations and warranties of such Selling Stockholder
contained in Section 1(b) hereof are true and correct in all respects
with the same force and effect as though expressly made at and as of
the Closing Time and (2) such Selling Stockholder has complied in all
material respects with all agreements and all conditions on its part to
be performed under this Agreement at or prior to Closing Time and (ii)
a certificate, signed by the acting Director or an Assistant Director
of the Division of Resolutions of the FDIC, dated the date of the
Closing Time, to the effect that the representations and warranties of
the FDIC-FRF in this Agreement are true and correct at the Closing
Time and the FDIC and the FDIC-FRF have complied with all agreements
contained in this Purchase Agreement and in the Share Exchange
Agreement and satisfied all the conditions on their part to be
performed or satisfied, in each case, at or prior to the Closing Time.

(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from Deloitte &
Touche LLP a letter dated such date, in form and substance satisfactory
to the Representative, together with signed or reproduced copies of
such letter for each of the other Underwriters containing statements
and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus.

(h) Bring-down Comfort Letter. At Closing Time, the Representative
shall have received from Deloitte & Touche LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in
the letter furnished pursuant to Subsection (g) of this Section, except
that the specified date referred to shall be a date not more than three
business days prior to Closing Time.

(i) Approval of Listing. At the Closing Time, the Securities shall have
been approved for inclusion in the NASDAQ Stock Market, subject only to
official notice of issuance.

(j) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms
and arrangements.

(k) Lock-up Agreements. At the date of this Agreement, the
Representative shall have received agreements substantially in the form
of Exhibit C hereto signed by the persons listed on Schedule D hereto.

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<PAGE> 31
(l) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Stockholders contained herein and the statements in any certificates
furnished by the Company, any subsidiary of the Company and the Selling
Stockholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representative
shall have received:

(i) Officers' Certificate A certificate, dated such
Date of Delivery, of the President or a Vice President of the
Company and of the chief financial or chief accounting officer
of the Company confirming that the certificate delivered at
the Closing Time pursuant to Section 5(e) hereof remains true
and correct as of such Date of Delivery.

(ii) Certificate of Selling Stockholders A
certificate, dated such Date of Delivery, (i) for each other
Selling Stockholder other than the FDIC-FRF, of (x) the
President or a Vice President of such Selling Stockholder in
the case of each Selling Stockholder that did not execute a
Power of Attorney and Custody Agreement or (y) an
Attorney-in-Fact on behalf of each Selling Stockholder other
than the FDIC-FRF and (ii) for the FDIC-FRF, of the Director
or an Assistant Director of the Division of Resolutions of the
FDIC, in each case confirming that the certificate delivered
at Closing Time pursuant to Section 5(f)(i) or (ii), as the
case may be, remains true and correct as of such Date of
Delivery.

(iii) Opinion of Counsel for the Company, Bank and
the Selling Stockholders The favorable opinions of (i)
Wachtell, Lipton, Rosen & Katz, special counsel for the
Company, the Bank and the Selling Stockholders, (ii) Bryan
Cave LLP, special counsel for the Company and the Bank,
together with (iii) Jonathon K. Heffron, Executive Vice
President and General Counsel of the Company, each in form and
substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinions required by Section 5(b) hereof.

(iv) Opinion of Counsel for Selling Stockholders
The favorable opinions of (i) counsel to non-individual
Selling Stockholders other than the FDIC-FRF, Prudential and
the Equitable Group, (ii) counsel to Prudential Insurance and
to the Equitable Group, and (iii) the Deputy General Counsel
for the FDIC-FRF, in each case in form and substance
satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(c)(i) or (ii),
as the case may be.

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<PAGE> 32
(v) Opinion of Counsel for Underwriters The
favorable opinion of Cleary, Gottlieb, Steen & Hamilton,
counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.

(vi) Bring-down Comfort Letter A letter from
Deloitte & Touche LLP, in form and substance satisfactory to
the Representative and dated such Date of Delivery,
substantially in the same form and substance as the letter
furnished to the Representative pursuant to Section 5(g)
hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.

(m) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Stockholders in connection with the issuance and sale
of the Securities as herein contemplated shall be satisfactory in form
and substance to the Representative and counsel for the Underwriters.

(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the Representative
by notice to the Company at any time at or prior to Closing Time or
such Date of Delivery, as the case may be, and such termination shall
be without liability of any party to any other party except as provided
in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters and Selling Stockholders by the
Company and the Bank. The Company and the Bank jointly and severally agree to
indemnify and hold harmless each Selling Stockholder and each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434

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<PAGE> 33
Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;

(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject
to Section 6(d) below) any such settlement is effected with
the prior written consent of the Company; and

(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by Merrill Lynch or such Selling Stockholder),
reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii)
above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company (A) by
the Selling Stockholder, or (B) by any Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).

The Company and the Bank will also jointly and severally indemnify and
hold harmless the Independent Underwriter and each person, if any, who controls
the Independent Underwriter within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act, from and against any and all losses, claims,
damages, liabilities and judgments incurred as a result of the Independent
Underwriter's participation as a "qualified independent underwriter' within the
meaning of Section 2720 of the NASD Conduct Rules in connection with the
offering of the Securities, except for any losses, claims, damages, liabilities
and judgments resulting from the Independent Underwriter's or such controlling
person's willful misconduct or gross negligence.

27
<PAGE> 34
(b) Indemnification of Underwriters by the Selling Stockholders. Each
Selling Stockholder, severally and not jointly, agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and
each Underwriter, and each person, if any, who controls such Underwriter within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 6(a) above, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder with respect to such Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or any Prospectus (or any amendment or
supplement thereto); provided, however, that such Selling Stockholder's
aggregate liability under this Section 6 shall be limited to an amount equal to
the net proceeds (after deducting the underwriting discount, but before
deducting expenses) received by such Selling Stockholder from the sale of
Securities pursuant to this Agreement.

(c) Indemnification of Company and the Selling Stockholders by
Underwriters. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Stockholder, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 6(a) above, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Merrill Lynch expressly for
use in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).

(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) or
Section 6(b) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(c)
above, counsel to the indemnified parties shall be selected by the Company or
the Selling Stockholder, as the case may be. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that

28
<PAGE> 35
counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances; provided, that if indemnity is sought
pursuant to the second paragraph of Section 6(a), then, in addition to such
counsel for the indemnified parties, the indemnifying party shall be liable for
the reasonable fees and expenses of not more than one separate counsel (in
addition to any necessary local counsel) for the Independent Underwriter and all
persons, if any, who control the Independent Underwriter within the meaning of
Section 15 of the 1933 Act and Section 20 of the 1934 Act if, in the reasonable
judgment of the Independent Underwriter there may exist a conflict of interest
between the Independent Underwriter and the other indemnified parties. In the
case of any such separate counsel for the Independent Underwriter and such
control persons of the Independent Underwriter, such counsel shall be designated
in writing by the Independent Underwriter. No indemnifying party shall, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

(e) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

(f) Agreements Between the Company and the Selling Stockholder
Unaffected. The provisions of this Section shall not affect any agreement among
the Company and the Selling Stockholders or any of them with respect to
indemnification.

(g) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees to indemnify and
hold harmless the Underwriters from and against any and all losses, expenses and
liabilities incurred by them, as incurred, as a result of the failure of the
designated employees or other persons to pay for and accept delivery of
Securities which, immediately following the effectiveness of the Registration
Statement, were at any time subject to a properly confirmed agreement to
purchase.

29
<PAGE> 36
(h) Registration Statement Undertaking. Insofar as the indemnity
agreement contained in this Section 6 may permit indemnification for liabilities
under the 1933 Act of any person who is a partner of an Underwriter or who
controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, and who, at the date of this Agreement, is a
director or officer of the Company or controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, such indemnity
agreement is subject to the undertaking of the Company in the Registration
Statement under Item 17 thereof.

SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company or each
Selling Stockholder, as the case may be, on the one hand and the Underwriters on
the other hand from the offering of the Securities pursuant to this Agreement or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company or each Selling Stockholder, as the case may be, on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions, or in connection with any failure of the nature referred to in
Section 6(g) hereof, which resulted in such losses, liabilities, claims, damages
or expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company or a Selling Stockholder,
as the case may be, on the one hand and the Underwriters on the other hand, in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and such Selling Stockholder and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet bear to the aggregate initial public offering price of the
Securities as set forth on such cover. The Company, the Bank and the
Underwriters agree that Merrill Lynch will not receive any additional benefits
hereunder for serving as the Independent Underwriter in connection with the
offering and sale of the Securities.

