SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarter ended March 31, 1997.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number:
0000906420
BANK UNITED CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3528556
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 SOUTHWEST FREEWAY, SUITE 1600
HOUSTON, TX 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 543-6958
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Number of shares outstanding of the registrant's $0.01 par value common
stock as of May 13, 1997 were as follows:
Title Of Each Class Number Of Shares
------------------- ----------------
Class A 28,354,276
Class B 3,241,320
<PAGE>
BANK UNITED CORP.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements.................................. 1
Consolidated Statements of Financial Condition -
March 31, 1997 and September 30, 1996........................... 1
Consolidated Statements of Operations -
For the Six Months Ended March 31, 1997 and 1996................ 2
Consolidated Statements of Operations -
For the Three Months Ended March 31, 1997 and 1996.............. 3
Consolidated Statements of Stockholders' Equity -
For the Six Months Ended March 31, 1997 and 1996................ 4
Consolidated Statements of Cash Flows -
For the Six Months Ended March 31, 1997 and 1996................ 5
Notes to Consolidated Financial Statements...................... 6
Independent Accountants' Report................................. 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 20
Item 2. Changes in the Rights of the Company's Security Holders........ 21
Item 3. Defaults by the Company Upon Senior Securities................ 21
Item 4. Submission of Matters to a Vote of Security Holders............ 21
Item 5. Other Information.............................................. 22
Item 6a.Exhibits....................................................... 22
Item 6b.Reports of Form 8-K............................................ 24
Signatures ........................................................ 25
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
MARCH 31, SEPTEMBER 30,
1997 1996
------------ ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents ....................... $ 111,252 $ 119,523
Securities purchased under agreements to
resell and federal funds sold ................. 538,455 674,249
Securities ...................................... 29,200 65,693
Mortgage-backed securities
Held to maturity, at amortized cost (fair
value of $562.1 million in 1997 and
$609.2 million in 1996) ..................... 584,789 630,048
Available for sale, at fair value ............. 940,297 1,027,860
Loans
Held to maturity (net of the allowance
for credit losses of $43.7 million in
1997 and $39.7 million in 1996) ............. 7,782,111 7,227,153
Held for sale ................................. 250,031 292,335
Federal Home Loan Bank stock .................... 194,668 179,643
Premises and equipment .......................... 37,716 40,209
Mortgage servicing rights ....................... 208,003 123,392
Real estate owned (net of the allowance
for losses of $1.0 million in 1997 and
$986 thousand in 1996) ........................ 29,462 29,744
Deferred tax asset .............................. 139,567 168,323
Other assets .................................... 157,074 134,205
------------ ------------
TOTAL ASSETS .................................... $ 11,002,625 $ 10,712,377
============ ============
LIABILITIES, MINORITY INTEREST,
AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits ........................................ $ 5,065,804 $ 5,147,945
Federal Home Loan Bank advances ................. 3,786,596 3,490,386
Securities sold under agreements to
repurchase and federal funds purchased ........ 927,859 832,286
Senior Notes .................................... 115,000 115,000
Advances from borrowers for taxes
and insurance ................................. 117,842 146,634
Other liabilities ............................... 235,127 263,583
------------ ------------
Total liabilities .......................... 10,248,228 9,995,834
------------ ------------
MINORITY INTEREST
Preferred stock issued by
consolidated subsidiary ....................... 185,500 185,500
------------ ------------
STOCKHOLDERS' EQUITY
Common stock .................................... 316 316
Paid-in capital ................................. 129,286 129,286
Retained earnings ............................... 434,193 403,674
Unrealized gains (losses) on securities
and mortgage-backed securities
available for sale, net of tax ................ 5,102 (2,233)
------------ ------------
Total stockholders' equity .................. 568,897 531,043
------------ ------------
TOTAL LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY .......................... $ 11,002,625 $ 10,712,377
============ ============
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE SIX MONTHS
ENDED MARCH 31,
1997 1996
------------ ------------
(UNAUDITED)
INTEREST INCOME
Short-term interest-earning assets ............. $ 17,537 $ 17,360
Securities ..................................... 2,231 2,147
Mortgage-backed securities ..................... 53,336 70,699
Loans .......................................... 318,400 323,930
Federal Home Loan Bank stock ................... 5,527 7,085
------------ ------------
Total interest income ..................... 397,031 421,221
------------ ------------
INTEREST EXPENSE
Deposits ....................................... 129,374 138,510
Federal Home Loan Bank advances ................ 105,302 136,501
Securities sold under agreements to
repurchase and federal funds purchased ....... 25,440 29,073
Senior Notes ................................... 4,626 5,205
------------ ------------
Total interest expense .................... 264,742 309,289
------------ ------------
Net interest income ....................... 132,289 111,932
PROVISION FOR CREDIT LOSSES .................... 11,219 5,850
------------ ------------
Net interest income after
provision for credit losses ............. 121,070 106,082
------------ ------------
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing rights
and single family warehouse loans ......... 16,931 19,157
Securities and mortgage-backed securities .... 1,593 2,863
Other loans .................................. 936 3,485
Sale of mortgage offices ..................... 3,998 --
Loan servicing fees and charges ................ 27,859 22,107
Other .......................................... 9,704 6,997
------------ ------------
Total non-interest income ................. 61,021 54,609
------------ ------------
NON-INTEREST EXPENSE
Compensation and benefits ...................... 39,300 39,898
Occupancy ...................................... 7,871 9,439
Data processing ................................ 7,219 8,120
Advertising and marketing ...................... 4,150 4,053
Amortization of intangibles .................... 14,545 9,801
SAIF deposit insurance premiums ................ 3,162 6,129
Furniture and equipment ........................ 2,248 3,128
Other .......................................... 24,691 18,736
------------ ------------
Total non-interest expense ................ 103,186 99,304
Income before income taxes and
minority interest ....................... 78,905 61,387
INCOME TAX EXPENSE ............................. 30,413 25,278
------------ ------------
INCOME BEFORE MINORITY INTEREST ................ 48,492 36,109
Less minority interest
Subsidiary preferred stock dividends ....... 9,126 9,126
Payments in lieu of dividends .............. -- 224
------------ ------------
NET INCOME ..................................... $ 39,366 $ 26,759
============ ============
EARNINGS PER COMMON SHARE ...................... $ 1.25 $ 0.87
============ ============
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
------------ ------------
(UNAUDITED)
INTEREST INCOME
Short-term interest-earning assets .............. $ 8,194 $ 10,179
Securities ...................................... 1,251 688
Mortgage-backed securities ...................... 26,520 32,521
Loans ........................................... 159,136 156,637
Federal Home Loan Bank stock .................... 2,827 3,411
------------ ------------
Total interest income ...................... 197,928 203,436
------------ ------------
INTEREST EXPENSE
Deposits ........................................ 62,650 66,684
Federal Home Loan Bank advances ................. 53,378 65,716
Securities sold under agreements to
repurchase and federal funds purchased ........ 13,081 13,547
Senior Notes .................................... 2,315 2,601
------------ ------------
Total interest expense ..................... 131,424 148,548
------------ ------------
Net interest income ........................ 66,504 54,888
PROVISION FOR CREDIT LOSSES ..................... 4,305 3,181
------------ ------------
Net interest income after
provision for credit losses .............. 62,199 51,707
------------ ------------
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing rights
and single family warehouse loans .......... 6,442 9,094
Securities and mortgage-backed securities ..... 952 2,899
Other loans ................................... (4) 224
Sale of mortgage offices ...................... 3,998 --
Loan servicing fees and charges ................. 15,175 11,646
Other ........................................... 4,792 3,824
------------ ------------
Total non-interest income .................. 31,355 27,687
------------ ------------
NON-INTEREST EXPENSE
Compensation and benefits ....................... 19,325 19,487
Occupancy ....................................... 3,616 4,813
Data processing ................................. 3,418 4,150
Advertising and marketing ....................... 1,895 2,582
Amortization of intangibles ..................... 8,721 5,041
SAIF deposit insurance premiums ................. 205 3,085
Furniture and equipment ......................... 1,029 1,548
Other ........................................... 11,899 9,306
------------ ------------
Total non-interest expense ................. 50,108 50,012
Income before income taxes
and minority interest .................... 43,446 29,382
INCOME TAX EXPENSE .............................. 16,780 12,144
------------ ------------
INCOME BEFORE MINORITY INTEREST ................. 26,666 17,238
Less minority interest - subsidiary
preferred stock dividends ..................... 4,563 4,563
------------ ------------
NET INCOME ...................................... $ 22,103 $ 12,675
============ ============
EARNINGS PER COMMON SHARE ....................... $ 0.70 $ 0.41
============ ============
