BANK UNITED CORP, 424B1, 1997-08-13

BANK UNITED CORP
424B1, 1997-08-13
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424B1
(TO PROSPECTUS DATED MAY 14, 1997) Registration Number 333-19237

1,218,511 SHARES

BANK
UNITED CORP.

CLASS A COMMON STOCK

The 1,218,511 shares (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 (the "Offering") at a purchase price of $37.00 per
share or an aggregate purchase price of $45,084,907 are being sold by certain of
the stockholders of the Company named in this Prospectus Supplement or their
transferees, pledges, donors or successors (collectively, the "Participating
Selling Stockholders"). See "Participating Selling Stockholders" herein. The
Company will not receive any of the proceeds from the sale of the Shares by the
Participating Selling Stockholders. In conjunction with the Offering, certain of
the Participating Selling Stockholders and Selling Stockholders (as defined in
the accompanying Prospectus) are also entering into derivative transactions with
an affiliate of Lehman Brothers Inc. See "Derivative Transactions."

The Class A Common Stock is traded on the Nasdaq Stock Market's National
Market (the "NASDAQ") under the symbol "BNKU". On August 12, 1997, the last
reported sale price of the Class A Common Stock on the NASDAQ was $37.25 per
share. Prospective purchasers of the Class A Common Stock are urged to obtain
current information as to market prices of the Class A Common Stock.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THE ACCOMPANYING PROSPECTUS 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 FEDERAL DEPOSIT INSURANCE
CORPORATION ("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.

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

The Shares are offered by Lehman Brothers Inc. ("Lehman Brothers" or
"Agent") as agent on behalf of the Participating Selling Stockholders. The
Agent may reject any offer in whole or in part, and the Participating Selling
Stockholders may cancel or modify the offer made hereby at any time without
notice. For its efforts, the Agent will be entitled to a commission of $0.56 per
share.

LEHMAN BROTHERS

August 12, 1997

<PAGE>
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THE
OFFERING MAY EFFECT TRANSACTIONS WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT
THE MARKET PRICE OF CLASS A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
NASDAQ OR OTHERWISE AND SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME. SEE "PLAN OF DISTRIBUTION."

S-2
<PAGE>
PROSPECTUS SUPPLEMENT

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
herein and in the accompanying Prospectus. Investors should carefully review the
information contained in this Prospectus Supplement and in the accompanying
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. Terms not
otherwise defined in this Prospectus Supplement shall have the meaning accorded
to them in the accompanying Prospectus.

THE COMPANY

The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. The Company operates a 70-branch community banking network serving
approximately 216,000 households and businesses, ten regional commercial banking
offices, six wholesale mortgage origination offices, a mortgage servicing
business, and a financial markets business. At June 30, 1997, the Company had
assets of $11.4 billion, deposits of $5.2 billion and stockholders' equity of
$582.7 million and was the largest publicly traded depository institution
headquartered in Texas, in terms of both assets and deposits.

-- COMMUNITY BANKING GROUP. The Community Banking Group's principal
activities include deposit gathering, consumer lending, small business
banking, investment product sales and retail mortgage originations. The
Community 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 69-unit ATM network, which
together serve as the platform for the Company's consumer and small
business banking activities. The community banking branch network
includes 36 branches in the greater Houston area, 29 branches in the
Dallas/Ft. Worth Metroplex and two branches each in Austin and San
Antonio as well as a branch and credit card processing center in Phoenix,
Arizona. Through its branch network, the Company maintains approximately
480,000 accounts with approximately 216,000 households and businesses.
See "Business -- Community Banking Group" in the accompanying
Prospectus.

-- COMMERCIAL BANKING GROUP. The Commercial Banking Group provides credit
and a variety of cash management and other services to real estate and
related businesses. 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
healthcare lending and other commercial and industrial loan products. See
"Business -- Commercial Banking Group" in the accompanying Prospectus.

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

-- MORTGAGE SERVICING GROUP. The Mortgage Servicing Group services first
mortgage loans for single family residences for both the Company's
portfolio and for investors. The Company's servicing portfolio at June
30, 1997 was $17.3 billion and approximately 225,000 loans. Additional
servicing rights recently acquired by the Company associated with $7.1
billion in single family loans had not been transferred to the Company as
of June 30, 1997. The total servicing portfolio at June 30, 1997,
adjusted for the acquired servicing rights, was $24.4 billion. Included
in the servicing portfolio at June 30, 1997 is $3.6 billion of servicing
related to loans held in the Company's portfolio.

The Company's address is 3200 Southwest Freeway, Houston, TX 77027, and its
phone number is (713) 543-6500.

S-3
<PAGE>
RECENT DEVELOPMENTS

The following presents selected financial data for the periods indicated.
The selected consolidated financial data as of June 30, 1997 and September 30,
1996, and for the nine months ended June 30, 1997 and 1996, 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" as of and for the years ended September 30, 1996 and 1995 included
in the accompanying Prospectus. The results of operations for the nine months
ended June 30, 1997 are not necessarily indicative of the results of operations
to be obtained for the entire fiscal year.

AT AT
JUNE 30, SEPTEMBER 30,
1997 1996
-------------- --------------
(IN THOUSANDS)
STATEMENT OF FINANCIAL CONDITION
DATA:
Total assets.................... $ 11,439,050 $ 10,712,377
Mortgage-backed securities,
net........................... 1,601,857 1,657,908
Loans, net:
Single family.............. 6,330,303 6,369,974
Commercial................. 1,655,536 981,001
Consumer................... 286,065 168,513
-------------- --------------
TOTAL LOANS, NET...... 8,271,904 7,519,488
-------------- --------------
Deposits........................ 5,249,888 5,147,945
Borrowings (1).................. 5,031,636 4,437,672
Minority interest: Bank
Preferred Stock............... 185,500 185,500
Total stockholders' equity...... 582,676 531,043
<TABLE>
<CAPTION>

FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net interest income............. $ 66,620 $ 60,461 $ 198,909 $ 172,393
Provision for credit losses..... 3,425 4,305 14,644 10,155
Non-interest income (2)......... 25,871 23,473 86,892 78,082
Non-interest expense (2)........ 49,814 68,689 153,000 167,993
Income before income taxes,
minority interest and
extraordinary loss............ 39,252 10,940 118,157 72,327
Income tax expense (benefit)
(2)........................... 15,086 (98,922) 45,499 (73,644)
Minority interest (2)........... 4,563 10,752 13,689 20,102
Extraordinary loss (2).......... 2,323 -- 2,323 --
Net income...................... 17,280 99,110 56,646 125,869
Net income applicable to common
shares........................ 17,280 94,143 56,646 119,111
Earnings per common share (3)... 0.54 3.26 1.79 4.13
Dividends paid per common
share......................... 0.14 3.46 0.42 3.46
</TABLE>
(NOTES ON PAGE S-6)