The relative fault of the Company or such Selling Stockholder, as the
case may be, on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Selling Stockholder, as the case may be, or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or any failure of the nature referred to in
Section 6(g) hereof.

30
<PAGE> 37
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters 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 above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, (i) no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the 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 any such untrue or
alleged untrue statement or omission or alleged omission and (ii) no Selling
Stockholder shall be required to contribute an amount in excess of the net
proceeds (after deducting the underwriting discount, but before deducting
expenses) received by such Selling Stockholder from the sale of Securities
pursuant to this Agreement.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.

The provisions of this Section shall not affect any other agreement
among the Company and the Selling Stockholders with respect to contribution.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company or the
Selling Stockholders, and shall survive delivery of the Securities to the
Underwriters.

31
<PAGE> 38
SECTION 9. Termination of Agreement.

(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Company and the Selling Stockholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, stockholder's equity, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representative, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or the NASDAQ Stock
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ Stock Market has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority, or (iv)
if a banking moratorium has been declared by Federal, New York or Texas
authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representative shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters (other than Donaldson, Lufkin & Jenrette
Securities Corporation), to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:

(a) if the number of Defaulted Securities does not
exceed 10% of the number of Securities to be purchased on such
date, each of the non-defaulting Underwriters shall be
obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or

32
<PAGE> 39
(b) if the number of Defaulted Securities exceeds 10%
of the number of Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which
occurs after the Closing Time, the obligation of the
Underwriters to purchase and the Selling Stockholders other
than the FDIC-FRF to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting
Underwriter.

No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company and the Selling Stockholders to sell
the relevant Option Securities, as the case may be, either the Representative or
the Company and any Selling Stockholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.

SECTION 11. Default by One or More of the Selling Stockholders or the
Company. (a) If for any reason one or more Selling Stockholders shall fail at
Closing Time or at a Date of Delivery to sell and deliver the number of
Securities which such Selling Stockholders are obligated to sell hereunder, and
the remaining Selling Stockholders do not exercise the right (which the
Underwriters hereby grant) to increase, pro rata or otherwise, the number of
Securities to be sold by them hereunder to the total number to be sold by all
Selling Stockholders as set forth in Schedule B hereto, then the Underwriters
may, at option of the Representative, by notice from the Representative to the
Company and the non-defaulting Selling Stockholders, either (a) terminate this
Agreement without any liability on the fault of any non-defaulting party except
that the provisions of Sections 1, 4, 6 and 7 shall remain in full force and
effect or (b) elect to purchase the Securities which the non-defaulting Selling
Stockholders have agreed to sell hereunder. No action taken pursuant to this
Section 11 shall relieve any Selling Stockholder so defaulting from liability,
if any, in respect of such default.

In the event of a default by any Selling Stockholder as referred to in
this Section 11, each of the Representative, the Company and the non-defaulting
Selling Stockholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.

(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any nondefaulting party;
provided, however, that the provisions of Sections 4, 6 and 7 shall remain in
full force and effect. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.

33
<PAGE> 40
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representative at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Syndicate
Operations; notices to the Company shall be directed to it at 50 Charles
Lindbergh Boulevard, Suite 500, Uniondale, NY 111553 attention of Jonathon K.
Heffron, Executive Vice President and General Counsel; notices to the Bank shall
be directed to it at 3200 Southwest Freeway, Suite 2000, P.O. Box 1370, Houston,
Texas 77251-1370 attention of Jonathon K. Heffron, Executive Vice President and
General Counsel; notices to the Selling Stockholders other than the FDIC - FRF
shall be directed to the addresses specified on Schedule F hereto and notices to
the FDIC - FRF shall be directed to the Federal Deposit Insurance Corporation,
550 17th Street, N.W., Washington, DC 20429, attention of the General Counsel.

SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company, the Bank and the Selling
Stockholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company, the Bank, and the Selling
Stockholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company, the Bank and the Selling
Stockholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.

SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.

SECTION 16. Representative. The Representative will act for the
Underwriters in connection with this Agreement and the transactions contemplated
hereby, and any action taken under this Agreement by the Representative shall be
binding upon all the Underwriters.

34
<PAGE> 41
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company, the Attorney(s)-in-Fact for
the Selling Stockholders other than the FDIC - FRF and the person specified in
Section 2 for notices going to the FDIC - FRF a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters, the Company, the Bank and the Selling Stockholders in
accordance with its terms.

Very truly yours,

BANK UNITED CORP.

By:__________________________________________
Name:
Title:

BANK UNITED

By:__________________________________________

Name:
Title:

ATTORNEY-IN-FACT, on behalf of the Selling
Stockholders named in Schedule B hereto
other than FDIC-FRF, Prudential and the
Equitable Group

____________________________________________
Name:
As Attorney-in-Fact

35
<PAGE> 42
FEDERAL DEPOSIT INSURANCE
CORPORATION,
as the manager of the FSLIC Resolution
Fund

By:_________________________________________
Name:
Title:

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA

By:_________________________________________
Name:
Title:

THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES

By:_________________________________________
Name:
Title:

EQUITABLE VARIABLE LIFE INSURANCE
COMPANY

By:_________________________________________
Name:
Title:

EQUITABLE DEAL FLOW FUND LP

By:_________________________________________
Name:
Title:

36
<PAGE> 43
EQUITABLE CAPITAL PARTNERS LP

By:_________________________________________
Name:
Title:

EQUITABLE CAPITAL PARTNERS
(RETIREMENT FUND) LP

By:_________________________________________
Name:
Title:

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

By_____________________________________
Authorized Signatory

For itself and as Representative of the other Underwriters named in Schedule A
hereto.

<PAGE> 44
SCHEDULE A

Name of Underwriter Number of Initial Securities
- ------------------- ----------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................
Lehman Brothers Inc..................
Smith Barney Inc.....................
--------------
Total
==============

Sch A - 1
<PAGE> 45
SCHEDULE B

<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
<S> <C> <C>
Selling Stockholders
- --------------------
Federal Deposit Insurance
Corporation as manager of
the FLSLIC Resolution
Fund 1,503,560
LSR Hyperion Corp. 566,242 110,297
Hyperion Funding Corp. 8,586 1,672
SAR Hyperion Corp. 150,249 29,267
SAS Hyperion Corp. 150,249 29,267
KRW Hyperion Corp. 44,966 8,759
CJK Hyperion Corp. 36,268 7,065
David M. Golush 67,720 13,191
Patricia A. Sloan 31,007 6,040
David W. Marcus 28,261 5,503
Jeffrey P. Cheesman 20,000 3,896
Robert A. Perro 15,704 3,059
The Prudential Insurance
Company of America 2,375,953 462,805
American Home Assurance
Company 1,255,847 244,623
Ameritech Pension Trust 1,267,744 246,940
The Equitable Life Assurance
Society of the United States 730,516 142,295
Equitable Variable Life
Insurance Company 48,302 9,409
Equitable Deal Flow Fund LP 145,152 28,274
Equitable Capital Partners LP 173,664 33,828
Equitable Capital Partners
(Retirement Fund) LP 85,536 16,661
Lewis S. Ranieri 1,825 355
</TABLE>

Sch B - 1
<PAGE> 46
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
<S> <C> <C>
Salvatore A. Ranieri Cust for
Margaret Ranieri 1,202 234
NY UGMA-AGE 21
Lewis S. Ranieri A/C/F Eric
Jimenez NJ UTMA-21 60 12
Lewis S. Ranieri A/C/F Jason
Jimenez NJ UTMA-21 60 12
Ranieri Family Trust F/B/O
Claudia L. Ranieri 790 154
U/A 7/1/93
Ranieri Family Trust F/B/O
Angela S. Ranieri 790 154
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 12/20/84 494 96
Trust F/B/O Jason Reid
Golush U/A 12/20/84 429 84
Gail W. Marcus 365 71
Janet L. Perro 172 34
Ranieri Bros. Shay & Co.,
Inc. 3,859 752
The Sweater Trust 103,044 20,072
Sun Life Insurance Co. of
America 171,740 33,453
Marilyn B. Arison 137,392 26,762
Masco Capital Corp. 85,870 16,726
Wolfson Descendants' 1983
Trust
South Ferry #2, L.P.
EDN Equities
Leslie Wexner 68,696 13,381
The Airlie Group, L.P. 68,696 13,381
Julius Berman 20,316 3,957
</TABLE>

Sch B - 2
<PAGE> 47
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
<S> <C> <C>
FAME Associates 24,044 4,683
Institutional Interests 52,816 10,288
Houston Firemen's Relief and
Retirement Fund 85,870 16,726
Alpine Investment Partners 34,348 6,691
Mortimer Zuckerman 3,435 669
Edward Linde 3,435 669
Connie S. Maniatty 3,435 669
Micha Astrachan 10,597 2,064
--------- ---------

TOTAL 9,589,306 1,575,000
========= =========
</TABLE>

Sch B - 3
<PAGE> 48
SCHEDULE C

10,500,000 Shares of Class A Common Stock
(Par Value $0.01 Per Share)

1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__________.