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------
CLASS A CLASS B CLASS C
------------------ ------------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 23,828,400 $ 239 -- $ -- 5,034,600 $ 50
Net income ................ -- -- -- -- -- --
Change in unrealized gains
(losses) ................ -- -- -- -- -- --
---------- ------ ---------- ------ --------- ------
BALANCE AT MARCH 31, 1996 ... 23,828,400 $ 239 -- $ -- 5,034,600 $ 50
========== ====== ========== ====== ========= ======
BALANCE AT SEPTEMBER 30, 1996 27,735,934 $ 277 3,859,662 $ 39 -- $--
Net income ................ -- -- -- -- -- --
Dividends declared: common
stock ($0.28 per share) -- -- -- -- -- --
Conversion of common stock 618,342 7 (618,342) (7) -- --
Change in unrealized gains
(losses) (Note 5) ....... -- -- -- -- -- --
---------- ------ ---------- ------ --------- ------
BALANCE AT MARCH 31, 1997 ... 28,354,276 $ 284 3,241,320 $ 32 -- $--
========== ====== ========== ====== ========= ======
</TABLE>
UNREALIZED TOTAL
PAID-IN RETAINED GAINS STOCKHOLDERS'
CAPITAL EARNINGS (LOSSES) EQUITY
-------- --------- ------- ---------
BALANCE AT SEPTEMBER 30, 1995 $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 ... $117,722 $ 411,498 $(3,068) $ 526,441
======== ========= ======= =========
BALANCE AT SEPTEMBER 30, 1996 $129,286 $ 403,674 $(2,233) $ 531,043
Net income ................ -- 39,366 -- 39,366
Dividends declared: common
stock ($0.28 per share) -- (8,847) -- (8,847)
Conversion of common stock -- -- -- --
Change in unrealized gains
(losses) (Note 5) ....... -- -- 7,335 7,335
-------- --------- ------- ---------
BALANCE AT MARCH 31, 1997 ... $129,286 $ 434,193 $ 5,102 $ 568,897
======== ========= ======= =========
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE SIX MONTHS
ENDED MARCH 31,
1997 1996
----------- -----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used) provided by operating activities $ (215,125) $ 342,568
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under
agreements to resell and federal funds sold . 135,794 (188,227)
Purchases of securities held to maturity ....... -- (1,460)
Proceeds from maturities of securities
held to maturity ............................ -- 1,500
Purchases of mortgage-backed securities
held to maturity ............................ (2,134) (3,841)
Repayments of mortgage-backed securities
held to maturity ............................ 39,843 135,527
Purchases of securities available for sale ..... -- (9,142)
Proceeds from maturities of securities
available for sale .......................... 52,600 --
Proceeds from sales of securities available
for sale .................................... 161,043 67,375
Proceeds from sales of mortgage-backed
securities available for sale ............... -- 201,523
Repayments of mortgage-backed securities
available for sale .......................... 110,562 115,954
Purchases of loans held to maturity ............ (715,082) (100,247)
Proceeds from sales of loans held to maturity .. 10,645 --
Change in loans held to maturity ............... 116,433 203,214
Purchases of Federal Home Loan Bank stock ...... (16,998) --
Redemption of Federal Home Loan Bank stock ..... 7,500 --
Purchases of premises and equipment ............ (5,916) (2,989)
Proceeds from sales of real estate owned
acquired through foreclosure ................ 33,100 20,099
Proceeds from sales of servicing rights ........ 7,461 6,174
----------- -----------
Net cash (used) provided
by investing activities ................ (65,149) 445,460
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits ......................... (82,141) (218,952)
Proceeds from Federal Home Loan Bank advances .. 2,209,202 200,000
Repayment of Federal Home Loan Bank advances ... (1,912,992) (444,500)
Net change in securities sold under agreements
to repurchase and federal funds purchased ... 95,573 (222,597)
Change in advances from borrowers for taxes
and insurance ............................... (28,792) (79,219)
Payment of dividends ........................... (8,847) --
----------- -----------
Net cash provided (used)
by financing activities ................ 272,003 (765,268)
----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............................ (8,271) 22,760
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ............................. 119,523 112,931
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD ....................................... $ 111,252 $ 135,691
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION AND NONCASH INVESTING ACTIVITIES
Cash paid for interest ......................... $ 261,166 $ 318,849
Cash paid for income taxes ..................... 525 2,044
Real estate owned acquired through foreclosure . 39,935 33,983
Sales of real estate owned financed by the Bank 11,953 452
Securitization of loans ........................ 172,194 --
Net transfer of loans from held to maturity .... 317 187,846
Transfer of mortgage-backed securities from
held to maturity to available for sale ...... 6,843 1,244,945
Change in unrealized gains (losses) on
securities and mortgage-backed securities
available for sale .......................... 7,335 3,579
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
Bank United Corp. (the "Parent Company") was incorporated in the state of
Delaware on December 19, 1988, and became the holding company for Bank United, a
federal savings bank (the "Bank") upon the Bank's formation on December 30,
1988. In December 1996, the Parent Company formed a new, wholly owned, Delaware
subsidiary, BNKU Holdings, Inc. ("Holdings"). After acquiring all of the common
stock of Holdings, the Parent Company contributed all of the common stock of the
Bank to Holdings, and Holdings assumed the Parent Company's obligations for $115
million 8.05% senior notes due May 15, 1998 (the "Senior Notes"). See Note 7. As
a result of these transactions, Holdings is the sole subsidiary of the Parent
Company and the Bank is the sole subsidiary of Holdings.
The accompanying unaudited Consolidated Financial Statements include the
accounts of the Parent Company, Holdings, the Bank, and the Bank's wholly owned
subsidiaries (collectively known as the "Company"). All significant intercompany
accounts have been eliminated in consolidation. The Parent Company has no
significant assets other than the equity interest in Holdings and Holdings has
no significant assets other than the equity interest in the Bank. Substantially
all of the Company's consolidated revenues are derived from the operations of
the Bank.
2. BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements were prepared
in accordance with the instructions for Form 10-Q and, therefore, do not include
all disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. All adjustments (consisting of only normal recurring
adjustments) that are necessary, in the opinion of management, for a fair
presentation of the interim financial statements have been included. The results
of operations for the six months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the entire fiscal year or any
interim period. The interim financial information should be read in conjunction
with the Consolidated Financial Statements and Notes included in the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission ("SEC").
Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes as of September 30, 1996 and March 31, 1996 have been
reclassified for comparative purposes to conform to the current presentation.
Such reclassifications had no effect on previously presented net income or
retained earnings.
3. CAPITAL
CAPITAL STOCK
On February 5, 1997, the SEC declared effective a registration statement for
10.2 million outstanding shares of its Class A common stock. These shares were
previously subject to restrictions on sale and transfer due to agreements
entered into in connection with the Company's August 1996 common stock public
offering. On February 10, 1997, restrictions on 7.2 million shares expired, and
restrictions on an additional 3.0 million shares will expire on August 14, 1997.
After these dates, the 10.2 million shares may be offered and sold from time to
time by the holding shareholders. The Company will not receive any of the
proceeds from the sale of these shares.
6
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income (adjusted in
fiscal 1996 for earnings on the common stock equivalents attributable to
warrants issued by the Bank no longer outstanding as of August 1996) by the
weighted average number of shares of common stock outstanding. Common stock
equivalents on the Bank's warrants were computed using the treasury stock
method. The table below presents the computation of earnings per common share
(in thousands, except share data and earnings per common share).
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended March 31, Ended March 31,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income .......................................... $ 22,103 $ 12,675 $ 39,366 $ 26,759
Less: Bank's net income attributable
to common stock equivalents on warrants ........... -- (851) -- (1,791)
------------ ------------ ------------ ------------
Net income applicable to common shares .............. $ 22,103 $ 11,824 $ 39,366 $ 24,968
============ ============ ------------ ------------
Average number of common shares outstanding ......... 31,595,596 28,863,000 31,595,596 28,863,000
============ ============ ============ ============
EARNINGS PER COMMON SHARE ........................... $ 0.70 $ 0.41 $ 1.25 $ 0.87
============ ============ ============ ============
</TABLE>
4. EMPLOYEE BENEFITS
On October 1, 1996, the Company adopted Statement of Financial Accounting
Standard ("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 by the Company and make pro forma
disclosures of net income and earnings per share ("EPS") under the fair value
based method of accounting. The Company will continue accounting for stock-based
employee compensation plans in accordance with Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and is
disclosing pro forma fair value information as prescribed by SFAS No. 123.
1996 STOCK INCENTIVE PLAN
In December 1996, the Company granted options to purchase 147,500 shares of
its common stock to certain employees of the Bank under the Bank United 1996
Stock Incentive Plan. Compensation expense was not recognized for the stock
options because the options had an exercise price approximating the fair value
of the Company's common stock at the date of grant. These options will vest at
the end of three years and will expire if not exercised within ten years of the
date of grant. The maximum number of options of Class A common stock available
for grant under this plan is 1,600,000.