S-4
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CERTAIN RATIOS AND OTHER DATA (4):
Mortgage servicing portfolio
Serviced for others (5).... $ 20,731,907 $ 8,208,417 $ 20,731,907 $ 8,208,417
Serviced for the Company... 3,639,047 3,828,845 3,639,047 3,828,845
-------------- -------------- -------------- --------------
$ 24,370,954 $ 12,037,262 $ 24,370,954 $ 12,037,262
-------------- -------------- -------------- --------------
Average number of common shares
outstanding................... 31,596 28,863 31,596 28,863
Book value per common share..... $ 18.44 $ 18.14 $ 18.44 $ 18.14
Tangible book value per common
share......................... 17.99 17.53 17.99 17.53
Return on average assets (6).... 0.79% 4.01% 0.86% 1.72%
Return on average common
equity........................ 12.02 78.92 13.56 33.06
Stockholders' equity to
assets........................ 5.09 4.80 5.09 4.80
Tangible stockholders' equity to
tangible assets............... 4.97 4.65 4.97 4.65
Net yield on interest-earning
assets........................ 2.56 2.25 2.58 2.09
Non-interest expenses to average
total assets.................. 1.80 2.51 1.87 1.97
Efficiency ratio (7)............ 53.56 79.62 54.02 66.88
Allowance for credit losses to
net nonaccrual loans (8)...... 71.59 45.21 71.59 45.21
Allowance for credit losses to
total loans................... 0.46 0.49 0.46 0.49
Net loan charge-offs to average
loans (8)..................... 0.42 0.19 0.26 0.17
Nonperforming assets to total
assets........................ 0.67 1.03 0.67 1.03
CERTAIN RATIOS AND OTHER DATA --
EXCLUDING NON-RECURRING AND
CERTAIN OTHER ITEMS (2) (4):
Net income...................... $ 19,603 $ 15,838 $ 56,507 $ 42,597
Net income applicable to common
shares........................ 19,603 14,909 56,507 39,876
Earnings per common share....... 0.61 0.52 1.78 1.38
Operating earnings (9).......... 38,512 31,797 110,890 86,836
Return on average assets (6).... 0.87% 0.76% 0.86% 0.67%
Return on average common
equity........................ 13.67 13.17 13.54 11.38
Efficiency ratio (7)............ 53.56 56.47 54.02 58.87
REGULATORY CAPITAL RATIOS OF THE
BANK:
Tangible Capital................ 7.59 6.15 7.59 6.15
Core Capital.................... 7.65 6.23 7.65 6.23
Total Risk-Based Capital........ 14.05 12.53 14.05 12.53
</TABLE>
(NOTES ON PAGE S-6)

S-5
<PAGE>
- ------------
(1) Includes FHLB Advances, securities sold under agreements to repurchase,
federal funds purchased, and long-term debt.

(2) Non-recurring items, deemed not to be part of the routine core business
operations of the Company, are composed of the following for the nine months
ended June 30,

-- 1997 (increased earnings per common share $0.01); (1) the gain on the
sale of mortgage offices of $3,998 ($2,462 net of tax); and (2) the
extraordinary loss on extinguishment of debt of $3,574 ($2,323 net of tax).

-- 1996 (increased earnings per common share $2.75); (1) compensation
expense of $7,820 ($4,816 net of tax); (2) charges totalling $12,537 ($7,729
net of tax) related to the restructuring of and items associated with the
mortgage origination business; (3) a contractual payment to previous
minority interests of $5,883; and (4) a tax benefit of $101,700.

(3) Earnings per common share represents net income (adjusted in fiscal 1996 for
earnings on the common stock equivalents attributable to the Bank's Warrant)
divided by the weighted average number of common shares outstanding. The
Warrant was exercised in August, 1996.

(4) Ratio, yield, and rate information are based on weighted average daily
balances, with the exception of return on average common equity which is
based on average monthly balances. Interim rates and yields are annualized.

(5) Includes purchased servicing rights of $7.1 billion at June 30, 1997, which
had not been transferred to the Company as of that date.

(6) Return on average assets is net income without deduction of minority
interest, divided by average total assets.

(7) Efficiency ratio is non-interest expenses (excluding goodwill amortization)
divided by net interest income plus non-interest income, excluding net gains
(losses) on securities, MBS, other loans and the sale of mortgage offices.

(8) During the quarter ended June 30, 1997, $31.3 million of nonperforming loans
were sold with related charge-offs of $5.0 million. Primarily as a result of
this transaction, the allowance for credit losses to net nonaccrual loans
increased to 71.59% at June 30, 1997 from 45.21% at June 30, 1996. Excluding
the charge-offs related to this sale of nonperforming assets, net loan
charge-offs to average loans would have been 0.18% for the three and nine
months ended June 30, 1997.

(9) Operating earnings consist of net income, including net gains (losses) on
the sale 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 and
applicable non-recurring items. See note 2 herein.

Net income was $17.3 million ($0.54 per share) for the quarter ended June
30, 1997, compared to $99.1 million ($3.26 per share) for the quarter ended June
30, 1996. Excluding several non-recurring items in both periods, the Company's
net income was $19.6 million ($0.61 per share) for the quarter ended June 30,
1997, compared to $15.8 million ($0.52 per share) for the quarter ended June 30,
1996. The non-recurring items included a $101.7 million tax benefit recorded
during the quarter ended June 30, 1996 and a $2.3 million after tax
extraordinary loss recorded during the quarter ended June 30, 1997 for the early
retirement of debt. The increase in net income excluding non-recurring items is
principally the result of an improved interest rate margin.

Net interest income was $66.6 million for the quarter ended June 30, 1997,
compared to $60.5 million for the quarter ended June 30, 1996, due to a 31 basis
point increase in the net yield on interest earning assets. This increase is
primarily due to the shift of assets to higher yielding commercial and consumer
loans from the traditionally lower yielding single family mortgages, as well as
lower funding costs.

During May 1997, the Company issued $220 million of fixed-rate Subordinated
Notes due May 2007 with a stated rate of 8.875% and an effective rate of 8.896%.
Net proceeds were used to repurchase and retire $114.5 million of Senior Notes,
pay the related costs and expenses and provide additional capital to

S-6
<PAGE>
the Bank. The costs associated with retiring the Senior Notes are reflected as
an extraordinary loss of $3.6 million, or $2.3 million after tax ($0.07 per
share) in the quarter ended June 30, 1997.

Total assets increased during the nine months ended June 30, 1997, by
$726.7 million, or 7%, to $11.4 billion. The majority of the increase is the
result of commercial and consumer loan purchases and originations, as well as
purchases of mortgage servicing rights ("MSRs"). These increases were funded
primarily with FHLB advances and securities sold under agreements to repurchase.
During the quarter ended June 30, 1997, the Company purchased $7.1 billion of
rights to service single family mortgage loans, which will expand the Company's
servicing portfolio to $24.4 billion when transferred to the Company. Included
in the servicing portfolio at June 30, 1997 is $3.6 billion of servicing related
to loans held in the Company's portfolio.

THE OFFERING

Class A Common Stock offered
by the Participating Selling
Stockholders............................ 1,218,511 Shares

Use of Proceeds........................... The Company will receive none of the
proceeds of the Shares sold by the
Participating Selling Stockholders.