2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $ ______, being an amount equal to the initial
public offering price set forth above less $______ per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.

Sch C - 1
<PAGE> 49
SCHEDULE D

List Of Persons And Entities Subject To Lock-Ups

<TABLE>
<CAPTION>
180-DAY ONE YEAR
------- --------
<S> <C>
Wolfson Descendants' 1983 Trust Scott A. Shay
South Ferry #2, L.P. LSR Funding Corp.
EDN Equities SAR Hyperion Corp.
LW-SP1, L.P. SAS Hyperion Corp.
LW-SP2, L.P. KRW Hyperion Corp.
Trust F/B/O Benjamin Jacob Shay CJK Hyperion Corp.
Trust F/B/O Ariel Rebecca Shay
</TABLE>

Sch D - 1
<PAGE> 50
SCHEDULE E

List Of Wholly-Owned Subsidiaries Of The Bank

Commonwealth United Mortgage Company, a Texas corporation.

United Agency Corporation, a Texas corporation.

United Capital Management Corporation, a Texas corporation.

United Financial Markets, Inc., a Texas corporation.

United Greenway Securities Services, Inc., a Texas corporation.

United Mortgage Securities Corporation, a Delaware corporation.

USAT Mortgage Securities, Inc., a Texas corporation.

Sch E - 1
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SCHEDULE F

List Of Names And Addresses Of Selling Stockholders

Sch F - 1
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EXHIBIT A-1

FORM OF OPINION OF
WACHTELL, LIPTON, ROSEN & KATZ
TO BE DELIVERED PURSUANT TO SECTION 5(b)

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.

(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus, and to enter into and perform its
obligations under the Purchase Agreement and the Share Exchange
Agreement. The activities of each of the Company's subsidiaries
are permitted to subsidiaries of a savings and loan holding
company.

(iii) The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.

(v) All of the issued and outstanding capital stock of the
Bank and each subsidiary of the Bank has been duly authorized and
validly issued, is fully paid and non-assessable and, except as
otherwise disclosed in the Registration Statement, is owned by
the Company, directly or through subsidiaries, to the best of our
knowledge, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any subsidiary was issued
in violation of the preemptive or similar rights of any
securityholder of such subsidiary.

(vi) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus in the column
entitled "Pro Forma" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to the Purchase
Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the
exercise of convertible securities or options referred to in the
Prospectus); the shares of issued and outstanding capital stock
of the Company, including the Securities to
<PAGE> 53
be purchased by the Underwriters from the Selling Stockholders,
have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital
stock of the Company, including the Securities to be purchased by
the Underwriters from the Selling Stockholders, was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.

(vii) The Securities to be purchased by the Underwriters
from the Company and the Selling Stockholders have been duly
authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement and, when issued and delivered by the
Company pursuant to the Purchase Agreement against payment of the
consideration set forth in the Purchase Agreement, will be
validly issued, fully paid and non-assessable and no holder of
the Securities is or will be subject to personal liability by
reason of being such a holder: and the issuance of the Securities
to be purchased by the Underwriters is not subject to the
preemptive or other similar rights of any securityholder of the
Company. The shares of Class A Common Stock to be sold to the
Underwriters by the Selling Stockholders pursuant to the Purchase
Agreement, including those issuable as a result of the
Conversion, upon delivery to the Underwriters as contemplated by
the Purchase Agreement will be duly authorized, validly issued,
fully paid and nonassessable. The sale of the Class A Common
Stock to the Underwriters by the Selling Stockholders is not
subject to the preemptive or other similar rights of any
securityholder of the Company. The Class A Common Stock conforms
to all statements relating thereto contained in the Prospectus
and such description conforms to the rights set forth in the
instruments defining the same.

(viii) The forms of certificate used to evidence the Class
A Common Stock complies in all material respects with all
applicable statutory requirements, with any applicable
requirements of the Certificate and By-Laws of the Company, and
the requirements of the NASDAQ Stock National Market.

(ix) The Registration Statement has been declared
effective under the 1933 Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made in the manner
and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued under the 1933 Act
and no proceedings for that purpose have been instituted or are
pending or threatened by the Commission.

(x) The Registration Statement, the Rule 430A Information,
the Prospectus, and each amendment or supplement to the
Registration Statement and Prospectus, as of their respective
effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to
which we need express no opinion) complied as to form in all

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material respects with the requirements of the 1933 Act and the
1933 Act Regulations.

(xi) There is not pending or, to our knowledge, threatened
any action, suit, proceeding, inquiry or investigation, to which
the Company or the Bank or any their respective subsidiaries is a
party, or to which the property of the Company or the Bank or any
their respective subsidiaries is subject, before or brought by
any court or governmental agency or body, domestic or foreign,
which might reasonably be expected to result in a Material
Adverse Effect, or to materially and adversely affect the
consummation of the transactions contemplated in the Purchase
Agreement or in the Share Exchange Agreement or the other
transactions described in the Registration Statement under the
caption "The Company - Background of the Offering - Dividend
Distribution and Restructuring", or the performance by the
Company and the Bank of their respective obligations hereunder or
thereunder.

(xii) The information in the Prospectus under the captions
"Risk Factors - Limitations on Use of Tax Losses; Restrictions on
Transfers of Stock," "Risk Factors - Holding Company Structure;
Ability to Pay Dividends," "Description of Capital Stock,"
"Business - The Assistance Agreement - Warrant Agreement,"
"Business - The Assistance Agreement - Warrant Purchase and
Exchange Agreement," "Legal Proceedings," and in the Registration
Statement under "Part II. Information Not Required in Prospectus
- Item 14. Indemnification of Directors and Officers," to the
extent that such information constitutes matters of law,
summaries of legal matters, the Certificate or By-laws or legal
proceedings, or legal conclusions, has been reviewed by us and is
correct in all material respects.

(xiii) To the best of our knowledge, there are no statutes
or regulations that are required to be described in the
Prospectus that are not described as required.

(xiv) All descriptions in the Registration Statement of
contracts and other documents to which the Company or its
subsidiaries are a party are accurate in all material respects;
to the best of our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in all
material respects.

(xv) Neither the Company, the Bank nor any of their
respective subsidiaries is in violation of its charter or by-laws
and no default by the Company, the Bank or any of their
respective subsidiaries exists in the due performance or
observance of any material obligation, agreement, covenant or

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condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is
described or referred to in the Registration Statement or the
Prospectus or filed as an exhibit to the Registration Statement.

(xvi) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any
court or governmental authority or agency, domestic or foreign
including, without limitation, the OTS and FDIC (other than under
the 1933 Act and the 1933 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky
laws of the various states, as to which we express no opinion) is
necessary or required for the performance by the Company of its
obligations under the Purchase Agreement in connection with the
offering, issuance or sale of the Securities by the Company under
the Purchase Agreement , for the consummation by the Company and
the Bank of the transactions contemplated by the Purchase
Agreement or the Share Exchange Agreement or the other
transactions described in the Registration Statement under the
caption "The Company-Background of the Offering."

(xvii) The execution, delivery and performance of the
Purchase Agreement and the Share Exchange Agreement by the
Company and the Bank, and the consummation of the transactions
contemplated in the Purchase Agreement, in the Share Exchange
Agreement and in the Registration Statement, including the other
transactions described in the Registration Statement under the
caption "The Company - Background of the Offering - Dividend
Distribution and Restructuring" (including the issuance and sale
of the Securities and the use of the proceeds from the sale of
the Securities as described in the Prospectus under the caption
"Use Of Proceeds") and compliance by each of the Company and the
Bank with its respective obligations under the Purchase Agreement
and the Share Exchange Agreement has been duly authorized by all
necessary corporate action and do not and will not, whether with
or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section 1(a)(x) of the Purchase Agreement)
under or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which the Company or any
subsidiary is a party or by which it or any of them may be bound,
or to which any of the property or assets of the Company, the
Bank or any of their respective subsidiaries is subject (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect),
nor will such action result in any violation of the provisions of
the charter or by-laws of the Company, the Bank or any of their
respective subsidiaries, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of

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any government, governmental instrumentality or court, domestic
or foreign, having jurisdiction over the Company, the Bank, or
any of their respective subsidiaries or any of their respective
properties, assets or operations.