MANAGEMENT COMPENSATION PROGRAM
In June 1996, the Company's Board of Directors approved a management
compensation program for the Company's executive officers, other key officers
and employees, and certain directors 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 ("Restricted Stock"); and (iii) the issuance of
1,154,520 options for purchase of an equivalent number of shares of Company
common stock (such options vest ratably from the date of grant through June 26,
1999 and may not be exercised prior to the third anniversary of the date of
grant). The options' exercise price of $20.125 per share was set at an amount
not less than the fair market value at the date of the grant and the options
will expire if not exercised within ten years of the date of the grant.
Compensation expense totalling $7.8 million, $4.8 million net of tax, was
recognized in the quarter ended June 30, 1996 for the cash bonus and the
Restricted Stock award. Compensation expense was not recognized for the stock
options, as the options had an exercise price approximating the fair value of
the Company's common stock at the date of grant.
7
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIRECTOR STOCK COMPENSATION PLAN
In June 1996, the Company's Board of Directors approved a director stock
plan for each member of the Company's Board who is not an employee ("Eligible
Director"). Each Eligible Director will be granted stock options to purchase
1,000 shares of Class A common stock of the Company when first elected to the
Company's Board of Directors and following each annual stockholders' meeting
thereafter. The options exercise price is 115% of the fair value of the
Company's common stock at the date of grant. The Company granted 10,000 options
under the director stock plan during fiscal 1996 and 10,000 of such options
during the quarter ended March 31, 1997. These options vest and become
exercisable if and when the fair value of the Company's common stock equals or
exceeds the exercise price of the option on any day during the 30-day period
commencing on the first anniversary of the date of the grant ("vesting window").
If these stock options do not vest during the vesting window, they will be
cancelled and all vested options will expire if not exercised within ten years
of the date of grant. The maximum number of options of Class A common stock
available for grant under this plan is 250,000.
A summary of the status of the Company's stock option plans as of March 31,
1997 and changes during the six months ending on that date is presented below.
The Company granted no options in the six months ended March 31, 1996 and had no
options outstanding at March 31, 1996. No options were exercised, forfeited or
expired during the six months ended March 31, 1997, however, in connection with
the sale of the mortgage offices, 33,718 options became fully vested. See Note
6. The weighted-average remaining contractual life of options outstanding at
March 31, 1997 was 9.4 years. None of the options outstanding at March 31, 1997
were exercisable. The weighted-average grant date fair value for the options
granted during the six months ended March 31, 1997 was $9.67 per share. The fair
value of each stock option was estimated using the Black- Scholes option pricing
model with the following weighted-average assumptions used for grants in the six
months ended March 31, 1997: estimated volatility of 26.10%; risk-free interest
rate of 6.24%; dividend yield of 2.08%; and an expected life of ten years.
Number of Weighted-Ave Range of
Shares Exercise Price Exercise Prices
--------- --------------- -----------------
Granted during fiscal 1996 .. 1,164,520 $ 20.15 $20.125 - $27.394
Granted during fiscal 1997 .. 157,500 27.48 $25.250 - $36.297
--------- --------------- -----------------
Outstanding at March 31, 1997 1,322,020 21.02 $20.125 - $36.297
========= =============== =================
The Company applies APB Opinion No. 25 in accounting for its stock
compensation plans. Accordingly, no compensation cost has been recognized for
its stock option plans. Had compensation cost been determined based on the fair
value at the grant date for awards consistent with SFAS No. 123, the Company's
net income and EPS would have been $37.9 million and $1.20 for the six months
ended March 31, 1997.
5. RECENT ACCOUNTING STANDARDS
On October 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires that long-lived assets and certain identified
intangibles held and used by an entity, along with goodwill related to those
assets, be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss must be recognized if the estimate of the future cash flows
(undiscounted and without interest charges) resulting from the use of the asset
and its eventual disposition is less than the carrying amount of the asset. The
adoption of this pronouncement did not have a material effect on the
Consolidated Financial Statements.
On January 1, 1997, the Company adopted 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 distinguishes
between transfers of financial assets that are sales and transfers that are
secured borrowings. SFAS No. 125, as amended, is to be applied prospectively and
earlier or retroactive application is not permitted. This statement superseded
SFAS No. 122 and requires, among other things, that the book value of loans be
allocated between mortgage servicing rights ("MSRs") and the related loans at
the time of the loan sale or securi-
8
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
tization, if servicing is retained. SFAS No. 125 also requires that receivables
be classified as available for sale or trading if they can be settled in such a
way that the holder may not recover substantially all of its recorded
investment. As a result, mortgage-backed securities ("MBS") held to maturity and
other assets totalling $22.3 million were reclassified to MBS and securities
available for sale on January 1, 1997. An unrealized gain of $8.2 million,
before tax, or $5.1 million after tax, was recorded in stockholders equity for
this transfer. Under SFAS No. 127, "Deferral of Certain Provisions of FASB
Statement No. 125", certain provisions of SFAS No. 125 are not effective until
January 1, 1998; these are: (i) secured borrowings and collateral for all
transactions and (ii) transfers of financial assets for repurchase agreements,
dollar rolls, securities lending, and similar transactions. Implementation of
the deferred portion of SFAS No. 125 should have no material effect on the
Consolidated Financial Statements.
In February 1997, SFAS No. 128, "Earnings per Share" was issued. This
statement establishes standards for computing and presenting EPS. It replaces
the presentation of primary EPS with basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
entities with complex capital structures and requires a reconciliation of the
basic EPS computation to the diluted EPS computation. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted and all
prior period EPS data must be restated.
For The Six Months For The Year Ended
Ended March 31, Ended September 30,
------------------ ----------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
EPS as reported .............. $ 1.25 $ 0.87 $ 3.87 $ 1.35 $ 3.55
Pro forma EPS under SFAS
No. 128 (unaudited)
Basic ................... 1.25 0.93 4.06 1.45 3.78
Diluted ................. 1.23 0.87 3.87 1.35 3.55
6. MORTGAGE BANKING RESTRUCTURINGS AND SALE OF OFFICES
In June 1996, the Company recorded a restructuring charge of $10.7 million
before tax, to recognize the costs of closing or consolidating mortgage
production offices and several regional operation centers and recorded $1.8
million of other expenses related to its mortgage origination business.
Effective February 1, 1997, the Company sold certain of its retail and
wholesale mortgage origination offices. In connection with this sale, the
remaining offices were restructured or closed. The net gain on the sale of these
offices, reduced by additional restructuring costs, was $4.0 million before tax,
$2.5 million after tax, or $0.08 per share and was recorded in the quarter ended
March 31, 1997. Restructuring costs were principally comprised of estimated
costs of severance and other benefits of $2.0 million and contractual
obligations for which no future benefit will be derived of $3.3 million.
At March 31, 1997, the unpaid liability relating to the sale, the two
restructurings and the branch closures was $6.6 million and is expected to be
paid in full by fiscal 1999. The Company intends to continue its mortgage
servicing business, its retail mortgage origination capability in Texas through
its Community Banking branches and its wholesale mortgage origination capability
through its Financial Markets Group.
7. SUBSEQUENT EVENTS
In May 1997, the Company issued $220 million of fixed-rate subordinated
notes due May 2007 with a stated rate of 8.875%. Net proceeds from this issuance
were used to repurchase and retire substantially all of the Company's $115
million, 8.05% Senior Notes due May 1998 and to pay related costs and expenses.
The Company paid a tender and consent premium, related tender expenses and
charged-off the remaining capitalized debt issuance costs of $1.9 million, $386
thousand and $1.3 million, respectively. These costs will be reflected as an
extraordinary loss of $3.6 million before tax, or $2.2 million after tax, in the
quarter ended June 30, 1997. The Company will use the remainder of the net
proceeds to increase the equity capital of the Bank. The Bank will use the
proceeds for general corporate purposes, which may include the acquisition of
the stock or assets of financial institutions and the funding of internal
growth.
Prior to the repurchase of the Senior Notes, the Bank was subject to certain
dividend limitations provided for in the Senior Note indenture. Such limitations
were eliminated in connection with this repurchase.
9
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Bank United Corp.:
We have reviewed the accompanying condensed consolidated statement of financial
condition of Bank United Corp. and its subsidiaries (collectively known as the
"Company") as of March 31, 1997, and the related condensed consolidated
statements of operations for the three-month and six-month periods ended March
31, 1997 and 1996 and the related condensed consolidated statements of
stockholders' equity and cash flows for the six-month periods ended March 31,
1997 and 1996. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of Bank United
Corp. and its subsidiary as of September 30, 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated October 28, 1996, we
expressed an unqualified opinion, including an explanatory paragraph regarding
the Company's change in its method of accounting for mortgage servicing rights
effective October 1, 1994 on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
statement of financial condition as of September 30, 1996 is fairly stated, in
all material respects, in relation to the consolidated statement of financial
condition from which it has been derived.