NASDAQ Symbol............................. BNKU

S-7
<PAGE>
PARTICIPATING SELLING STOCKHOLDERS

The Participating Selling Stockholders consist of certain of the Selling
Stockholders listed in the accompanying Prospectus. See "Selling Stockholders"
in the accompanying Prospectus. Not all of the Shares covered by the Prospectus
are being offered in the Offering. The following table sets forth information
with respect to the beneficial ownership of Class A Common Stock by the
Participating Selling Stockholders as of the date of this Prospectus Supplement
and the number of Shares offered by each of the Participating Selling
Stockholders in the Offering.

SHARES OF
CLASS A
COMMON
STOCK
OWNED
AS OF THE SHARES
HOLDER DATE HEREOF OFFERED HEREBY
- ------------------------------------- ------------ ---------------
SAR Hyperion Corp.(1)................ 759,543 345,543
SAS Hyperion Corp.(2)................ 759,543 329,543
David M. Golush...................... 342,340 140,000
KRW Hyperion Corp.(3)................ 227,311 113,656
Patricia A. Sloan.................... 156,745 76,745
David W. Marcus...................... 142,866 85,434
Jeffrey P. Cheesman.................. 128,813 38,813
Robert A. Perro...................... 79,386 39,386
Hyperion Funding Corp.(4)............ 43,403 43,403
Ranieri Family Trust F/B/O -- Claudia
L. Ranieri U/A 7/1/93.............. 3,994 2,994
Ranieri Family Trust F/B/O -- Angela
S. Ranieri U/A 7/1/93.............. 3,994 2,994
- ------------
(1) All stock owned by Salvatore A. Ranieri.
(2) All stock owned by Scott A. Shay.
(3) All stock owned by Kendrick R. Wilson III.
(4) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay,
and Kendrick R. Wilson III.

Lewis S. Ranieri is Chairman of the Board of the Company and Salvatore A.
Ranieri, Scott A. Shay, David M. Golush, Kendrick R. Wilson III, and Patricia A.
Sloan are directors of the Company. All of the Participating Selling
Stockholders are general partners and limited partners of Hyperion Ventures
L.P., a Delaware limited partnership, which is a general partner of Hyperion
Partners L.P., except for the two trusts, which are limited partners of Hyperion
Partners L.P. See "Selling Stockholders" in the accompanying Prospectus.

Certain of the Participating Selling Stockholders and Selling Stockholders
are also entering into derivative transactions with an affiliate of Lehman
Brothers with respect to 377,397 shares. See "Derivative Transactions."

S-8
<PAGE>
DERIVATIVE TRANSACTIONS

In conjunction with the Offering, certain of the Participating Selling
Stockholders and Selling Stockholders are also entering into derivative
transactions ("collars") with Lehman Brothers Finance S.A. ("LBF"), an
affiliate of Lehman Brothers. See "Participating Selling Stockholders." Under
the terms of the collars, certain Participating Selling Stockholders and Selling
Stockholders will (1) buy a cash-settled put option from LBF against a certain
number of their shares of Class A Common Stock and (2) sell a cash-settled call
option to LBF for an equal number of shares. The effect of the collars will be
to guarantee a minimum value (set by the strike price of the put) for the
relevant number of shares while preserving a portion of the potential
appreciation in the stock price (up to the strike price of the call).

In order to hedge, for its own account, the trading position created by the
collars, LBF intends to sell short approximately 58% of the number of shares of
Class A Common Stock pledged as collateral in connection with the collars. The
Shares being sold by the Participating Selling Stockholders in the Offering will
be sold simultaneously with those being sold short by LBF. The price of the
Shares being sold by the Participating Selling Stockholders and those shares of
Class A Common Stock being sold short by LBF will be identical.

PLAN OF DISTRIBUTION

The Shares offered hereby are being offered by Lehman Brothers, as Agent
for the Company, pursuant to a Sales Agency Agreement dated August 12, 1997 (the
"Sales Agency Agreement"), between the Company, the Participating Selling
Stockholders and the Agent. The Agent has agreed to solicit offers to purchase
such Shares in one or more transactions on the NASDAQ, or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Agent may, but is not obligated to,
position and resell a portion of such Shares as principal to facilitate the
transaction.

In connection with the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise affect
the market price of the Class A Common Stock. The Agent or an affiliate of the
Agent also may create a short position for its account by selling more Class A
Common Stock in connection with the Offering than the Agent is committed to sell
on behalf of the Participating Selling Stockholders, including pursuant to the
arrangements described above under "Derivative Transactions," and in such
cases, may purchase Class A Common Stock in the open market following completion
of the Offering to cover all or a portion of such short position. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.

The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act. The Company has agreed to indemnify the Agent against certain
liabilities, including liabilities under the Securities Act.

The Agent has in the past performed other investment banking services for
the Company not related to the Offering, for which it has been paid customary
fees.

LW-SP1, L.P. and LW-SP2, L.P., which owns an aggregate of 2,146,748 shares
of Class A Common Stock (6.8% of the outstanding Class A Common Stock) are
limited partnerships of which LW Real Estate Investments, L.P. is general
partner and owns a 99% interest. Lehman Brothers owns approximately 75%
partnership interest in LW Real Estate Investments. LW-SP1, and LW-SP2 have
entered into the Letter Agreement (as defined in the accompanying Prospectus)
pursuant to which, among other things, they have agreed not to transfer their
Class A Common Stock until August 8, 1998. Accordingly, neither LW-SP1 or LW-SP2
is among the Participating Selling Stockholders nor are their shares of Class A
Common Stock included among the shares of Class A Common Stock covered by the
accompanying Prospectus.

S-9
<PAGE>
PROSPECTUS DATED MAY 14, 1997

PROSPECTUS

10,208,610 SHARES

BANK
UNITED CORP.

CLASS A COMMON STOCK

The 10,208,610 shares of Class A common stock, par value $0.01 per share
("Class A Common Stock"), of Bank United Corp. (the "Company") covered
hereby (the "Shares") may be offered (the "Offering") and sold from time to
time by the holders named in this Prospectus or by their transferees, pledgees,
donees or successors (collectively, the "Selling Stockholders") pursuant to
this Prospectus as appropriately amended or supplemented. The Selling
Stockholders are the general partners and limited partners of Hyperion Partners
L.P., a Delaware limited partnership ("Hyperion Partners") and three other
entities with which an affiliate of Hyperion Partners has a fiduciary
relationship. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of the Shares by the Selling Stockholders. The
Company has agreed to bear certain registration and similar expenses in
connection with the Offering and the Selling Stockholders will bear all other
expenses of the Offering, including brokerage fees and any underwriting
discounts or commissions.

The Shares may be offered or sold by the Selling Stockholders from time to
time directly to purchasers or through agents, underwriters or dealers on terms
to be determined at the time of sale. See "Plan of Distribution". If required,
the names of any such agents or underwriters involved in the sale of the Shares
in respect of which this Prospectus is being delivered and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in an accompanying supplement to this Prospectus.