(xviii) To the best of our knowledge, there are no persons
with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or
otherwise registered by the Company or the Bank under the 1933
Act, except as described in Registration Statement or as set
forth in any agreement described therein as containing such
rights.

(xix) The Company is not, and upon the issuance and sale
of the Securities as contemplated in the Purchase Agreement and
the application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company," as such terms are
defined in the 1940 Act.

(xx) The Purchase Agreement has been duly authorized,
executed and delivered by or on behalf of each Selling
Stockholder (other than the FDIC-FRF, Prudential and the
Equitable Group) and constitutes the valid and binding
obligation of each Selling Stockholder.

(xxi) The Power of Attorney and Custody Agreement
constitutes the valid and binding obligation of each Selling
Stockholder (other than the FDIC-FRF, Prudential and the
Equitable Group) enforceable against such Selling Stockholder
in accordance with its terms.

(xxii) The execution, delivery and performance of (i) the
Purchase Agreement by each Selling Stockholder and (ii) the Power
of Attorney and Custody Agreement by or on behalf of each Selling
Stockholder (other than the FDIC-FRF, Prudential and the
Equitable Group) will not contravene any provision of the General
Corporation Law of the State of Delaware, the laws of the State
of New York or the federal laws of the United States of America
applicable to such Selling Stockholder, provided that the
foregoing opinion is limited to such laws which, in our
experience, are normally applicable to public offerings of
securities of the type contemplated by the Purchase Agreement
excluding laws that are applicable to any Selling Stockholder
solely because of its specific status (including regulatory
status), other than its status as a Selling Stockholder.

(xxiii) No consent, approval, authorization or order of or
qualification by the State of Delaware (as it relates to the
General Corporation Law of the State of Delaware), the State of
New York or any federal governmental body or agency is required
for the performance by any Selling Stockholder of its obligations
under the Purchase Agreement and the Power of Attorney and
Custody Agreement, except such as have been obtained under the
1933 Act or such as may be required by state securities laws in
connection with the purchase

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and distribution of the Securities by the Underwriters, provided
that the foregoing opinion is limited to such consents,
approvals, authorizations, orders or qualifications which, in our
experience, are normally applicable to public offerings of
securities of the type contemplated by the Purchase Agreement
excluding consents, approvals, authorizations, orders or
qualifications that are applicable to any Selling Stockholder
solely because of its specific status (including regulatory
status), other than its status as a Selling Stockholder.

(xxiv) Assuming that the Underwriters purchase the
Securities to be delivered by or on behalf of the Selling
Stockholders at the Closing Time in good faith and without notice
of any security interests, claims, liens, equities, encumbrances
and other adverse claims as such term is used in Section 8-302 of
the Uniform Commercial Code as in effect in the State of New
York, the delivery of certificates representing such Securities,
duly endorsed to the Underwriters or in blank, will pass to the
Underwriters valid title to such Securities, free and clear of
all security interests, claims, liens, equities, encumbrances and
other adverse claims.

Nothing has come to our attention that would lead us to believe
that the Registration Statement or any amendment thereto, including the Rule
430A Information (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we make no
statement), at the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we need make
no statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

* * * * *

In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).

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EXHIBIT A-2

FORM OF OPINION OF BRYAN CAVE
TO BE DELIVERED PURSUANT TO
SECTION 5(b)

(i) The Bank has been duly organized and is validly
existing as a federally chartered savings bank in good standing
under the laws of the United States. The Bank is a member of the
Federal Home Loan Bank of Dallas, and has been duly issued a
certificate stating that its savings accounts are insured by the
FDIC in accordance with applicable law, and no proceedings for
the termination or revocation of such membership or insurance are
pending or, to the best of our knowledge, threatened.

(ii) The Bank has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under this Agreement and the Share Exchange
Agreement. Each subsidiary of the Bank has been duly organized
and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation and has the
power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus. The Bank
and each of its subsidiaries is duly qualified as a foreign
corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse
Effect.

(iii) The activities of each of the Bank's subsidiaries
are permitted to subsidiaries of a federally chartered savings
bank, the deposits of which are insured by the SAIF, which is
administered by the FDIC.

(iv) In the event the Company shall become either directly
or indirectly a bank holding company for purposes of the Bank
Holding Company Act of 1956, as amended (the "BHC Act") and the
rules and regulations of the Board of Governors of the Federal
Reserve System thereunder (the "BHC Rules"), the current
activities of the Company and its subsidiaries (as defined in the
BHC Rules) would be activities permissible for a bank holding
company under the BHC Act and the BHC Rules.

(v) No cease and desist order has been entered by the
Office of Thrift Supervision (the "OTS") or the Federal Deposit
Insurance Corporation ("FDIC") against the Bank or any of its
subsidiaries
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(vi) The information in the Prospectus under the captions
"Risk Factors - Holding Company Structure; Ability to Pay
Dividends", "Business - The Assistance Agreement" and
"Regulation", to the extent such information constitutes matters
of law, summaries of legal matters, or legal conclusions, has
been reviewed by us and is correct in all material respects.

(vii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any
court or governmental authority or agency, domestic or foreign
including, without limitation, the OTS and FDIC (other than under
the 1933 Act and the 1933 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky
laws of the various states, as to which we express no opinion) is
necessary or required for the performance by the Company of its
obligations under the Purchase Agreement in connection with the
offering, issuance or sale of the Securities by the Company under
the Purchase Agreement or the consummation by the Bank of the
transactions contemplated by the Purchase Agreement or the Share
Exchange Agreement.

* * * * *

In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent he deems proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).

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EXHIBIT A-3

FORM OF OPINION OF
JONATHON K. HEFFRON,
GENERAL COUNSEL OF THE COMPANY,
TO BE DELIVERED PURSUANT TO SECTION 5(b)

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.

(iv) The Bank is the only "significant subsidiary" of the
Company (as such term is defined in Rule 1-02 of Regulation S-X).
The only subsidiaries of the Company other than the Bank are the
wholly-owned subsidiaries of the Bank listed on Schedule E to the
Purchase Agreement, which, considered in the aggregate as a
single subsidiary, do not constitute a "significant subsidiary"
as defined in Rule 1-02 of Regulation S-X. The activities of all
of the Bank's subsidiaries are permitted to subsidiaries of a
federally chartered savings bank, the deposits of which are
insured by the SAIF, which is administered by the FDIC.

(v) The Bank has been duly organized and is validly
existing as a federally chartered savings bank in good standing
under the laws of the United States.

(vi) The Bank has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under this Agreement and the Share Exchange
Agreement. Each subsidiary of the Bank has been duly organized
and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation and has the
power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus. The Bank
and each of its subsidiaries is duly qualified as a foreign
<PAGE> 61
corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse
Effect.

(vii) All of the issued and outstanding capital stock of
the Bank and each subsidiary of the Bank has been duly authorized
and validly issued, is fully paid and non-assessable and, except
as otherwise disclosed in the Registration Statement, is owned by
the Company, directly or through subsidiaries, to the best of my
knowledge, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any subsidiary was issued
in violation of the preemptive or similar rights of any
securityholder of such subsidiary.

(viii) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the
column entitled "Pro Forma" under the caption "Capitalization"
(except for subsequent issuances, if any, pursuant to the
Purchase Agreement or pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant
to the exercise of convertible securities or options referred to
in the Prospectus); the shares of issued and outstanding capital
stock of the Company, including the Securities to be purchased by
the Underwriters from the Selling Stockholders, have been duly
authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital
stock of the Company, including the Securities to be purchased by
the Underwriters from the Selling Stockholders, was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.

(ix) The Securities to be purchased by the Underwriters
from the Company and the Selling Stockholders have been duly
authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement and, when issued and delivered by the
Company pursuant to the Purchase Agreement against payment of the
consideration set forth in the Purchase Agreement, will be
validly issued, fully paid and non-assessable and no holder of
the Securities is or will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities
to be purchased by the Underwriters is not subject to the
preemptive or other similar rights of any securityholder of the
Company. The shares of Class A Common Stock to be sold to the
Underwriters by the Selling Stockholders pursuant to the Purchase
Agreement, including those issuable as a result of the
Conversion, upon delivery to the Underwriters as contemplated by
the Purchase Agreement, will be duly authorized, validly issued,
fully paid and nonassessable. The sale of the Class A Common
Stock to the Underwriters by the Selling Stockholders is not
subject to the preemptive or other similar rights of any
securityholder of the Company. The Class A

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Common Stock conforms to all statements relating thereto
contained in the Prospectus and such description conforms to the
rights set forth in the instruments defining the same.