Deloitte & Touche LLP
Houston, Texas
April 22, 1997
10
<PAGE>
BANK UNITED CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DISCUSSION OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND
1996
GENERAL
Net income was $39.4 million ($1.25 per share) for the six months ended
March 31, 1997, compared to $26.8 million ($ 0.87 per share) for the six months
ended March 31, 1996, reflecting a 47% increase. Net income for the six months
ended March 31, 1997 includes a $4.0 million gain ($0.08 per share, after tax)
for the sale of certain mortgage offices. See Note 6 to the Consolidated
Financial Statements. Operating earnings were $72.4 million and $55.0 million
for the six months ended March 31, 1997 and 1996. Operating earnings includes
net income before taxes and minority interest and excludes net gains (losses) on
securities, MBS and other loans and excludes the gain on the sale of the
mortgage offices. The increase in net income and operating earnings reflects an
increase in net interest income and higher mortgage loan servicing fees and
charges, partially offset by an increase in the provision for credit losses and
mortgage servicing amortization expense.
NET INTEREST INCOME
Net interest income was $132.3 million for the six months ended March 31,
1997, compared to $111.9 million for the six months ended March 31, 1996,
reflecting a $20.4 million, or 18% increase. This increase is attributable to a
54 basis point increase in the net yield on interest-earning assets ("net
yield"), partially offset by an $869.3 million decrease in average
interest-earning assets.
AVERAGE BALANCE SHEET, INTEREST INCOME/EXPENSE, AND AVERAGE YIELD/RATE
<TABLE>
<CAPTION>
For The Six Months Ended March 31,
---------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
Average Yield/ Average Yield/
Balance Interest Rate (2) Balance Interest Rate (2)
----------- -------- ------- ----------- -------- -------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Short-term interest-earning assets ...... $ 597,513 $ 17,537 5.81 $ 575,936 $ 17,360 5.93%
Securities .............................. 77,749 2,231 5.75 85,807 2,147 5.00
Mortgage-backed securities .............. 1,576,883 53,336 6.76 2,177,645 70,699 6.49
Loans (1) ............................... 7,847,869 318,400 8.11 8,092,849 323,930 8.01
FHLB stock .............................. 190,769 5,527 5.81 227,895 7,085 6.22
----------- -------- ------- ----------- -------- -------
Total interest-earning assets ........ 10,290,783 397,031 7.71 11,160,132 421,221 7.55
Non-interest-earning assets ............... 567,641 -- -- 379,397 -- --
----------- -------- ------- ----------- -------- -------
TOTAL ASSETS ......................... $10,858,424 -- -- $11,539,529 -- --
=========== ======== ======= =========== ======== =======
INTEREST-BEARING LIABILITIES
Deposits ................................ $ 5,051,337 129,374 5.14 $ 5,063,588 138,510 5.47
FHLB advances ........................... 3,721,496 105,302 5.60 4,346,960 136,501 6.18
Securities sold under agreements to
repurchase and federal funds purchased . 905,887 25,440 5.55 982,169 29,073 5.82
Senior Notes ............................ 115,000 4,626 8.05 115,000 5,205 9.05
----------- -------- ------- ----------- -------- -------
Total interest-bearing liabilities ... 9,793,720 264,742 5.39 10,507,717 309,289 5.84
Non-interest-bearing liabilities,
minority interest, and
stockholders' equity ................... 1,064,704 -- -- 1,031,812 -- --
-------- -------
TOTAL LIABILITIES, MINORITY INTEREST,
AND STOCKHOLDERS' EQUITY .......... $10,858,424 -- -- $11,539,529 -- --
=========== ======== ======= =========== ======== =======
Net interest income/interest rate spread .. -- $132,289 2.32% -- $111,932 1.71%
=========== ======== ======= =========== ======== =======
Net yield on interest-earning assets ...... -- -- 2.58% -- -- 2.04%
=========== ======== ======= =========== ======== =======
Ratio of average interest-earning assets to
average interest-bearing liabilities .... 1.05 -- -- 1.06 -- --
=========== ======== ======= =========== ======== =======
</TABLE>
(1) Includes nonaccrual loans.
(2) Annualized.
11
<PAGE>
BANK UNITED CORP.
The yield on interest-earning assets increased to 7.71% for the six months
ended March 31, 1997 from 7.55% for the six months ended March 31, 1996,
primarily as a result of the changing mix of loans to higher yielding commercial
and consumer loans from lower yielding single family mortgages and higher rates
on adjustable-rate MBS. Average interest-earning assets decreased primarily due
to principal repayments on loans and MBS.
The cost of funds decreased to 5.39% for the six months ended March 31, 1997
from 5.84% for the six months ended March 31, 1996, primarily due to a decrease
in Federal Home Loan Bank ("FHLB") advance rates and lower deposit rates, as
higher rate deposits matured and were replaced with lower rate deposits.
PROVISION FOR CREDIT LOSSES
The provision for credit losses increased $5.4 million to $11.2 million for
the six months ended March 31, 1997. The increased provision resulted from
single family loan purchases as well as changes in the composition of the loan
portfolio. Single family loan purchases were $601.8 million and $145.3 million
for the six months ended March 31, 1997 and 1996. The commercial and consumer
loan portfolios increased 81% and 92%, respectively, from March 31, 1996 to
March 31, 1997.
ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
COMMERCIAL MORTGAGE
MULTI- REAL ESTATE, BANKER
SINGLE SINGLE FAMILY MULTI- FAMILY SMALL BUSINESS FINANCE
FAMILY (1) CONSTRUCTION CONSUMER FAMILY CONSTRUCTION AND HEALTHCARE LINE OF CREDIT TOTAL
---------- ----------- -------- ------- ------------ ------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 29,632 $ 361 $ 3,247 $ 2,855 $ 199 $ 97 $ 410 $ 36,801
Provision ............. 2,435 122 3,030 143 32 86 2 5,850
Net charge-offs ....... (3,224) -- (2,938) -- -- -- -- (6,162)
---------- ----------- -------- ------- ------------ ------------- ------------- --------
Balance at March 31, 1996 ... $ 28,843 $ 483 $ 3,339 $ 2,998 $ 231 $ 183 $ 412 $ 36,489
========== =========== ======== ======= ============ ============= ============= ========
Balance at September 30, 1996 $ 28,672 $ 693 $ 5,219 $ 4,118 $ 232 $ 314 $ 412 $ 39,660
Provision ............. 6,769 376 2,629 646 15 557 227 11,219
Net charge-offs ....... (4,079) (73) (2,834) (148) -- 3 -- (7,131)
---------- ----------- -------- ------- ------------ ------------- ------------- --------
Balance at March 31, 1997 ... $ 31,362 $ 996 $ 5,014 $ 4,616 $ 247 $ 874 $ 639 $ 43,748
========== =========== ======== ======= ============ ============= ============= ========
</TABLE>
(1) Includes single family portfolio and warehouse loans.
12
<PAGE>
BANK UNITED CORP.
NONPERFORMING ASSETS
MARCH 31, SEPTEMBER 30,
1997 1996
------------ ------------
(IN THOUSANDS)
Nonaccrual loans ............................... $ 85,764 $ 92,187
Consumer ..................................... 950 1,039
Multi-family ................................. 2,281 144
Commercial real estate and small business .... 121 350
------------ ------------
89,116 93,720
Discounts .................................... (620) (4,077)
------------ ------------
Net nonaccrual loans ...................... 88,496 89,643
REO, primarily single family properties ........ 30,497 30,730
------------ ------------
Total nonperforming assets ................ $ 118,993 $ 120,373
============ ============
SELECTED ASSET QUALITY RATIOS
AT OR FOR AT OR FOR
THE SIX MONTHS THE YEAR ENDED
ENDED MARCH 31, 1997 SEPTEMBER 30, 1996
-------------------- --------------------
Allowance for credit losses
to net nonaccrual loans
Single family .................. 36.71% 32.46%
Total .......................... 49.44 44.24
Allowance for credit losses to
total loans ..................... 0.54 0.52
Nonperforming assets to total
assets .......................... 1.08 1.12
Net nonaccrual loans to total
loans ........................... 1.10 1.19
Nonperforming assets to total
loans and REO ................... 1.47 1.59
Net loan charge-offs to average
loans - Annualized
Single family .................. 0.13 0.12
Total .......................... 0.18 0.17
Single family nonaccrual loans decreased $6.4, from $92.2 million at
September 30, 1996 to $85.8 million at March 31, 1997, primarily from loans
being foreclosed on and transferred to Real Estate Owned ("REO"). Discounts
decreased $3.5 million during the six months ended March 31, 1997, reflecting
the recognition of non-accretable discounts into income. These discounts
principally related to potential credit risks on bulk purchases of single family
loans and upon obtaining sufficient seasoning, payoffs, and stabilized
delinquencies, a portion of these discounts was recognized into income.
At March 31, 1997 and September 30, 1996, the recorded investment in
impaired loans pursuant to SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan" totalled $3.6 million and $3.9 million, respectively. The average
outstanding balance for the six months ended March 31, 1997 was $3.6 million and
the average outstanding balance for fiscal 1996 was $4.4 million.