The Company has two classes of common stock outstanding: Class A Common
Stock and Class B Common Stock, par value $0.01 per share ("Class B Common
Stock"). The Class A Common Stock and the Class B Common Stock (together, 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 to be offered by
the Selling Stockholders pursuant to this Prospectus will consist solely of
shares of Class A Common Stock.

The Selling Stockholders and any broker-dealers, agents or underwriters
which participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commission received by them or any profit
received by them on the resale of Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution".

The Class A Common Stock is traded on the Nasdaq Stock Market's National
Market (the "NASDAQ") under the symbol "BNKU". On May 12, 1997, the last
reported sale price of the Class A Common Stock on the NASDAQ was $31.625 per
share. Prospective purchasers of the Class A Common Stock are urged to obtain
current information as to market prices of the Class A Common Stock.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 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 FEDERAL DEPOSIT INSURANCE
CORPORATION ("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.

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

<PAGE>
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 OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES.

THE COMPANY

The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. The Company operates a 71 branch community banking network serving
nearly 210,000 households and businesses, ten regional commercial banking
offices, five wholesale mortgage origination offices, a mortgage servicing
business, and a financial markets business. At March 31, 1997, the Company had
assets of $11.0 billion, deposits of $5.1 billion and stockholders' equity of
$568.9 million and was 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. In December 1996, the Company
formed a new, wholly owned, Delaware subsidiary, BNKU Holdings, Inc.
("Holdings"). After acquiring all the common stock of Holdings, the Company
contributed all the common stock of the Bank to Holdings, and Holdings assumed
the obligations of the Company's $115 million 8.05% senior notes due May 15,
1998 (the "Senior Notes"). As a result of these transactions, Holdings is the
sole direct subsidiary of the Company and the Bank is the sole direct subsidiary
of Holdings. In conjunction with the formation of Holdings, the Company's
headquarters were relocated from Uniondale, New York to Houston, Texas. The
Company's address is 3200 Southwest Freeway, Houston, TX 77027, and its phone
number is (713) 543-6500.

BUSINESS STRATEGY

After initially obtaining assets and deposits through the acquisition of
failed thrifts and from the Resolution Trust Corporation (the "RTC"), the
Company's operating strategy historically emphasized traditional single family
mortgage lending and deposit gathering activities, with a focus on minimizing
interest rate and credit risk while maximizing the net value of the Company's
assets and liabilities. Over the past few years, however, the Company's
management has pursued a strategy designed to reduce its reliance on its single
family mortgage lending by developing higher margin 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 and the level of lower
cost transaction and commercial deposit accounts. While the pursuit of this
strategy entails risks different to those present in traditional single family
mortgage lending, 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 business. 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 acquisitions,
while maintaining adequate capitalization. See "Risk Factors -- Evolution of
Business" and "Business_-- Community Banking Group" and "-- Commercial
Banking Group".
<PAGE>
OPERATIONAL OVERVIEW

The Company's operating structure reflects its current strategy at March
31, 1997, with four business groups.

-- COMMUNITY BANKING GROUP. The Community Banking Group's principal
activities include deposit gathering, consumer lending, small business
banking, investment product sales and retail mortgage originations. The
Community Banking Group, which has marketed itself under the name
"Bank United" since 1993, operates a 71 branch community banking
network, a 24-hour telephone banking center, and a 68-unit ATM network,
which together serve as the platform for the Company's consumer and
small business banking activities. The community banking branch network
includes 37 branches in the greater Houston area, 29 branches in the
Dallas/Ft. Worth Metroplex and two branches each in Austin and San
Antonio as well as a branch and credit card processing center in
Phoenix, Arizona. Through its branch network, the Company maintains
over 461,000 accounts with an estimated 210,000 households and
businesses. See "Business -- Community Banking Group".

-- FINANCIAL MARKETS GROUP. The Financial Markets Group manages the
Company's asset portfolio activities, including loan acquisition and
management, wholesale mortgage originations, and the securitization of
loans. Additionally, under the supervision of the 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. See "Business -- Financial Markets Group".

-- MORTGAGE BANKING GROUP. The Mortgage Banking Group principally engaged
in three activities prior to February 1, 1997: retail mortgage
originations, wholesale mortgage originations and mortgage servicing.
The Mortgage Banking Group currently services first mortgage loans for
single family residences for both the Company's portfolio and for
investors. The Company's servicing portfolio at March 31, 1997 was
$14.3 billion. 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 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 and was
recorded in the quarter ended March 31, 1997. The Company's sale of
these offices was consistent with its commitment to advance its
strategic focus on traditional community and commercial banking
products and services. 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. See
"Business -- Mortgage Banking Group".

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.
<PAGE>
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, as manager of the Federal
Savings and Loan Insurance Corporation ("FSLIC") Resolution Fund (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. During the quarter ended June 30, 1996, the
Company also recorded a $101.7 million tax benefit related to its net operating
loss carryforwards ("NOLs").

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 nonvoting common stock for certain shares of its
voting common stock held by Hyperion Partners; (ii) Hyperion Partners then
distributed the Hyperion Holdings common stock owned by it to its limited and
general partners in accordance with 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 part of the Restructuring, the common stock
of the Company was converted 1,800 to one. Subsequent to the Restructuring,
there were no shares of Class C Common Stock outstanding. 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, the FDIC-FRF
surrendered to the Bank a portion of the warrant (the "Warrant") it held to
purchase 158,823 shares of common stock of the Bank ("Bank Common Stock") for
a cash payment of $6.1 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
Common Stock. See "Business -- The Assistance Agreement" and "Selling
Stockholders".

In August 1996, the Company completed the offering of 12,075,000 shares of
Class A Common Stock (the "August Offering"). Of the 12,075,000 shares sold,
910,694 were sold by the Company, with the balance sold by certain selling
stockholders, including the FDIC-FRF which sold all of the shares received upon
exercise of the Warrant. Since the August Offering, the Class A Common Stock has
been listed on the NASDAQ under the symbol "BNKU". On May 12, 1997, the last
reported sale price of the Class A Common Stock on the NASDAQ was $31.625 per
share. The 10,208,610 shares of Class A Common Stock covered by this Prospectus
are subject to restrictions on sale and transfer due to agreements entered into
in connection with the August Offering. After the restrictive dates, the shares
may be sold from time to time by holding stockholders. On February 10, 1997,
restrictions on 7,189,763 shares expired and certain stockholders sold 4,276,713
shares in a secondary public offering on that date. See "Selling Stockholders"
and "Plan of Distribution".

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 August
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 seven individuals who have more than 20 years of related
industry experience, the majority of which comes from commercial banking. See
"Management".

Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of mortgage-backed securities ("MBS"),
serves as Chairman of the Board of the Company and as a director of the Bank and
provides strategic and managerial advice to the Company. 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 herein), the
Company succeeded to and
<PAGE>

recorded substantial NOLs which have resulted in certain tax benefits. As of
March 31, 1997, the Company had NOLs of $768 million available to reduce taxable
income in future years. Pursuant to the Tax Benefits Agreement (as defined
herein), the Bank is required to pay to the FDIC-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 August Offering and the Offering have been 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 were 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 August Offering, except in certain
circumstances, including the approval of the Board of Directors of the Company.
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 fiscal 1996. See "Risk Factors -- Limitations on
Use of Tax Losses; Restrictions on Transfers of Stock", "Capitalization" and
Note 14 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, such as the Bank, that had been operating under previously granted
capital and accounting forbearances, and that FIRREA eliminated these
forbearances. 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.