(x) There is not pending or, to my knowledge, threatened
any action, suit, proceeding, inquiry or investigation, to which
the Company or the Bank or any their respective subsidiaries is a
party, or to which the property of the Company or the Bank or any
their respective subsidiaries is subject, before or brought by
any court or governmental agency or body, domestic or foreign,
which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof
or the consummation of the transactions contemplated in the
Purchase Agreement or in the Share Exchange Agreement or the
other transactions described in the Registration Statement under
the caption "The Company - Background of the Offering - Dividend
Distribution and Restructuring", or the performance by the
Company and the Bank of either of their respective obligations
hereunder or thereunder. The aggregate of all pending legal or
governmental proceedings to which the Company, the Bank, or any
of their respective subsidiaries is known by me to be a party or
of which any of their respective property or assets is the
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business,
could not reasonably be expected to result in a Material Adverse
Effect. No cease and desist order has been entered by the Office
of Thrift Supervision or the FDIC against the Company, the Bank
or any of their respective subsidiaries. No labor dispute with
the employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent, and the Company is not
aware of any existing or imminent labor disturbance by the
employees of any of its or any subsidiary's principal suppliers,
manufacturers, customers or contractors, which, in either case,
may reasonably be expected to result in a Material Adverse
Effect.

(xi) The information in the Prospectus under the captions
"Risk Factors - Limitations on Use of Tax Losses; Restrictions on
Transfers of Stock," "Risk Factors - Holding Company Structure;
Ability to Pay Dividends," "Description of Capital Stock,"
"Business - The Assistance Agreement Warrant Agreement,"
"Business - The Assistance Agreement - Warrant Purchase and
Exchange Agreement," "Legal Proceedings," and in the Registration
Statement under "Part II. Information Not Required in Prospectus
- Item 14. Indemnification of Directors and Officers," to the
extent that such information constitutes matters of law,
summaries of legal matters, the Company's Certificate or Bylaws
or legal proceedings, or legal conclusions, has been reviewed by
me and is correct in all material respects.

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(xii) To the best of my knowledge, there are no statutes
or regulations that are required to be described in the
Prospectus that are not described as required.

(xiii) All descriptions in the Registration Statement of
contracts and other documents to which the Company or its
subsidiaries are a party are accurate in all material respects;
to the best of my knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in all
material respects.

(xiv) Neither the Company, the Bank nor any of their
respective subsidiaries is in violation of its charter or by-laws
and no default by the Company, the Bank or any of their
respective subsidiaries exists in the due performance or
observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is
described or referred to in the Registration Statement or the
Prospectus or filed as an exhibit to the Registration Statement.

(xv) The execution, delivery and performance of the
Purchase Agreement and the Share Exchange Agreement by the
Company and the Bank, and the consummation of the transactions
contemplated in the Purchase Agreement, in the Share Exchange
Agreement and in the Registration Statement, including the other
transactions described in the Registration Statement under the
caption "The Company - Background of the Offering - Dividend
Distribution and Restructuring" (including the issuance and sale
of the Securities and the use of the proceeds from the sale of
the Securities as described in the Prospectus under the caption
"Use Of Proceeds") and compliance by each of the Company and the
Bank with its respective obligations under the Purchase Agreement
and the Share Exchange Agreement has been duly authorized by all
necessary corporate action and do not and will not, whether with
or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section 1(a)(x) of the Purchase Agreement)
under or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to me, to which the Company or any
subsidiary is a party or by which it or any of them may be bound,
or to which any of the property or assets of the Company, the
Bank or any of their respective subsidiaries is subject (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect),
nor will such

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action result in any violation of the provisions of the charter
or by-laws of the Company, the Bank or any of their respective
subsidiaries, or any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to me, of any government,
governmental instrumentality or court, domestic or foreign,
having jurisdiction over the Company, the Bank, or any of their
respective subsidiaries or any of their respective properties,
assets or operations.

(xvi) There are no persons with registration rights or
other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the
Company or the Bank under the 1933 Act, except as described in
Registration Statement or as set forth in any agreement described
therein as containing such rights.

(xvii) The Company, the Bank and each of its subsidiaries
possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated
by them; the Company, the Bank and each of its subsidiaries are
in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in
full force and effect would not have a Material Adverse Effect;
and neither the Company, the Bank nor any of their respective
subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses
which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

(xviii) The Company, the Bank and each of their respective
subsidiaries have good and marketable title to all real, tangible
and intangible property reflected in the most recent balance
sheet included in the Prospectus as owned by the Company, the
Bank and its subsidiaries and good title to all other properties
reflected in the most recent balance sheet included in the
Prospectus as owned by them, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Company, the Bank or any of their respective
subsidiaries; or, with respect to any such real property, render
title unmarketable as to a material part thereof and all of the
leases and subleases material to the business of the Company, the
Bank and of their respective subsidiaries, considered as one
enterprise, and under which the Company, the Bank or any of their
respective subsidiaries holds properties

5
<PAGE> 65
described in the Prospectus, are in full force and effect, and
neither the Company, the Bank nor any of their respective
subsidiaries has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the
Company, the Bank or any of their respective subsidiaries under
any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company, the Bank or such
subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.

(xix) Except as described in the Registration Statement or
except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) the Company, the Bank and each of
their respective subsidiaries is not in violation of any federal,
state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to
the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company,
the Bank and each of their respective subsidiaries have all
permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or, to the knowledge
of the Company, threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company, the Bank
or any of their respective subsidiaries and (D) to the knowledge
of the Company there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up
or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the
Company, the Bank or any of their respective subsidiaries
relating to Hazardous Materials or any Environmental Laws.

(xx) In the event the Company shall become either directly
or indirectly a bank holding company for purposes of the Bank
Holding Company Act of 1956, as amended (the "BHC Act") and the
rules and regulations of the Board of Governors of the Federal
Reserve System thereunder (the "BHC Rules"), the current
activities of the Company and its subsidiaries (as defined in the
BHC Rules) would be activities permissible for a bank holding
company under the BHC Act and the BHC Rules.

6
<PAGE> 66
Nothing has come to my attention that would lead me to believe
that the Registration Statement or any amendment thereto, including the Rule
430A Information (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we make no
statement), at the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we need make
no statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

* * * * *

7
<PAGE> 67
EXHIBIT B-1

FORM OF OPINION OF COUNSEL TO NON-INDIVIDUAL SELLING
STOCKHOLDERS OTHER THAN FDIC-FRF, PRUDENTIAL AND EQUITABLE
GROUP

[LETTERHEAD OF COUNSEL]

August , 1996

MERRILL LYNCH & CO.

Merrill Lynch, Pierce, Fenner & Smith Incorporated
as Representative of the Several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

We [I am the ___________ of __________ and I] have acted as
special counsel to the entities listed on Schedule I hereto (the "Scheduled
Selling Stockholders") in connection with the offering by the Scheduled Selling
Stockholders and certain other persons (the Scheduled Selling Stockholders
together with such other persons the "Selling Stockholders") of up to __________
shares (including shares to be sold upon exercise of over-allotment options) of
Class A common stock, par value $0.01 per share (the "Class A Common Stock"), of
Bank United Corp., a Delaware corporation (the "Company"), of which up to
__________ shares (including shares to be sold upon exercise of over-allotment
options) are offered by the Scheduled Selling Stockholders pursuant to a
registration statement of the Company on Form S-1 (No. 333-06229). This opinion
letter is furnished pursuant to Section 5(c) of the purchase agreement (the
"Purchase Agreement"), dated August , 1996, among the Company, the Selling
Stockholders and the several underwriters named in Schedule A thereto (the
"Underwriters") in connection with the closing of the sale by the Scheduled
Selling Stockholder of __________ such shares (the "Securities") on the date
hereof.

In arriving at the opinions expressed below, we [I] have reviewed
the following:

(a) a draft dated August 1, 1996 of the form of Purchase
Agreement;
<PAGE> 68
(b) an executed copy of a power of attorney of each Scheduled
Selling Stockholder dated August __, 1996 (the "Power of Attorney"); and

(c) an executed copy of a custody agreement between each
Scheduled Selling Stockholder and The Bank of New York, as custodian, dated
August __, 1996 (the "Custody Agreement").