NET GAINS (LOSSES)
Net gains (losses) declined $2.0 million to $23.5 million during the six
months ended March 31, 1997, compared to $25.5 million during the same period in
1996. This decrease primarily reflects a decrease in gains on sales of loans and
MBS, partially offset by the gain on the sale of mortgage origination offices.
See Note 6 to the Consolidated Financial Statements.
LOAN SERVICING FEES AND CHARGES
Loan servicing fees and charges increased $5.8 million, or 26%, to $27.9
million for the six months ended March 31, 1997, from $22.1 million for the six
months ended March 31, 1996. This increase reflects a larger portfolio of
13
<PAGE>
BANK UNITED CORP.
single family loans serviced for others of $10.7 billion at March 31, 1997,
compared to $7.6 billion at March 31, 1996. See "Discussion of Changes in
Financial Condition from September 30, 1996 to March 31, 1997".
NON-INTEREST EXPENSE
Non-interest expense was $103.2 million for the six months ended March 31,
1997 and $99.3 million for the six months ended March 31, 1996, or 1.91% and
1.72% of average total assets for those same periods.
The increase in non-interest expense reflects higher legal expense ($2.2
million for the six months ended March 31, 1997 compared to $856,000 for the
year ago period), due to the forbearance litigation (see "Legal Proceedings"),
and increased mortgage servicing amortization expense of $4.7 million due to
purchases of MSRs. These increases were offset by a $3.0 million reduction in
Savings Association Insurance Fund ("SAIF") deposit insurance premiums and by
reduced expenses resulting from the sale and restructuring of the mortgage
origination business. See Note 6 to the Consolidated Financial Statements.
Average full-time equivalent employees decreased 23% to 2,020 for the six
months ended March 31, 1997 from 2,637 for the six months ended March 31, 1996.
However, total compensation expense declined only 1.5% during the six months
ended March 31, 1997 compared to the six months ended March 31, 1996, reflecting
the deferral of compensation related costs into the basis of the related
originated loans during both periods.
DISCUSSION OF CHANGES IN FINANCIAL CONDITION FROM SEPTEMBER 30, 1996 TO MARCH
31, 1997
GENERAL
Total assets increased during the six months ended March 31, 1997 by $290.2
million, or 3%, to $11.0 billion. The majority of the increase occurred in the
loan portfolio, principally due to purchases and originations, and MSRs also
increased due to purchases. These increases were funded primarily with FHLB
advances and securities sold under agreements to repurchase ("reverse repurchase
agreements").
ORIGINATION, PURCHASE, AND SALE OF LOANS
FOR THE SIX MONTHS
ENDED MARCH 31,
1997 1996
------------ ------------
(IN THOUSANDS)
Beginning balance, September 30 ................ $ 7,519,488 $ 8,260,240
Originations
Single family ............................. 1,153,489 1,945,434
Commercial ................................ 645,493 355,156
Consumer .................................. 63,362 53,570
Purchases
Single family ............................. 601,799 145,277
Commercial ................................ 274,762 7,927
Consumer .................................. 62,267 --
Net change in mortgage banker
finance line of credit .................. 78,804 32,437
Repayments .................................. (1,197,605) (1,109,850)
Securitized loans sold or transferred (1) ... (967,132) (1,335,333)
Sales ....................................... (169,908) (452,211)
Other ....................................... (32,677) (24,567)
------------ ------------
Ending balance, March 31 ....................... $ 8,032,142 $ 7,878,080
============ ============
(1) Primarily represents loans securitized by the mortgage banking segment and
sold to third parties.
14
<PAGE>
BANK UNITED CORP.
LOAN PORTFOLIO
MARCH 31, SEPTEMBER 30,
1997 1996
------------ ------------
(IN THOUSANDS)
Single family .............................. $ 6,394,830 $ 6,369,974
Single family construction ................. 303,813 240,488
Consumer ................................... 242,974 168,513
Multi-family ............................... 550,872 472,074
Multi-family construction .................. 70,725 30,608
Commercial real estate ..................... 73,618 9,928
Commercial real estate construction ........ 41,990 21,473
Commercial ................................. 19,805 --
Healthcare and healthcare construction ..... 39,560 8,750
Small business ............................. 75,802 58,331
Mortgage banker finance line of credit ..... 218,153 139,349
------------ ------------
TOTAL LOANS .............................. $ 8,032,142 $ 7,519,488
============ ============
SUMMARY
Single family .............................. $ 6,394,830 $ 6,369,974
Commercial ................................. 1,394,338 981,001
Consumer ................................... 242,974 168,513
------------ ------------
$ 8,032,142 $ 7,519,488
============ ============
Securities purchased under agreements to resell ("repurchase agreements")
and federal funds sold decreased $135.8 million, contributing to the funding of
loan purchases and originations.
During the first six months of fiscal 1997, $198.3 million of small business
loans were purchased, a portion of which were pooled into securities totalling
$167.3 million. Of those loans securitized, $159.5 million were sold for a gain
of $1.1 million.
Commercial loans, which include single family construction, multi-family,
healthcare, small business, and mortgage banker finance line of credit loans,
increased $413.3 million, or 42%, during the six months ended March 31, 1997.
Additionally, the Company had $775.3 million of outstanding commercial loan
commitments that had not been funded as of March 31, 1997. This increase is
consistent with the Company's strategy to reduce its reliance on single family
residential lending lines of business by developing higher margin commercial and
consumer lending lines of business.
Single family loans increased during the six months ended March 31, 1997
despite lower originations and principal repayments. Purchases of single family
loans increased during the six months ended March 31, 1997 as compared to the
prior year period in an effort to offset the effect of principal repayments in
that portfolio. Single family loan originations decreased, reflecting a decline
in mortgage refinance activity due to higher average market interest rates
during the six months ended March 31, 1997 as compared to the six months ended
March 31, 1996.
MSRs increased $84.6 million to $208.0 million at March 31, 1997, compared
to $123.4 million at September 30, 1996. During the six months ended March 31,
1997, the Company purchased servicing rights associated with $5.2 billion in
single family loans at a premium of $85.3 million. Additional servicing rights
associated with $3.5 billion in single family loans had not been transferred to
the Company as of March 31, 1997. The total servicing portfolio at March 31,
1997, after inclusion of these servicing rights, was $17.8 billion. In May 1997,
the Company entered into a contract to purchase servicing rights associated with
$7.0 billion of loans with a loan count of 27,000. The purchase is expected to
close during the third quarter of fiscal 1997.
15
<PAGE>
BANK UNITED CORP.
Deposits decreased $82.1 million, or 2%, during the six months ended March
31, 1997 primarily due to maturities of consumer certificates of deposit that
were not renewed. In the aggregate, FHLB advances, reverse repurchase
agreements, and federal funds purchased increased $391.8 million during the six
months ended March 31, 1997 primarily to fund loan purchases and originations.
LIQUIDITY
The Bank is required by the Office of Thrift Supervision ("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 and borrowings
payable on demand or with unexpired maturities of one year or less. The Bank's
average daily liquidity ratio for March 1997 was 6.40% and the average
short-term liquidity ratio for March 1997 was 3.39%.
The primary sources of funds consist of deposits, advances from the FHLB,
reverse repurchase agreements, and principal repayments on loans and MBS.
Funding resources are principally used to meet ongoing commitments to fund
deposit withdrawals, repay borrowings, fund existing and continuing loan
commitments, and maintain liquidity. Management believes that the Bank has
adequate resources to fund all of its commitments.
The Company's and Holding's ability to pay dividends on their common stock
and to meet their other cash obligations is dependent upon the receipt of
dividends from the Bank. The declaration of dividends by the Bank on all classes
of its capital stock is subject to the discretion of the Board of Directors of
the Bank, the terms of the Bank Preferred Stock, applicable regulatory
requirements, and compliance with the covenants of the Senior Notes.
See Note 7 to the Consolidated Financial Statements.
The ability of the Bank to pay dividends is subject to regulation by the
OTS. At March 31, 1997, the Bank had $164.3 million of available capacity for
the payment of dividends under these requirements. The ability of the Bank to
pay dividends is also subject to covenants provided in the indenture agreement
for the Senior Notes. Under the Senior Note indenture, aggregate dividends paid
by the Bank on its preferred stock, and certain other payments or investments
are limited to the sum of (i) 50% of the Company's 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 Company
after March 31, 1993, and (iii) $12 million. At April 1, 1997, $78.8 million was
available for payment of dividends under this restriction. See Note 7 to the
Consolidated Financial Statements.
REGULATORY MATTERS
The Bank's capital level at March 31, 1997 and September 30, 1996 qualified
it as "well-capitalized", the highest of five tiers under applicable regulatory
definitions. The Bank's capital ratios at March 31, 1997 and September 30, 1996,
and the applicable regulatory capital requirements were as follows:
MARCH 31, 1997 SEPTEMBER 30, 1996 REQUIREMENT
-------------- ------------------ -----------
Tangible capital ............. 6.87% 6.57% 1.50%
Core capital ................. 6.93 6.64 3.00
Tier 1 capital ............... 11.99 12.40 6.00
Total risk-based capital ..... 12.68 13.09 8.00
16
<PAGE>
BANK UNITED CORP.