In 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 to abide by the terms of the
Forbearance Agreement.

The Company currently expects the trial of its case to commence during the
second quarter of fiscal 1998. 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 and the Bank have entered into an agreement with Hyperion
Partners acknowledging 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. The Company is also unable to predict the timing of the resolution of
its claims. Consequently, no assurances can be given as to the results of this
suit. See "Legal Proceedings".
<PAGE>
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, 1996, 1995 and 1994 and the statement of
financial condition data at September 30, 1996 and 1995 are derived from, and
are qualified by reference to, the audited Consolidated Financial Statements.
The statement of operations data set forth below for the years ended September
30, 1993 and 1992 and the statement of financial condition data at September 30,
1994, 1993 and 1992 are derived from the Company's audited consolidated
financial statements. Information at or for the six months ended March 31, 1997
and 1996 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, 1997 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,
---------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL CONDITION DATA
Total assets......................... $11,002,625 $11,266,636 $10,712,377 $11,983,534 $8,910,161 $8,440,556 $6,255,283
Loans................................ 8,032,142 7,878,080 7,519,488 8,260,240 5,046,174 4,862,379 4,101,716
Mortgage-backed securities........... 1,525,086 1,954,070 1,657,908 2,398,263 2,828,903 2,175,925 833,425
Deposits............................. 5,065,804 4,963,321 5,147,945 5,182,220 4,764,204 4,839,388 4,910,760
Federal Home Loan Bank advances(1)... 3,786,596 4,139,023 3,490,386 4,383,895 2,620,329 2,185,445 632,345
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 927,859 949,936 832,286 1,172,533 553,000 310,000 --
Long-term debt(1).................... 115,000 115,000 115,000 115,000 115,000 115,000 106,090
Minority interest -- Bank Preferred
Stock(2)........................... 185,500 185,500 185,500 185,500 85,500 85,500 --
Total stockholders' equity(3)........ 568,897 526,441 531,043 496,103 451,362 389,203 232,373
Book value per common share(4)....... 18.01 18.24 16.81 17.19 15.64 13.48 8.19

STATEMENT OF OPERATIONS DATA
Interest income...................... $ 397,031 $ 421,221 $ 812,312 $ 746,759 $ 494,706 $ 482,490 $ 502,854
Interest expense..................... 264,742 309,289 584,778 552,760 320,924 300,831 348,291
---------- ---------- ---------- ---------- --------- --------- ---------
Net interest income.............. 132,289 111,932 227,534 193,999 173,782 181,659 154,563
Provision for credit losses.......... 11,219 5,850 16,469 24,293 6,997 4,083 21,133
---------- ---------- ---------- ---------- --------- --------- ---------
Net interest income after
provision for credit losses.... 121,070 106,082 211,065 169,706 166,785 177,576 133,430
Non-interest income.................. 61,021 54,609 110,036 114,981 118,889 146,691 103,790
Non-interest expense................. 103,186 99,304 253,265 194,576 199,593 201,964 180,415
---------- ---------- ---------- ---------- --------- --------- ---------
Income before income taxes,
minority interest and
extraordinary loss............. 78,905 61,387 67,836 90,111 86,081 122,303 56,805
Income tax expense (benefit)......... 30,413 25,278 (75,765) 37,415 (31,899) (26,153) 200
Less minority interest(2)(5)......... 9,126 9,350 24,666 10,977 9,010 6,537 --
Extraordinary loss(6)................ -- -- -- -- -- 14,549 --
---------- ---------- ---------- ---------- --------- --------- ---------
Net income....................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970 $ 127,370 $ 56,605
========== ========== ========== ========== ========= ========= =========
Net income applicable to common
shares......................... $ 39,366 $ 24,968 $ 113,327 $ 38,824 $ 102,519 $ 118,640 $ 52,406
Earnings per common share(4)......... 1.25 0.87 3.87 1.35 3.55 4.11 1.85
Dividends per common share........... 0.28 -- 3.46 -- -- -- --
Average number of common shares
outstanding(4)..................... 31,596 28,863 29,260 28,863 28,863 28,863 28,366
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED MARCH
31, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CERTAIN RATIOS AND OTHER DATA(7)
Operating earnings(8)................ $ 72,378 $ 55,039 $ 114,659 $ 91,295 $ 75,514 $ 77,105 $ 50,024
Return on average assets(9).......... 0.90% 0.63% 1.28% 0.50% 1.42% 1.83% 0.89%
Return on average common equity...... 14.36 10.43 23.06 8.80 26.32 44.87 28.18
Stockholders' equity to assets....... 5.17 4.67 4.96 4.14 5.07 4.61 3.71
Tangible stockholders' equity to
tangible assets.................... 5.06 4.48 4.81 3.93 4.68 4.14 2.58
Net yield on interest-earning
assets(10)......................... 2.58 2.04 2.10 1.92 2.20 2.61 2.60
Non-interest expense to average total
assets............................. 1.91 1.72 2.26 1.86 2.41 2.76 2.85
Efficiency ratio(11)................. 54.24 60.16 74.97 59.50 66.38 65.11 63.98
Allowance for credit losses to net
nonaccrual loans................... 49.44 38.00 44.24 48.74 30.73 71.71 74.04
Allowance for credit losses to total
loans.............................. 0.54 0.46 0.52 0.44 0.46 0.61 0.68
Net loan charge-offs to average
loans.............................. 0.18 0.15 0.17 0.16 0.30 0.05 0.07
Nonperforming assets to total
assets............................. 1.08 1.10 1.12 0.84 1.09 0.72 0.89
Regulatory capital ratios of the
Bank(12)
Tangible capital................. 6.87 6.88 6.57 6.20 6.01 6.17 4.24
Core capital..................... 6.93 6.96 6.64 6.29 6.17 6.43 5.04
Total risk-based capital......... 12.68 14.20 13.09 13.45 14.02 14.87 12.19
Number of community banking
branches........................... 71 67 70 65 62 62 65
Number of commercial banking
origination offices................ 10 9 9 9 5 3 2
Number of mortgage origination
offices............................ 5 112 85 122 145 109 93
Single family servicing portfolio.... $14,285,123 $11,594,485 $13,246,848 $12,532,472 $8,920,760 $8,073,226 $7,187,000
Single family originations(13)....... 1,203,409 1,049,318 3,762,198 3,447,250 5,484,111 6,737,762 6,118,363
Loans purchased for held to maturity
portfolio.......................... 715,082 100,247 148,510 2,658,093 1,406,275 1,212,103 916,613
CERTAIN RATIOS AND OTHER
DATA -- EXCLUDING NON-RECURRING AND
CERTAIN OTHER ITEMS(14)
Net income........................... $ 36,904 $ 26,759 $ 56,392 $ 41,719 $ 50,804 $ 97,736 $ 56,605
Net income applicable to common
shares............................. 36,904 24,968 53,295 38,824 47,585 91,461 52,406
Earnings per common share............ 1.17 0.87 1.82 1.35 1.65 3.17 1.85
Return on average assets(9).......... 0.85% 0.63% 0.67% 0.50% 0.72% 1.42% 0.89%
Return on average common equity...... 13.47 10.43 11.47 8.80 12.27 34.43 28.18
Efficiency ratio(11)................. 54.24 60.16 58.85 59.50 66.38 65.11 63.98
</TABLE>
- ------------