In addition, we [I] have made such investigations of law as [I]
have deemed appropriate as a basis for the opinions expressed below.

In rendering the opinions expressed below, we [I] have assumed
the authenticity of all documents submitted to us [me] as originals and the
conformity to the originals of all documents submitted to us as copies. In
addition, we [I] have assumed and have not verified the accuracy as to factual
matters of each document we [I] have reviewed (including, without limitation,
the accuracy of the representations and warranties of the Company and the
Selling Stockholders in the Purchase Agreement).

Based on the foregoing, and subject to the further assumptions
and qualifications set forth below, it is our [my] opinion that:

(i) Each of the Selling Stockholders named in Schedule I hereto
(the "Scheduled Selling Stockholders') has the [corporate] power and authority
to enter into the Purchase Agreement and the Power of Attorney and Custody
Agreement and to sell transfer and deliver the Securities to be sold by such
Scheduled Selling Stockholder under the Purchase Agreement.

(ii) The Purchase Agreement has been duly authorized by each
Scheduled Selling Stockholder, and the Power of Attorney and Custody Agreement
has been duly authorized, executed and delivered, in each by or on behalf of
each Scheduled Selling Stockholder and constitutes the valid, binding and
enforceable obligation of such Scheduled Selling Stockholder.

(iii) The execution and delivery of the Purchase Agreement and
the Power of Attorney and Custody Agreement and the sale of the Securities by
each Scheduled Selling Stockholder to the Underwriters, and compliance by such
Scheduled Selling Stockholder with the terms of the Purchase Agreement and the
Power of Attorney and Custody Agreement have been duly authorized by all
necessary action on the part of such Scheduled Selling Stockholder and do not
and will not result in a violation of the [certificate of incorporation and by
laws or comparable constitutional documents] of such Scheduled Selling
Stockholder, and do not and will not conflict with, or result in a breach of any
of the terms and provision of, or constitute a default under (A) any statute,
rule or regulation relating to such Scheduled Selling Stockholder or its legal
or regulatory status in each case, that in our [my] experience are normally
applicable to transactions of the type provided for in the Purchase Agreement,
(B) any material judgment, order, rule, injunction or regulation of any court or
governmental agency or body, domestic or foreign, having jurisdiction over such
Scheduled Selling Stockholder or any of its

2
<PAGE> 69
respective properties or (C) any material contract, agreement or other
instrument to which such Scheduled Selling Stockholder is a party or by which it
is bound or to which any of its properties are subject.

Insofar as the foregoing opinions relate to the legality,
validity, binding effect or enforceability of any agreement or obligation of a
Scheduled Selling Stockholder, we [I] have assumed that each other party to such
agreement or obligation has duly authorized and executed such agreement or
obligation and has satisfied those legal requirements that are applicable to it
to the extent necessary to make such agreement or obligation enforceable against
it. In addition, the foregoing opinions are subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity.

The foregoing opinions are limited to the federal law of the
United States of America and the law of the State of New York.

We are [I am] furnishing this opinion letter to you, as
Representative of the Underwriters, solely for the benefit of the Underwriters
in connection with the offering of the Shares. This opinion letter is not to be
used, circulated, quoted or otherwise referred to for any other purpose.

Very truly yours,

[NAME OF COUNSEL]

By______________________________________________

3
<PAGE> 70
SCHEDULE I
TO EXHIBIT B-1

Names Of Selling Stockholder(s) As To Which Opinion Is Being Given

4
<PAGE> 71
EXHIBIT B-2

FORM OF OPINION OF COUNSEL TO PRUDENTIAL AND OPINION OF COUNSEL
TO EQUITABLE GROUP

[LETTERHEAD OF COUNSEL]

August , 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
as Representative of the Several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

In arriving at the opinions expressed below, we [I] have reviewed
an executed copy of the Purchase Agreement executed by the Scheduled Selling
Stockholders. In addition, we [I] have made such investigations of law as [I]
have deemed appropriate as a basis for the opinions expressed below.
<PAGE> 72
In rendering the opinions expressed below, we [I] have assumed
the authenticity of all documents submitted to us [me] as originals and the
conformity to the originals of all documents submitted to us as copies. In
addition, we [I] have assumed and have not verified the accuracy as to factual
matters of each document we [I] have reviewed (including, without limitation,
the accuracy of the representations and warranties of the Company and the
Selling Stockholders in the Purchase Agreement).

Based on the foregoing, and subject to the further assumptions
and qualifications set forth below, it is our [my] opinion that:

(i) Each of the Selling Stockholders named in Schedule I hereto
(the "Scheduled Selling Stockholders') has the [corporate] power and authority
to enter into the Purchase Agreement and to sell transfer and deliver the
Securities to be sold by such Scheduled Selling Stockholder under the Purchase
Agreement.

(ii) The Purchase Agreement has been duly authorized, executed
and delivered by or on behalf of each Scheduled Selling Stockholder and
constitutes the valid and binding obligation of such Scheduled Selling
Stockholder.

(iii) The execution and delivery of the Purchase Agreement and
the sale of the Securities by each Scheduled Selling Stockholder to the
Underwriters, and compliance by such Scheduled Selling Stockholder with the
terms of the Purchase Agreement, including the delivery to the Underwriters of
the certificates evidencing such Securities and the execution and delivery to
the Underwriters of a stock power in blank, have been duly authorized by all
necessary action on the part of such Scheduled Selling Stockholder and do not
and will not result in a violation of the [certificate of incorporation and by
laws or comparable constitutional documents] of such Scheduled Selling
Stockholder, and do not and will not conflict with, or result in a breach of any
of the terms and provision of, or constitute a default under (A) any statute,
rule or regulation relating to such Scheduled Selling Stockholder or its legal
or regulatory status in each case, that in our [my] experience are normally
applicable to transactions of the type provided for in the Purchase Agreement,
(B) any material judgment, order, rule, injunction or regulation of any court or
governmental agency or body, domestic or foreign, having jurisdiction over such
Scheduled Selling Stockholder or any of its respective properties or (C) any
material contract, agreement or other instrument to which such Scheduled Selling
Stockholder is a party or by which it is bound or to which any of its properties
are subject.

2
<PAGE> 73
The foregoing opinions are limited to the federal law of the
United States of America and the law of the State of New York.

Very truly yours,

[NAME OF COUNSEL]

By______________________________________________

3
<PAGE> 74
SCHEDULE I
TO EXHIBIT B-2

Names Of Selling Stockholder(s) As To Which Opinion Is Being Given

4
<PAGE> 75
EXHIBIT B-3

FORM OF OPINION OF COUNSEL TO FDIC-FRF
[LETTERHEAD OF COUNSEL]

August , 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
as Representative of the Several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

I am the Deputy General Counsel of the Federal Deposit Insurance
Corporation (the "FDIC") and I have acted as special counsel to the FDIC and the
FDIC as the manager of the FISLIC Resolution Fund (the "FDIC-FRF") in connection
with the offering by the FDICFRF and certain other persons (the FDIC-FRF
together with such other persons the "Selling Stockholders") of up to __________
shares (including shares to be sold upon exercise of over-allotment options) of
Class A common stock, par value $0.01 per share (the "Class A Common Stock"), of
Bank United Corp., a Delaware corporation (the "Company"), of which up to
__________ shares (including shares to be sold upon exercise of over-allotment
options) are offered by the FDIC-FRF pursuant to a registration statement of the
Company on Form S-1 (No. 333-06229). This opinion letter is furnished pursuant
to Section 5(c) of the purchase agreement (the "Purchase Agreement"), dated
August , 1996, among the Company, the Selling Stockholders and the several
underwriters named in Schedule A thereto (the "Underwriters") in connection with
the closing of the sale by the FDIC-FRF of __________ such shares (the
"Securities") on the date hereof.

In arriving at the opinions expressed below, I have reviewed an
executed copy of the Purchase Agreement executed by the FDIC-FRF. In addition, I
have made such investigations of law as I have deemed appropriate as a basis for
the opinions expressed below.

In rendering the opinions expressed below, I have assumed the
authenticity of all documents submitted to me as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, I have
assumed and have not verified the accuracy as to factual matters of each
document I have reviewed (including, without limitation, the accuracy
<PAGE> 76
of the representations and warranties of the Company and the Selling
Stockholders other than the FDIC-FRF in the Purchase Agreement).