DISCUSSION OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1996
GENERAL
Net income was $22.1 million ($0.70 per share) for the three months ended
March 31, 1997, compared to $12.7 million ($0.41 per share) for the three months
ended March 31, 1996, reflecting a 74% increase. Net income for the three months
ended March 31, 1997 includes a $4.0 million gain ($0.08 per share, after tax)
for the sale of certain mortgage offices. See Note 6 to the Consolidated
Financial Statements. Operating earnings were $38.5 million and $26.3 million
for the three months ended March 31, 1997 and 1996. The increase in net income
and operating earnings reflects an increase in net interest income and higher
mortgage servicing fees and charges, partially offset by an increase in mortgage
servicing amortization expense.
NET INTEREST INCOME
Net interest income was $66.5 million for the three months ended March 31,
1997, compared to $54.9 million for the three months ended March 31, 1996,
reflecting an $11.6 million, or 21% increase. This increase is attributable to a
54 basis point increase in the net yield, partially offset by a $642.1 million
decrease in average interest-earning assets.
AVERAGE BALANCE SHEET, INTEREST INCOME/EXPENSE, AND AVERAGE YIELD/RATE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------
1997 1996
------------------------------- -------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE (2) BALANCE INTEREST RATE (2)
----------- -------- -------- ----------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Short-term interest-earning assets ........................ $ 560,082 $ 8,194 5.85% $ 702,781 $ 10,179 5.73%
Securities ................................................ 78,801 1,251 6.44 56,176 688 4.93
Mortgage-backed securities ................................ 1,540,910 26,520 6.88 2,076,009 32,521 6.27
Loans (1) ................................................. 7,974,249 159,136 7.98 7,929,818 156,637 7.90
FHLB stock ................................................ 198,343 2,827 5.78 229,738 3,411 5.97
----------- -------- -------- ----------- -------- --------
Total interest-earning assets .................... 10,352,385 197,928 7.66 10,994,522 203,436 7.40
Non-interest-earning assets .................................... 592,417 -- -- 366,214 -- --
----------- -------- -------- ----------- -------- --------
TOTAL ASSETS ..................................... $10,944,802 -- -- $11,360,736 -- --
=========== ======== ======== =========== ======== ========
INTEREST-BEARING LIABILITIES
Deposits .................................................. $ 4,991,255 62,650 5.09 $ 4,986,669 66,684 5.38
FHLB advances ............................................. 3,846,585 53,378 5.55 4,317,036 65,716 6.02
Securities sold under agreements to
repurchase and federal funds purchased ................... 940,199 13,081 5.57 936,366 13,547 5.72
Senior Notes .............................................. 115,000 2,315 8.05 115,000 2,601 9.05
----------- -------- -------- ----------- -------- --------
Total interest-bearing liabilities ............... 9,893,039 131,424 5.35 10,355,071 148,548 5.72
Non-interest-bearing liabilities, minority interest,
and stockholders' equity ................................. 1,051,763 -- -- 1,005,665 -- --
----------- -------- -------- ----------- -------- --------
TOTAL LIABILITIES, MINORITY INTEREST,
AND STOCKHOLDERS' EQUITY ......................... $10,944,802 -- -- $11,360,736 -- --
=========== ======== ======== =========== ======== ========
Net interest income/interest rate spread ....................... -- $ 66,504 2.31% -- $ 54,888 1.68%
=========== ======== ======== =========== ======== ========
Net yield on interest-earning assets ........................... -- -- 2.55% -- -- 2.01%
=========== ======== ======== =========== ======== ========
Ratio of average interest-earning assets to
average interest-bearing liabilities ...................... 1.05 -- -- 1.06 -- --
=========== ======== ======== =========== ======== ========
</TABLE>
(1) Includes nonaccrual loans.
(2) Annualized.
17
<PAGE>
BANK UNITED CORP.
The yield on interest-earning assets increased to 7.66% for the three months
ended March 31, 1997 from 7.40% for the three months ended March 31, 1996,
primarily as a result of the changing mix of loans to higher yielding commercial
and consumer loans from lower yielding single family mortgages and higher rates
on adjustable-rate MBS. Average interest-earning assets decreased primarily due
to principal repayments on MBS.
The cost of funds decreased to 5.35% for the three months ended March 31,
1997 from 5.72% for the three months ended March 31, 1996, primarily due to a
decrease in FHLB advance rates and lower deposit rates, as higher rate deposits
matured and were replaced with lower rate deposits.
PROVISION FOR CREDIT LOSSES
The provision for credit losses increased $1.1 million to $4.3 million for
the three months ended March 31, 1997. The increased provision resulted from
single family loan purchases as well as changes in the composition of the loan
portfolio. Single family loan purchases were $249.2 million and $52.1 million
for the three months ended March 31, 1997 and 1996. The commercial and consumer
loan portfolios increased 81% and 92%, respectively, from March 31, 1996 to
March 31, 1997.
ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
COMMERCIAL MORTGAGE
MULTI- REAL ESTATE, BANKER
SINGLE SINGLE FAMILY MULTI- FAMILY SMALL BUSINESS FINANCE
FAMILY (1) CONSTRUCTION CONSUMER FAMILY CONSTRUCTION AND HEALTHCARE LINE OF CREDIT TOTAL
--------- ------------ -------- ------- -------- -------------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 .. $ 29,949 $ 413 $ 3,412 $ 2,802 $ 222 $ 121 $ 410 $ 37,329
Provision ............... 1,185 70 1,657 196 9 62 2 3,181
Net charge-offs ......... (2,291) -- (1,730) -- -- -- -- (4,021)
--------- ------------ -------- ------- -------- -------------- -------------- --------
Balance at March 31, 1996 ..... $ 28,843 $ 483 $ 3,339 $ 2,998 $ 231 $ 183 $ 412 $ 36,489
========= ============ ======== ======= ======== ============== ============== ========
Balance at December 31, 1996 .. $ 31,522 $ 918 $ 5,041 $ 4,752 $ 232 $ 544 $ 523 $ 43,532
Provision ............... 2,051 151 1,633 12 15 327 116 4,305
Net charge-offs ......... (2,211) (73) (1,660) (148) -- 3 -- (4,089)
--------- ------------ -------- ------- -------- -------------- -------------- --------
Balance at March 31, 1997 ..... $ 31,362 $ 996 $ 5,014 $ 4,616 $ 247 $ 874 $ 639 $ 43,748
========= ============ ======== ======= ======== ============== ============== ========
</TABLE>
(1) Includes single family portfolio and warehouse loans.
NET GAINS (LOSSES)
Net gains (losses) declined $829,000 to $11.4 million during the three
months ended March 31, 1997. This decrease primarily reflects a decrease in
gains on sales of single family and multi-family portfolio loans partially
offset by the gain in the sale of mortgage offices. See Note 6 to the
Consolidated Financial Statements.
LOAN SERVICING FEES AND CHARGES
Loan servicing fees and charges increased $3.6 million, or 30%, to $15.2
million for the three months ended March 31, 1997, from $11.6 million for the
three months ended March 31, 1996. This increase reflects a larger portfolio of
single family loans serviced for others of $10.7 billion at March 31, 1997,
compared to $7.6 billion at March 31, 1996.
NON-INTEREST EXPENSE
Non-interest expense was $50.1 million for the three months ended March 31,
1997 and $50.0 million for the three months ended March 31, 1996, or 1.86% and
1.77% of average total assets for those same periods.
The increase in non-interest expense reflects higher legal expense ($1.1
million for the three months ended March 31, 1997 compared to $286,000 for the
year ago quarter) due to the forbearance litigation (see "Legal Proceedings"),
and in increased mortgage servicing amortization expense of $3.7 million due to
purchases of MSRs. These increases were offset by a $2.9 million reduction in
SAIF deposit insurance premiums and by reduced expenses resulting from the sale
and restructuring of the mortgage origination business. See Note 6 to the
Consolidated Financial Statements.
18
<PAGE>
BANK UNITED CORP.
Average full-time equivalent employees decreased 33% to 1,764 for the three
months ended March 31, 1997 from 2,623 for the three months ended March 31,
1996. However, total compensation expense declined less than 1% during the three
months ended March 31, 1997 compared to the three months ended March 31, 1996,
reflecting the deferral of compensation related costs into the basis of the
related originated loans during both periods.