(1) Long-term debt is comprised of Senior Notes and other long-term debt.
Long-term debt excludes Federal Home Loan Bank ("FHLB") advances with
maturities greater than one year. FHLB advances with maturities greater
than one year were $2,714,147 and $323,916 as of March 31, 1997 and 1996,
respectively, and were $926,291, $1,992,010, $782,129, $708,945, and
$55,445 at September 30, 1996, 1995, 1994, 1993, and 1992, respectively.
See Notes 9 and 21 to the Consolidated Financial Statements.

(2) 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. All of
the outstanding shares of common stock of the Bank are owned by Holdings, a
wholly owned subsidiary of the Company.

(3) In August 1996, the Company filed a registration statement with the
Commission and 12,075,000 shares of the Company's Class A Common Stock were
sold to the public. The Company sold 910,694 shares and

(NOTES CONTINUED ON FOLLOWING PAGE)
<PAGE>
certain stockholders sold 11,164,306 shares. See "Management's Discussion
and Analysis -- Capital Resources and Liquidity -- Capital" and Note 16 to
the Consolidated Financial Statements.

(4) Earnings per common share represents net income (adjusted for earnings on
the common stock equivalents attributable to the Bank's Warrant) 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 in
June 1996. See Notes 1 and 16 to the Consolidated Financial Statements.

(5) In connection with its Acquisition, the Bank issued to the FDIC-FRF the
Warrant to acquire 158,823 shares of common stock of the Bank at an
exercise price of $0.01 per share. Payments in lieu of dividends related to
the Warrant. In August 1996, the FDIC-FRF surrendered a portion of the
Warrant for a cash payment of $6.1 million, exercised the remainder of the
Warrant and immediately exchanged the shares of common stock of the Bank it
received for 1,503,560 shares of Common Stock of the Company. The FDIC-FRF
sold all of these shares in the August Offering. See "Business -- The
Assistance Agreement -- Warrant Agreement".

(6) Reflects costs and charges associated with the repayment of the note
payable to related party and the 15.75% Notes (as defined, see
"Management's Discussion and Analysis -- Capital Resources and
Liquidity -- Notes Payable") and the issuance of the Senior Notes.

(7) Ratio, yield, and rate information are based on weighted average daily
balances for fiscal 1993 and subsequent periods and average monthly
balances for fiscal 1992, with the exception of return on average common
equity, which is based on average monthly balances for all periods
presented. Interim rates are annualized.

(8) 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, other loans, and the sale of mortgage
offices and excludes certain non-recurring items in fiscal 1996. See note
14 herein and "Business -- General."

(9) Return on average assets represents income before minority interest and
extraordinary loss, divided by average total assets.

(10) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.

(11) 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, other loans, and the sale
of mortgage offices.

(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 "Business -- Regulation -- Safety and Soundness
Regulations -- Capital Requirements".

(13) Includes $51.3 million, $31.0 million, $129.0 million, $135.3 million,
$100.3 million, $116.5 million, and $127.0 million of brokered and
purchased loans for the six months ended March 31, 1997 and 1996, and
fiscal 1996, 1995, 1994, 1993, and 1992, respectively.

(14) Certain items have been excluded as they are deemed to be non-recurring and
not part of the routine core business operations of the Company.
Non-recurring items for the six months ended March 31, 1997 relate to the
gain on the sale of mortgage offices of $3,998 ($2,462 net of tax), or
$0.08 per common share. Non-recurring items for fiscal 1996 were comprised
of: (i) a one-time SAIF assessment charge of $33,657 ($20,729 net of tax);
(ii) compensation expense of $7,820 ($4,816 net of tax); (iii) charges
totalling $12,537 ($7,729 net of tax), related to the restructuring of and
items associated with the mortgage origination business; (iv) a contractual
payment to previous minority interests of $5,883; and (v) a tax benefit of
$101,700. Non-recurring items totalled $2.05 per common share for fiscal
1996. See Notes 13, 14, 15, 16, and 18 to the Consolidated Financial
Statements. During fiscal 1994, a tax benefit of $58,166, or $1.90 per
common share, was recorded. During fiscal 1993, a tax benefit of $44,183
and an extraordinary loss of $14,549 (see note 6 herein) were recorded,
totalling $0.94 per common share in fiscal 1993.
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered by
the Selling Stockholders................ 10,208,610 shares
Common Stock to be outstanding immediately
after the Offering...................... 28,354,276 shares Class A Common Stock(1)
3,241,320 shares Class B Common Stock(2)
Total........................... 31,595,596 shares of Common Stock
Risk Factors.............................. General Business Risks; Evolution of Business; 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; Federal Programs;
Limitations on Stock Ownership; Anti-takeover Provisions; Dependence
on Key Personnel; Conversion of Class B Common Stock; Dilution of
Voting Power; Potential Effect of Shares Eligible for Future Sale;
Liability under Representations and Warranties and Other Credit
Risks; Litigation.
Use of Proceeds........................... The Company will receive none of the proceeds of the sales of shares
by the Selling Stockholders. See "Use of Proceeds".
NASDAQ Symbol............................. BNKU
</TABLE>

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

(1) 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".

(2) Assumes no conversion of Class B Common Stock into Class A Common Stock
other than as a result of sale pursuant to the Offering. As described 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

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 sale
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 of the sale to increase the equity capital of the Bank. The Bank will
use the proceeds of such investment 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.
<PAGE>
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 single family mortgage lending business. See
"Prospectus Summary -- Business Strategy". The Community Banking Group and the
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 single family mortgage lending. Loan balances for these types
of loans are typically larger than those for single family mortgage loans and,
thus, when there are defaults and losses, they can be greater on a per loan
basis than those for single family 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
single family 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 single family 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
single family mortgage lending and require skills and experience of management
and staff different than that for single family 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 single family mortgage lending. Commercial and
community banking pricing is very competitive and more subjective than that for
single family mortgage lending.

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
"Prospectus Summary -- 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".

10
<PAGE>
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/Ft. 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. 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 the basis
of the 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 may have
significantly lower deposit insurance costs.

FUNDING AND LIQUIDITY

In recent years, the Company has relied primarily on collateralized
borrowings, such as borrowings from the FHLB of Dallas ("FHLB Dallas") and
borrowings on securities sold under agreements to repurchase ("reverse
repurchase agreements") to fund its asset growth. For the six months ended
March 31, 1997, such borrowings funded 43% of the Company's average 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 the greater of 65% of
fully disbursed single family loans, unless assets are physically pledged to the
FHLB Dallas and 45% of total assets. At March 31, 1997, the amounts available
under these restrictions were $4.4 billion and $5.0 billion, respectively, $3.8
billion of which had been advanced at March 31, 1997.