Based on the foregoing, and subject to the further assumptions
and qualifications set forth below, it is my opinion that:

(i) The FDIC has statutory authority pursuant to 12 U.S.C. 1821a
on behalf of the FDIC-FRF to execute this Agreement and the Share Exchange
Agreement, to sell, assign, transfer and deliver the Securities being sold by
the FDIC - FRF hereunder in the manner provided herein, to perform its
obligations under this Agreement and the Share Exchange Agreement, and to take
all other actions taken by it on behalf of the FDIC - FRF in connection herewith
and therewith.

(ii) Each of the Purchase Agreement and the Share Exchange
Agreement has been duly authorized, executed and delivered by the FDIC-FRF and
is the legal, valid and binding agreement of the FDIC-FRF, enforceable in
accordance with its terms.

(iii) The FDIC-FRF had, on the date of the Purchase Agreement
(and has, as necessary, as of the date hereof), good and valid title to the
warrants (the "Warrants") for the purchase of 158,823 shares of common stock,
par value $0.01, of the Bank (the "Bank Common Stock"), free and clear of all
liens, encumbrances, security interests and claims whatsoever; and at or prior
to the date hereof, provided the Bank has first redeemed a portion of the
Warrants as contemplated by the Share Exchange Agreement, the FDIC-FRF has duly
exercised the balance of the Warrants and complied with all of the conditions
applicable for such exercise, including the payment of the exercise price
specified therein, and exchanged the shares of Bank Common Stock issuable upon
such exercise for shares of Class B Common Stock (of the Company), all as
contemplated by the Share Exchange Agreement; and pursuant to such exercise and
exchange, on the date hereof, the FDIC-FRF has good and valid title to the
Securities being sold by it pursuant to the Purchase Agreement, free and clear
of any security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind, other than pursuant to the Purchase Agreement.

(iv) Upon delivery of Securities by the FDIC-FRF and payment of
the purchase price therefor as contemplated by the Purchase Agreement and the
Share Exchange Agreement, assuming each Underwriter has no notice of any adverse
claim, each of the Underwriters will receive good and marketable title to the
Securities purchased by it from the FDIC - FRF, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind.

(v) Neither the execution and delivery of the Purchase Agreement
or the Share Exchange Agreement, nor the sale of the Securities by the FDIC-FRF,
nor the consummation of any of the other transactions contemplated in the
Purchase Agreement or the Share Exchange Agreement, nor the fulfillment of the
terms of the Purchase Agreement, has violated or will violate any provision of
Federal law as administered by the FDIC or to which the FDIC-FRF is subject.

2
<PAGE> 77
(vi) No actions, suits or proceedings before or by any court or
governmental agency, body or authority, or arbitrator are pending or, to the
best of my knowledge, threatened or contemplated, seeking to prevent the sale of
the Securities or the consummation of the Purchase Agreement or the Share
Exchange Agreement.

(vii) No filing with, or consent, approval, authorization, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign is necessary or required for the performance by the
FDIC-FRF of its obligations under the Purchase Agreement or under the Share
Exchange Agreement, or the consummation of the transactions contemplated by this
Agreement or the Share Exchange Agreement, except such as may have previously
been made or obtained or will have been obtained or made prior to the Closing
Time or as may be required under the 1933 Act or the 1933 Act Regulations or
state securities laws.

(viii) The information set forth in the Registration Statement
and the Prospectus under the caption "Selling Stockholder" which specifically
relate to the FDIC-FRF and to the FDIC did not, at the date the Registration
Statement became effective, contain any 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 the date of the Prospectus and on
the date hereof, did not and do not contain any 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, in light of the circumstances under which they
were made, not misleading.

Insofar as the foregoing opinions relate to the legality,
validity, binding effect or enforceability of any agreement or obligation of a
Scheduled Selling Stockholder, I have assumed that each other party to such
agreement or obligation has duly authorized and executed such agreement or
obligation and has satisfied those legal requirements that are applicable to it
to the extent necessary to make such agreement or obligation enforceable against
it. In addition, the foregoing opinions are subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity.

The foregoing opinions are limited to the federal law of the
United States of America and the law of the State of New York.

I am furnishing this opinion letter to you, as Representative of
the Underwriters, solely for the benefit of the Underwriters in connection with
the offering of the Shares. This opinion letter is not to be used, circulated,
quoted or otherwise referred to for any other purpose.

Very truly yours,

[NAME OF COUNSEL]

By______________________________________________
Deputy General Counsel

3
<PAGE> 78
EXHIBIT C

FORM OF LOCK-UP AGREEMENT PURSUANT TO SECTION 5(K)

August __, 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
as Representative of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
North Tower
World Financial Center
New York, New York 10281-1209

Re: Proposed Public Offering by Bank United Corp.

Ladies and Gentlemen:

The undersigned, ________________, a stockholder of Bank United
Corp., a Delaware corporation (the "Company"), understands that Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
proposes to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company, Bank United, a federal stock savings bank, and the Selling Stockholders
named in Schedule B to the Purchase Agreement providing for the public offering
of 10,500,000 shares (not including any shares to be sold upon exercise of the
Underwriters' over-allotment option) of the Company's Class A common stock, par
value $0.01 per share (the "Class A Common Stock"). In recognition of the
benefit that such offering will confer upon the undersigned as a stockholder of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of
________* from the date of the Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, any share of Class A Common
Stock, or any

- ----------------------------
*Fill in 180 days or one year, as appropriate.
<PAGE> 79
Page 2

securities convertible into or exercisable or exchangeable for Class A Common
Stock, or file or cause to be filed any registration statement under the 1933
Act, with respect to any of the foregoing, or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Class A Common
Stock, whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of Class A Common Stock or other such
securities, in cash or otherwise.

Very truly yours,

Signature:_______________________________

Print Name:______________________________

<PAGE> 1
EXHIBIT 2.2

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 14, 1996 by and among
Hyperion Holdings Inc., a Delaware corporation ("Parent") and USAT Holdings
Inc., a Delaware corporation ("Sub").

WHEREAS, Parent owns all of the issued and outstanding common stock of
Sub;

WHEREAS, the Boards of Directors of Parent has determined that it is
appropriate and desirable to cause Sub to offer and sell to the public a
limited number of shares of common stock of Sub in an initial public offering;

WHEREAS, in furtherance of the foregoing and to increase the
marketability and desirability of the Sub Common Stock to be offered to the
public in the initial public offering, the Board of Directors of Parent has
determined that it is in the best interests of Parent and Sub to consummate the
business combination transaction provided for herein in which Parent will,
subject to the terms and conditions set forth herein, merge with and into Sub
(the "Merger"), so that Sub is the surviving corporation in the Merger; and

WHEREAS, the parties desire to make agreements in connection with the
Merger and also to prescribe certain conditions to the Merger;

NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and intending to be legally bound hereby, the parties agree
as follows:

1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time (as defined in Section 1.2 hereof), Parent shall
merge with and into Sub. Sub shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall continue
its corporate existence under the laws of the State of Delaware. Upon
consummation of the Merger, the separate corporate existence of Parent shall
terminate.

1.2 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger executed in accordance with the relevant provisions of
the DGCL and shall make any other filings or recordings required under the DGCL.

<PAGE> 2
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State or at such other time as Parent
and Sub shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").

1.3 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 251 of the DGCL. The
directors and officers of Sub immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.

1.4 Conversion of Parent Common Stock and Sub Class C Common Stock.
At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Sub or the holder of any of the following securities:

(a) All of the shares of common stock, par value $.01 per share, of
Parent ("Parent Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted, upon surrender to Sub of the certificate or
certificates formerly representing such shares held by the persons as set forth
on Schedule 1 attached hereto, into the number of shares of class A common
stock, par value $.01 per share, of the Surviving Corporation "Sub Class A
Common Stock") and class B common stock, par value $0.01 per share, of the
Surviving Corporation ("Sub Class B Common Stock") as set forth on Schedule 1
attached hereto.

(b) All of the shares of Class C Common Stock, par value $.01 per
share, of Sub ("Class C Common Stock") issued and outstanding immediately prior
to the Effective Time shall be converted, upon surrender to Sub of the
certificate or certificates formerly representing such shares held by the
persons as set forth on Schedule 2 attached hereto, into the number of shares
of Sub Class B Common Stock set forth on Schedule 2 attached hereto.

(c) All of the shares of Parent Common Stock converted into Sub Class A
Common Stock or Sub Class B Common Stock, as set forth on Schedule 1 attached
hereto, and all of the shares of Class C Common Stock converted into Sub Class
B Common Stock, as set forth on Schedule 2 attached hereto, pursuant to this
Section 1.4 shall no longer be outstanding and shall automatically be cancelled
and shall cease to exist as of the Effective Time.