FORWARD-LOOKING INFORMATION
Statements and financial discussion and analysis by management contained
herein that are not historical facts are forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve a number of risks and
uncertainties. The important factors that could cause actual results to differ
materially from the forward-looking statements include, without limitation,
changes in interests rates and economic conditions; the shift in the Company's
emphasis from residential mortgage lending to community and commercial banking
activities; the restructuring and sale of a substantial part of the Company's
mortgage banking origination business; increased competition for deposits and
loans; changes in the availability of funds; changes in local economic and
business conditions; changes in availability of residential mortgage loans
originated by other financial institutions or the Company's ability to purchase
such loans on favorable terms; transactions in the Company's common stock that
might result in an ownership change triggering an annual limitation on the use
of the Company's net operating loss carryforwards under Section 382 of the
Internal Revenue Code of 1986, as amended; changes in the ability of the Bank to
pay dividends on its common stock; changes in applicable statutes and government
regulations or their interpretation; the continuation of the significant
disparity in the deposit insurance premiums paid by thrift institutions and
commercial banks; changes in government programs that facilitate the issuance of
MBS or the Company's continued eligibility to participate in such programs; the
loss of senior management or operating personnel; claims with respect to
representations and warranties made by the Company to purchasers and insurers of
mortgage loans and to purchasers of MSRs; claims of noncompliance by the Company
with statutory and regulatory requirements; and changes in the status of
litigation to which the Company is a party. For further information regarding
these factors, see "Risk Factors" in the prospectus dated April 29, 1997,
relating to the public offering of the Company's 8.875% Subordinated Notes due
2007 filed with the SEC (File No. 333-19861).
19
<PAGE>
BANK UNITED CORP.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 7, 1995, Maxxam Inc. ("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 Federal Savings and Loan Insurance Corporation ("FSLIC") approving the
acquisition, which was consummated on December 30, 1988 and involved
substantially all the Bank's initial assets and liabilities (the "Acquisition").
The Bank intervened in the Fifth Circuit case. On December 10, 1996, the Fifth
Circuit Court, in a PER CURIAM opinion and order, affirmed the order approving
the Acquisition in all respects, and Maxxam did not file an appeal to the
Supreme Court of the United States within the applicable time limit.
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's Motion to Intervene was
granted by the District Court Judge on November 21, 1996, and the Bank may file
a motion to intervene at a later date. Maxxam contends that it submitted the
most favorable bid to acquire the assets and liabilities of United Savings
Association of Texas ("Old USAT") and that it should have been selected as the
winning bidder. The Company is not a party to either of these proceedings.
On July 25, 1995, the Bank, the Parent Company (including its predecessors)
and Hyperion Partners L.P. (collectively, "Plaintiffs") 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 Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("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 the 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 six contractual
documents. To accomplish this transaction, the FSLIC and its regulating agency,
the Federal Home Loan Bank Board ("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.
The lawsuit was stayed from the outset by a judge of the Court of Federal
Claims pending the Supreme Court's decision in UNITED STATES V. WINSTAR CORP.,
an action by three other thrifts raising similar issues (the "WINSTAR cases").
Since the Supreme Court ruling, the Chief Judge of the Court of Federal Claims
convened a number of status conferences to establish a case management protocol
for the more than 100 lawsuits on the Court of Federal Claims docket, that, like
Plaintiffs' case, involve issues similar to those raised in the WINSTAR cases.
20
<PAGE>
BANK UNITED CORP.
Following a number of status conferences, Chief Judge Loren Smith of the
United States Court of Federal Claims transferred all WINSTAR-related cases to
his own docket and entered an Omnibus Case Management Order governing
proceedings in such cases, including the Company's case. Under the Omnibus Case
Management Order, Chief Judge Smith serves as the "Managing Judge" for all
WINSTAR-related cases and may assign other judges of the United States Court of
Federal Claims to resolve pre-trial discovery disputes and common legal issues
and to conduct trials. The Government and Plaintiffs exchanged certain
significant documents as early as October 2, 1996 pursuant to a court order, and
the Company and the Bank have responded to the Government's first discovery
request. Trials on damages in two of the three WINSTAR cases that were decided
by the United States Supreme Court in July 1996 are scheduled for early 1997.
Damages trials in the remaining cases subject to the Omnibus Case Management
Plan are scheduled to begin four months after completion of the first two
damages trials. The Company's case is one of thirteen cases that "shall be
accorded priority in the scheduling" of the damages trials under the Omnibus
Case Management Order. On January 3, 1997, the court issued a scheduling order
scheduling the trial of the Company's case in the third month after the trials
of the "priority" cases begin.
In December 1996, Chief Judge Smith decided the motion IN LIMINE on damage
theories of Glendale Federal, one of four WINSTAR plaintiffs, and allowed
Glendale Federal to assert several other alternative damage theories against the
Government. 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. The Company, on November 27, 1996, moved for partial summary
judgment on liability, and the Government has opposed the motion. The Company is
pursuing an early trial on damages. Uncertainties remain concerning the
administration of the Omnibus Case Management Order and the future course of the
Company's lawsuit pursuant to the Omnibus Case Management Order. Accordingly,
the Company cannot predict the timing of any resolution of its claims. The
Company expects the trial of its case to commence during the second quarter of
fiscal 1998. The Company is unable to predict the outcome of its suit against
the United States and the amount of judgment for damages, if any, that may be
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 L.P. 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 L.P. 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.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
Not applicable.
ITEM 3. DEFAULTS BY THE COMPANY UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Parent Company was held on March
6, 1997, for the purpose of voting on the proposals described below. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities Exchange
Act of 1934, and there was no solicitation in opposition to management's
solicitation.
All of management's nominees for directors as listed in the proxy statement
were elected with the following vote:
Nominee Share For Shares Withheld
------- --------- ---------------
Lewis S. Ranieri 19,520,672 306,240
Barry C. Burkholder 19,053,372 305,540
Lawrence Chimerine, Ph.D. 19,160,372 198,540
Alan E. Master 19,159,672 199,240
The appointment of Deloitte & Touche, L.L.P., as independent auditor was
approved by the following vote:
Shares For Share Against Shares Abstaining
---------- ------------- -----------------
18,578,290 4,891 10,110
21
<PAGE>
BANK UNITED CORP.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6A. EXHIBITS
Exhibits followed by a parenthetical reference are incorporated by reference
herein from the document described in such parenthetical reference.
Exhibit No. Identification Of Exhibit
- ----------- -------------------------
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
(Exhibit 2.1 to Form S-1 filed on June 18, 1996)
2.2 Merger Agreement, dated as of June 17, 1996, by and between the
Company and Hyperion Holdings relating to the Merger (Exhibit 2.2
to Form S-1 filed on August 7, 1996)
3.1 Form of Restated Certificate of Incorporation of the Registrant, as
amended (Exhibit 3.1 to Form S-1 filed on June 18, 1996)
3.2 Form of Bylaws of the Registrant (Exhibit 3.2 to Form S-1 filed on
June 18, 1996)
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 (Exhibit 4.1 to Form S-1 filed on
June 18, 1996)
4.2 Form of 8.05% Senior Note due May 15, 1998 (included in the
Indenture filed as Exhibit 4.1 hereto) (Exhibit 4.2 to Form S-1
filed on June 18, 1996)
4.3 Exchange and Registration Rights relating to .05% Senior Notes due
May 15, 1998 (Exhibit 4.3 to Form S-1 filed on June 18, 1996)
4.4 First Supplemental Indenture, dated as of January 23, 1995, between
the Registrant and the Bank of New York, as Trustee, relating to
8.05% Senior Notes due May 15, 1998 (Exhibit 4.4 to Form S-1 filed
on June 18, 1996)
4.5 Form of Class A common stock certificate (Exhibit 4.5 to Form S-1
filed on July 25, 1996)
4.6 Indenture, dated as of May 7, 1997, between the Registrant and The
Bank of New York, as Trustee, relating to the Registrant's 8.875%
Subordinated Notes due May 1, 2007 (Exhibit 4.2 to Form S-1 filed
on April 24, 1997)
4.7 Form of 8.875% Subordinated Notes due May 1, 2007 (included in the
Indenture filed as Exhibit 4.2 hereto) (Exhibit 4.3 to Form S-1 on
April 24, 1997)
4.8 Form of 8.05% Senior Note due May 15, 1998 (included in Indenture
filed as Exhibit 4.1 hereto) (Exhibit 4.4 to Form S-1 filed on
April 24, 1997)
4.9 Exchange and Registration Rights relating to Registrant's 8.05%
Senior Notes due May 15, 1998. (Incorporated by reference to
Exhibit 4.3 in the Registrant's Registration Statement on Form S-1,
Registration No. 333-06229).
4.10 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. (Incorporated by
reference to Exhibit 4.4 in the Registrant's Registration Statement
on Form S-1, Registration No. 333-06229.)