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, 1997, the Company had $1.1
billion in such collateral, $963.1 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 not shown signs of further deterioration.
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".

11
<PAGE>
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, 1997, the Company had NOLs of $768 million available to
reduce taxable income in future years. Such tax deductions would be subject to
significant limitation under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code") if the Company undergoes an ownership change (as
defined herein, 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 5.5% for March 31,
1997). 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 $51 million. If the Company were to undergo an Ownership Change, a
significant portion of the $101.7 million tax benefit recognized in fiscal 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.

Although the Company has attemped to protect against a future Ownership
Change that is not initiated by the Company by imposing in the Company's
Restated Certificate of Incorporation (the "Certificate") and the Company's
By-Laws (the "By-Laws") limitations on disqualifying transfers at any time
during the three years following the August Offering, 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 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") 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 Board of Directors of the Company 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 has utilized a substantial portion of its available
ownership limitation in connection with the August 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 three-year
period following the August Offering 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

The Company, through Holdings, owns all the outstanding common stock of the
Bank. As a holding company without significant assets other than its indirect
ownership of all of the common stock of 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

12
<PAGE>
Holdings, which, in turn, is dependent on 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, and applicable regulatory
requirements and compliance with the covenants of the Senior Notes. 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 Holdings) 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.

As of March 31, 1997, the Bank had $164.3 million of available capacity for
the payment of dividends on its capital stock without prior approval of the OTS,
and at April 1, 1997, $78.8 million was available for payment of dividends on
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". If the Company were to become subject to regulation as a
bank holding company by the Board of Governors of the Federal Reserve Systems
(the "Board of Governors"), whether as a result of the consolidation into the
Board of Governors of all regulatory powers over financial institutions or some
other occurrence, the Company would become subject to capital requirements and
limitations on the types of business activities in which it may engage that are
not currently applicable to it as a savings and loan holding company. If this
were to occur, the Company believes that it would be permitted to continue its
activities and operations substantially as currently conducted and that the
subordinated notes issued in May 1997 would constitute Tier 2 Capital, as
currently defined by the regulations of the Board of Governors. See Note 21 to
the Consolidated Financial Statements.

FEDERAL PROGRAMS

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

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

13
<PAGE>
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, 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".

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, 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.

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.

At the time of the August Offering the Company entered into a three-year
consulting agreement with Mr. Lewis Ranieri, under which Mr. Ranieri provides
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 has entered 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.

CONVERSION OF CLASS B COMMON STOCK; DILUTION OF VOTING POWER

Certain Selling Stockholders 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".

14
<PAGE>
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE

The Company currently has 31,595,596 shares of Common Stock outstanding. Of
such shares, 12,075,000 were registered under the Securities Act of 1933, as
amended ("Securities Act") and sold to the public in August 1996 and
19,520,596 are subject to contractual restrictions on sale which expire at
various times. The Company has agreed to use its best efforts to register the
19,520,596 shares under the Securities Act and to maintain the effectiveness of
such registration for a specified period. The Registration Statement of which
this Prospectus forms a part covers the 10,208,610 shares which will become
available for sale in 1997. Pursuant to the terms of the Letter Agreement (as
defined, herein), the Company intends to register the remaining 9,311,986 shares
of Common Stock covered hereby as promptly as practicable. See "Selling
Stockholders".

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 mortgage servicing rights ("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 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 the United
States Court of Appeals for the Fifth Circuit and a motion to intervene in the
U.S. District Court for the Southern District of Texas, 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-FRF pursuant to section 7(a)(2) of the Assistance
Agreement (as defined, herein). 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. See "Legal Proceedings".

15
<PAGE>
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. The Company operates a 71 branch community banking network serving
nearly 210,000 households and businesses, ten regional commercial banking
offices, five wholesale mortgage origination offices, a mortgage servicing
business, and a financial markets business. At March 31, 1997, the Company had
assets of $11.0 billion, deposits of $5.1 billion and stockholders' equity of
$568.9 million and was 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. In December 1996, the
Company formed a new, wholly owned, Delaware subsidiary, Holdings. After
acquiring all the common stock of Holdings, the Company contributed all the
common stock of the Bank to Holdings, and Holdings assumed the obligations of
the Company's Senior Notes. As a result of these transactions, Holdings is the
sole direct subsidiary of the Company and the Bank is the sole direct subsidiary
of Holdings. In conjunction with the formation of Holdings, the Company's
corporate headquarters were relocated from Uniondale, New York to 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 (the "Assistance
Agreement"). On December 23, 1993, the Company and the FDIC entered into an
agreement providing for the termination of the Assistance Agreement. See
"Business -- The Assistance Agreement".

Immediately after the Acquisition, the Bank operated 19 banking branches,
primarily in the greater Houston metropolitan area, with no significant loan
origination capabilities. Through both acquisitions and internal growth, the
Bank has substantially expanded its Texas community banking branch network,
built a nationwide mortgage banking business, and established itself as a
provider of a broad array of financial products, including commercial banking
services and products. In 1990, 1991, and 1992, the Bank entered into various
agreements with the RTC, whereby the Bank purchased 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. 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 purchased several mortgage origination networks as well as MSRs. In June
1996, the Company, through a restructuring plan, began closing or consolidating
mortgage production offices and several regional operation centers. Effective
February 1997, the Company sold, restructured or closed the remaining offices.
The Company will continue its wholesale mortgage origination capability through
its Financial Markets Group. The Company intends to continue to pursue
additional community and commercial banking expansion opportunities, including
acquisitions, while maintaining adequate capitalization.

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. Subsequent to the completion of the
Restructuring and the August Offering, the Company's Class A Common Stock has
been listed on the NASDAQ under the symbol "BNKU".

16
<PAGE>
DIVIDEND, DISTRIBUTION AND RESTRUCTURING

In fiscal 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. During fiscal 1996, the Company also recorded
a $101.7 million tax benefit related to its NOLs.

During fiscal 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 the Company was converted 1,800 to one. 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, the FDIC-FRF surrendered to
the Bank a portion of the Warrant for a cash payment of $6.1 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 the Company's Common Stock.

In August 1996, the Company completed the August Offering of 12,075,000
shares of Class A Common Stock. Of the 12,075,000 shares sold, 910,694 were sold
by the Company, with the balance sold by certain stockholders, including the
FDIC-FRF which sold all of the shares received upon exercise of the Warrant. See
"Business -- The Assistance Agreement" and "Selling Stockholders". The Class
A Common Stock is listed on NASDAQ under the symbol "BNKU". On May 12, 1997,
the last reported sale price of the Class A Common Stock on the NASDAQ was
$31.625 per share. Prospective purchasers of the Class A Common Stock are
advised to obtain current information as to market prices of the Class A Common
Stock.