-2-
<PAGE> 3
(d) Each certificate (each a "Parent Common Certificate") previously
representing any such shares of Parent Common Stock shall be deemed to
represent the right to receive a certificate representing the number of whole
shares of Sub Class A Common Stock or Sub Class B Common Stock, as indicated
on Schedule 1 attached hereto. Parent Common Certificates previously
representing shares of Parent Common Stock shall be exchanged for certificates
representing whole shares of Sub Class A Common Stock or Sub Class B Common
Stock, as set forth on Schedule 1 attached hereto, upon the surrender of such
Parent Common Certificates.

(e) Each certificate (each a "Class C Common Certificate") previously
representing any such shares of Class C Common Stock shall be deemed to
represent the right to receive a certificate representing the number of whole
shares of Sub Class B Common Stock indicated on Schedule 2 attached hereto.
Class C Common Certificates previously representing shares of Class C Common
Stock shall be exchanged for certificates representing whole shares of Sub
Class B Common Stock, as set forth on Schedule 2 attached hereto, upon the
surrender of such Class C Common Certificates.

1.5 Other Sub Common Stock. All of the shares of capital stock of Sub
that are owned by Parent or by Sub, or by any subsidiary of Sub, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist as of the Effective Time, and no consideration shall be
delivered in exchange therefor.

1.6 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Sub in effect as of the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or under applicable law.

1.7 By-Laws. At the Effective Time, the By-laws of Sub in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or under
applicable law.

1.8 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.

1.9 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the

-3-

<PAGE> 4
Merger shall be subject to the satisfaction at or prior to the Effective Time
of the following conditions:

(a) Stockholder Approval. To the extent required by law, the
transactions contemplated by this Agreement shall have been duly authorized by
the stockholders of Parent and Sub in accordance with applicable law and their
respective Certificates of Incorporation and By-laws.

(b) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect.

(c) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or any of the other transactions contemplated by this Agreement shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any regulatory, administrative
or governmental entity which prohibits, restricts or makes illegal consummation
of the Merger.

1.10 Termination. This Agreement may be terminated at any time prior
to the Effective Time by the mutual consent of Parent and Sub in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board.

1.11 Effect of Termination. In the event of termination of this
Agreement by either Parent or Sub as provided in Section 1.10, this Agreement
shall forthwith become void and have no effect, and neither Parent nor Sub nor
any of their respective officers or directors shall have any liability of any
nature whatsoever hereunder, or in connection with the transactions
contemplated hereby.

1.12 Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date").

1.13 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.

-4-
<PAGE> 5
1.14 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.

1.15 Severability; No Third Party Beneficiaries. Any term or provision
of this Agreement which is invalid or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
<PAGE> 6
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.

HYPERION HOLDINGS INC.

By: /s/ Scott A. Shay
---------------------------------
Name: Scott A. Shay
Title: Vice President

USAT HOLDINGS INC.

By: /s/ Salvatore A. Ranieri
---------------------------------
Name: Salvatore A. Ranieri
Title: Vice President

-6-

<PAGE> 1
EXHIBIT 5.1

[Letterhead of Wachtell, Lipton, Rosen & Katz]

August 6, 1996

Bank United Corp.
Suite 500
50 Charles Lindbergh Blvd.
Uniondale, NY 11553

Ladies and Gentlemen:

In connection with the registration of 10,500,000 shares of common
stock, par value $.01 per share (the "Shares"), of Bank United Corp., a
Delaware corporation (formerly known as "USAT Holdings Inc.") (the "Company"),
under the Securities Act of 1933, as amended, on Form S-1 filed with the
Securities and Exchange Commission (the "Commission") on June 18, 1996 (File
No. 333-06229), as amended (and as it may be further amended, the "Registration
Statement"), you have requested our opinion with respect to the following
matters.

In connection with our rendering this opinion, we have reviewed (i) the
forms of the Restated Certificate of Incorporation (the "Restated Certificate")
and By-Laws of the Company as set forth as exhibits to the Registration
Statement; (ii) the Registration Statement; (iii) certain resolutions adopted
by the Board of Directors of the Company; (iv) the form of stock certificate
representing the Shares, (v) the Merger Agreement, dated as of June 18, 1996 by
and between the Company and Hyperion Holdings Inc.; and (vi) such other
documents, records and papers as we have deemed necessary or appropriate in
order to give the opinions set forth herein. We have, with your consent, relied
as to factual matters on certificates or other documents furnished by the
Company or its officers and by governmental authorities and upon such other
documents and data that we have deemed appropriate. We have assumed the
authenticity of all documents submitted to us as originals and the conformity
to original documents of all documents submitted to us as copies.

We are not members of the Bar of any jurisdiction other than the State
of New York, and, with your consent, we are opining herein as to the effect on
the subject transaction only of the General Corporation Law of the State of
Delaware, and we express no opinion with respect to the applicability thereto,
or the effect thereon, of any other laws or the laws of any other jurisdiction.

Based on such examination and review, and subject to the foregoing, we
are of opinion that the Shares have been duly authorized, and, upon issuance,
delivery and payment therefor in the manner contemplated by the Registration
Statement, validly issued, fully paid and non-assessable.

We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm in the Prospectus that is a part of
the Registration Statement. In giving such consent, we do not hereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.

Very truly yours,

/s/ Wachtell, Lipton, Rosen & Katz

<PAGE> 1

Exhibit 21

BANK UNITED CORP.
SCHEDULE OF SUBSIDIARIES

Bank United

BANK UNITED
SCHEDULE OF SUBSIDIARIES

United Capital Management Corporation

Commonwealth United Mortgage Company

USAT Mortgage Securities, Inc.

United Financial Markets, Inc.

United Agency Corporation

Commonwealth General Services Agency, Inc.

United Greenway Securities Services, Inc.

United Mortgage Securities Corporation

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Bank United Corp.
(formerly USAT Holdings Inc.) on Form S-1 of our report dated October 31, 1995
(except for Note 21, as to which the date is July 24, 1996), appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Selected
Consolidated Financial and Other Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP
- -------------------------------
DELOITTE & TOUCHE LLP
New York, New York
August 6, 1996

<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND FORM S-1 AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JUNE 25, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH DOCUMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-END> MAR-31-1996 SEP-30-1995
<CASH> 135,691 112,931
<INT-BEARING-DEPOSITS> 4,720,761 5,001,024
<FED-FUNDS-SOLD> 659,279 471,052
<TRADING-ASSETS> 1,267 1,081
<INVESTMENTS-HELD-FOR-SALE> 1,336,030 461,070
<INVESTMENTS-CARRYING> 676,391 2,053,206
<INVESTMENTS-MARKET> 660,582 2,033,912
<LOANS> 7,878,080 8,260,240
<ALLOWANCE> 36,489 36,801
<TOTAL-ASSETS> 11,266,636 11,983,534
<DEPOSITS> 4,963,321 5,182,220
<SHORT-TERM> 5,088,959 5,556,428
<LIABILITIES-OTHER> 387,415 448,289
<LONG-TERM> 115,000 115,000
0 0
0 0
<COMMON> 289 289
<OTHER-SE> 526,152 495,814
<TOTAL-LIABILITIES-AND-EQUITY> 11,266,636 11,983,534
<INTEREST-LOAN> 323,930 526,528
<INTEREST-INVEST> 90,206 208,785
<INTEREST-OTHER> 7,085 11,446
<INTEREST-TOTAL> 421,221 746,759
<INTEREST-DEPOSIT> 138,510 264,366
<INTEREST-EXPENSE> 309,289 552,760
<INTEREST-INCOME-NET> 111,932 193,999
<LOAN-LOSSES> 5,850 24,293
<SECURITIES-GAINS> 2,863 26
<EXPENSE-OTHER> 99,304 194,576
<INCOME-PRETAX> 61,387 90,111
<INCOME-PRE-EXTRAORDINARY> 26,759 41,719
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,759 41,719
<EPS-PRIMARY> 0.87 1.35
<EPS-DILUTED> 0.87 1.35
<YIELD-ACTUAL> 2.00 1.92
<LOANS-NON> 103,714 85,235
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 36,801 23,454
<CHARGE-OFFS> 6,250 11,078
<RECOVERIES> 88 132
<ALLOWANCE-CLOSE> 36,489 36,801
<ALLOWANCE-DOMESTIC> 36,489 36,801
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0

</TABLE>