4.11 Second Supplemental Indenture, dated as of December 3, 1996 among
Registrant, BNKU Holdings, Inc. and The Bank of New York, as
Trustee, relating to Registrant's 8.05% Senior Notes due May 15,
1998 (Exhibit 4.7 to Form S-1 filed on April 24, 1997)
4.12 Third Supplemental Indenture, dated as of March 27, 1997 between
the Registrant and The Bank of New York, as Trustee, relating to
the Registrant's 8.05% Senior Notes due May 15, 1998 (Exhibit 4.8
to Form S-1 filed on April 24, 1997)
5 Opinion of Wachtell, Lipton, Rosen & Katz as to the validity of the
shares of Class A Common Stock. (Exhibit 5 to Form S-1 filed on
January 27, 1997)
10.1 Assistance Agreement dated December 30, 1988, among the Bank, the
Registrant, Hyperion Holdings Inc., Hyperion Partners L.P., and the
FSLIC (Exhibit 10.1 to Form S-1 filed on June 18, 1996)
10.1a Settlement and Termination Agreement dated as of December 23, 1993,
among the Bank, the Registrant, Hyperion Holdings Inc., Hyperion
Partners L.P., and the FDIC (Exhibit 10.1a to Form S-1 filed on
June 18, 1996)
22
<PAGE>
Exhibit No. Identification Of Exhibit
- ----------- -------------------------
10.1b Tax Benefits Agreement dated December 28, 1993, among the Bank, the
Registrant, Hyperion Holdings Inc., Hyperion Partners L.P., and the
FDIC (Exhibit 10.1b to Form S-1 filed on June 18, 1996)
10.2 Acquisition Agreement dated December 30, 1988, between the Bank and
the FSLIC (Exhibit 10.2 to Form S-1 filed on June 18, 1996)
10.3 Warrant Agreement dated December 30, 1988, between the Bank and the
FSLIC (Exhibit 10.3 to Form S-1 filed on June 18, 1996)
10.3a Amended and Restated Warrant Agreement dated December 28, 1993,
between the Bank and the FDIC (Exhibit 10.3a to Form S-1 filed on
June 18, 1996)
10.4 Regulatory Capital Maintenance Agreement, dated December 30, 1988
among the Bank, the Registrant, Hyperion Holdings, Hyperion
Partners, and the FSLIC (terminated) (Exhibit 10.4 to Form S-1
filed on June 18, 1996)
10.5 Federal Stock Charter of the Bank and First Amendment to charter
approved on August 26, 1992 (Exhibit 10.5 to Form S-1 filed on June
18, 1996)
10.6 Amended and Restated Federal Stock Charter of the Bank and Second
Amendment approved on October 30, 1992 (Exhibit 10.6 to Form S-1
filed on June 18, 1996)
10.6a Third Amendment to the Federal Stock Charter of the Bank approved
on April 23, 1996 (Exhibit 10.6a to Form S-1 filed on June 18,
1996)
10.6b Amended and Restated Bylaws of the Bank (Exhibit 10.6b to Form S-1
filed on June 18, 1996)
10.7 Specimen Preferred Stock, Series A, certificate, $25.00 per share
stated value, of the Bank (Exhibit 10.7 to Form S-1 filed on June
18, 1996)
10.7a Certificate of Designation of Noncumulative Preferred Stock,
Series A of the Bank (Exhibit 10.7a to Form S-1 filed on June 18,
1996)
10.7b Specimen Preferred Stock, Series B, certificate, $25.00 per share
stated value, of the Bank (Exhibit 10.7b to Form S-1 filed on June
18, 1996)
10.7c Certificate of Designation of Noncumulative Preferred Stock, Series
B of the Bank (Exhibit 10.7c to Form S-1 filed on June 18, 1996)
10.8 Data Processing Agreement dated January 1, 1992, between the Bank
and Systematics Financial Services, Inc., a First Amendment (dated
October 28, 1992), and Second Amendment (dated September 1, 1992)
(Exhibit 10.8 to Form S-1 filed on June 18, 1996)
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. (Exhibit 10.8a to Form S-1 filed on June
18, 1996)
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. (Exhibit 10.8b to Form S-1 filed on June
18, 1996)
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. (Exhibit 10.8c to Form S-1 filed on June
18, 1996)
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. (Exhibit 10.8d to Form S-1 filed on June
18, 1996)
10.9 Management and Consulting Services Agreement dated January 1, 1992,
between the Bank and Systematics Financial Services Inc., First
Amendment (dated March 18, 1992), and Second Amendment (dated
September 1, 1992) (Exhibit 10.9 to Form S-1 filed on June 18,
1996)
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 (Exhibit 10.10 to
Form S-1 filed on June 18, 1996)
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.) (Exhibit 10.10a to Form
S-1 filed on June 18, 1996)
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.) (Exhibit 10.10b to
Form S-1 filed on June 18, 1996)
23
<PAGE>
Exhibit No. Identification Of Exhibit
- ----------- -------------------------
10.11 Lease Agreement dated November 20, 1990, between the Bank and
Greenway Plaza, LTD. (Leased premises at 3800 Buffalo Speedway)
(Exhibit 10.11 to Form S-1 filed on June 18, 1996)
10.12 Employment Agreement dated March 18, 1991, between the Bank and
Barry C. Burkholder (Exhibit 10.12 to Form S-1 filed on June 18,
1996)
10.12a Amendment, dated April 10, 1996, to the Employment Agreement
between the Bank and Barry C. Burkholder (Exhibit 10.12a to Form
S-1 filed on June 18, 1996)
10.13 Letter Agreement Related to Employment, dated April 4, 1990,
between the Bank and Anthony J. Nocella (Exhibit 10.13 to Form S-1
filed on June 18, 1996)
10.14 Letter Agreement Related to Employment, dated June 18, 1990,
between the Bank and George R. Bender (Exhibit 10.14 to Form S-1
filed on June 18, 1996)
10.15 Letter Agreement Related to Employment, dated April 6, 1990,
between the Bank and Jonathon K. Heffron (Exhibit 10.15 to Form S-1
filed on June 18, 1996)
10.16 Letter Agreement Related to Employment, dated May 10, 1991, between
the Bank and Leslie H. Green (Exhibit 10.16 to Form S-1 filed on
June 18, 1996)
10.17 Management Incentive Plan dated April 20, 1992 (Exhibit 10.17 to
Form S-1 filed on June 18, 1996)
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 (Exhibit 10.18
to Form S-1 filed on June 18, 1996)
10.22 Supplemental Executive Savings Plan of the Bank (Exhibit 10.22 to
Form S-1 filed on June 18, 1996)
10.23 Directors Supplemental Savings Plan of the Bank (Exhibit 10.23 to
Form S-1 filed on June 18, 1996)
10.24 Warrant Purchase and Exchange Agreement, dated July 23, 1996, by
and among the Parent Company, the Bank and the Federal Deposit
Insurance Corporation (Exhibit 10.24 to Form S-1 filed on July 25,
1996)
10.25 Tax Sharing Agreement dated as of May 1, 1996, by and between the
Parent Company and the Bank (Exhibit 10.25 to Form 10-K filed on
December 20, 1996)
10.26 Form of The Company's 1996 Stock Incentive Plan (Exhibit 10.26 to
Form S-1 filed on July 25, 1996)
10.27 Form of The Company's Director Stock Plan (Exhibit 10.27 to Form
S-1 filed on July 25, 1996)
10.28 Employment Agreement, dated August 1, 1996, between the Company and
Barry C. Burkholder (Exhibit 10.28 to Form 10-K filed on December
20, 1996)
10.29 Employment Agreement, dated August 1, 1996, between the Company and
Anthony J. Nocella (Exhibit 10.29 to Form 10-K filed on December
20, 1996)
10.30 Employment Agreement, dated August 1, 1996, between the Company and
Jonathon K. Heffron (Exhibit 10.30 to Form 10-K filed on December
20, 1996)
10.31 Employment Agreement, dated August 1, 1996, between the Company and
Ronald D. Coben (Exhibit 10.31 to Form 10-K filed on December 20,
1996)
10.32 Form of Nontransferable Stock Agreement (Exhibit 10.32 to Form S-1
filed on July 25, 1996)
10.33 Form of Stock Option Agreement (Exhibit 10.33 to Form S-1 filed on
July 25, 1996)
10.34 Consulting Agreement (Exhibit 10.34 to Form 10-K filed on December
20, 1996)
10.35 Recovery Agreement (Exhibit 10.35 to Form 10-K filed on December
20, 1996)
10.36 Stock Purchase Agreement, dated January 15, 1993, between Hyperion
Partners and Hyperion Holdings (Exhibit 10.36 to Form S-1 filed on
July 25, 1996)
10.37 Asset Purchase and Sale Agreement, dated January 17, 1997, between
the Bank and National City Mortgage Co. (Exhibit 10.38 to Form 10-Q
filed on February 14, 1997)
*27 Financial Data Schedule
* Filed herewith.
ITEM 6B. REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the six months ended March
31, 1997.
24
<PAGE>
BANK UNITED CORP.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANK UNITED CORP.
(Registrant)
Date MAY 14, 1997 /s/ BARRY C. BURKHOLDER
Barry C. Burkholder
President
Chief Executive Officer
(Duly Authorized Officer)
Date MAY 14, 1997 /s/ ANTHONY J. NOCELLA
Anthony J. Nocella
Executive Vice President
Chief Financial Officer
25
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
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0
0
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