The 10,208,610 shares of Class A Common Stock covered by this Prospectus
may be sold by the Selling Stockholders from time to time following the
expiration of certain restrictions on sale and transfer to which the Shares are
subject, the first of which expired on February 10, 1997. See "Selling
Stockholders" and "Plan of Distribution."

The August Offering and this Offering were 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 August Offering except in certain circumstances,
including with approval of the Board of Directors of the Company. See
"Description of Capital Stock -- Common Stock -- Restrictions on Transfers of
Stock". The limitations on Transfers allowed the Company to record a $101.7
million tax benefit in fiscal 1996. See "Risk Factors -- Limitations on Use of
Tax Losses; Restrictions on Transfers of Stock" and Note 14 to the Consolidated
Financial Statements.

Pursuant to the terms of the Letter Agreement, (as defined herein), this
Prospectus covers all of the Shares received by the Selling Stockholders in the
Restructuring and not sold in the August Offering. This Prospectus enables the
Selling Stockholders to sell the Shares held by them upon the expiration of the
restrictions on sale and transfer to which such Shares are subject. See
"Selling Stockholders". The table contained under the caption "Selling
Stockholders" sets forth the Shares held by each Selling Stockholder covered by
this Prospectus and also indicates the time when the Shares held by each of the
Selling Stockholders became or will become available for sale: February 10, 1997
or August 14, 1997. The sale of Shares may also be subject to additional
restrictions on sale and transfer contained in the Certificate and By-Laws. See
"Description of Capital Stock -- Common Stock -- Restrictions on Transfer of
Stock."

17
<PAGE>
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 August
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 seven individuals who have more than 20 years of related
industry experience, the majority of which comes from commercial banking. See
"Management".

Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBSs, serves as non-executive Chairman of
the Board of the Company and as a director of the Bank, for which he is paid an
annual retainer and meeting fees, and provides strategic and managerial advice
to the Company.

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 such as the
Bank, that had been operating under previously granted capital and accounting
forbearances, and that FIRREA eliminated these forbearances. 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.

In 1995, Plaintiffs filed suit against the United States in the Court of
Federal Claims for alleged failures of the United States to abide by the terms
of the Forbearance Agreement. The Company currently expects the trial of its
case to commence during the second quarter of fiscal 1998. 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 is
also unable to predict the timing of the resolution of its claims. Consequently,
no assurances can be given as to the results of this suit. See "Legal
Proceedings".

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of Class A
Common Stock by the Selling Stockholders. See "Selling Stockholders".

18
<PAGE>
DIVIDEND POLICY

On December 5, 1996, the Company's Board declared a dividend of $0.14 per
share, payable on
December 26, 1996 to holders of record of the Company's Class A and Class B
Common Stock on December 16, 1996. This was the first dividend declared since
the August Offering. On March 6, 1997, the Company's Board declared a dividend
of $0.14 per share, payable on March 26, 1997 to holders of record of the
Company's Class A and Class B Common Stock on March 17, 1997. The Company
intends, subject to its financial results, contractual, legal, and regulatory
restrictions, and other factors that the Company's Board of Directors may deem
relevant, to declare and pay a dividend for the Common Stock on a quarterly
basis.

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 Holdings, which, in
turn, is dependent on 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. See Note 21 to the
Consolidated Financial Statements. 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 through Holdings 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
Holdings) 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". Prior to the August Offering, the Company had 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.

19
<PAGE>
CAPITALIZATION

The following table sets forth the historical capitalization of the Company
at March 31, 1997 and the pro forma capitalization of the Company as of March
31, 1997. In addition to the long-term debt of the Company reflected below, the
Bank had long-term borrowings consisting of deposits, FHLB advances, and certain
other funding liabilities incurred in the ordinary course of business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity" and Notes 8, 9, 10 and 11 to the
Consolidated Financial Statements.

AT MARCH 31, 1997
---------------------------
HISTORICAL PRO FORMA
----------- ----------
(IN THOUSANDS, EXCEPT
RATIOS AND SHARE DATA)
Long-term debt -- Senior Notes(1).... $ 115,000 $ 115,000
Minority Interest(2)................. 185,500 185,500
Stockholders' equity:
Preferred stock(3).............. -- --
Common stock.................... 316 316
Paid-in capital................. 129,286 129,286
Retained earnings(4)............ 434,193 434,133
Unrealized gains on securities
and mortgage-backed securities
available for sale, net of
tax........................... 5,102 5,102
----------- ----------
Total stockholders' equity...... 568,897 568,837
----------- ----------
Total consolidated
capitalization........... $ 869,397 $ 869,337
=========== ==========
Ratio of equity to assets............ 5.17% 5.17%
Ratio of tangible equity to tangible
assets............................. 5.06% 5.06%
Shares outstanding
Class A......................... 28,354,276 28,354,276
Class B......................... 3,241,320 3,241,320
Class C......................... -- --
Book value per common share.......... $ 18.01 $ 18.00
Tangible book value per share........ $ 17.61 $ 17.61
Regulatory capital of the Bank
Tangible capital
Amount..................... $ 747,869 $ 747,809
Ratio...................... 6.87% 6.87%
Core capital
Amount..................... $ 754,934 $ 754,874
Ratio...................... 6.93% 6.93%
Total risk-based capital
Amount..................... $ 798,737 $ 798,677
Ratio...................... 12.68% 12.68%

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

(1) See Note 21 to the Consolidated Financial Statements.

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

(3) The Company had 10,000,000 shares of Preferred Stock authorized, none of
which were issued as of March 31, 1997.

(4) Offering expenses are estimated to be $60,000.

20
<PAGE>
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, 1996 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, 1996 and 1995, and the Consolidated
Statements of Operations for each of the years in the three year period ended
September 30, 1996, 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, 1997 and 1996 are not audited, but,
in the opinion of management, include all adjustments (consisting only of 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, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year.

FIVE-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
---------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION
ASSETS
Cash and cash equivalents............ $ 111,252 $ 135,691 $ 119,523 $ 112,931 $ 76,938 $ 65,388 $ 94,723
Securities purchased under agreements
to resell and
federal funds sold................. 538,455 659,279 674,249 471,052 358,710 547,988 206,000
Trading account assets............... 1,190 1,267 1,149 1,081 1,011 1,006 94,691
Securities........................... 28,010 58,351 64,544 116,013 114,115 43,430 4,909
Mortgage-backed securities........... 1,525,086 1,954,070 1,657,908 2,398,263 2,828,903 2,175,925 833,425
Loans................................ 8,032,142 7,878,080 7,519,488 8,260,240 5,046,174 4,862,379 4,101,716
Covered Assets and related
assets(1)............................ -- -- -- -- -- 392,511 610,901
All other assets..................... 766,490 579,898 675,516 623,954 484,310 351,929 308,918
---------- ---------- ---------- ---------- --------- --------- ---------
Total assets................. $11,002,625 $11,266,636 $10,712,377 $11,983,534 $8,910,161 $8,440,556 $6,255,283
========== ========== ========== ========== ========= ========= =========
LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY
Deposits............................. $5,065,804 $4,963,321 $5,147,945 $5,182,220 $4,764,204 $4,839,388 $4,910,760
Federal Home Loan Bank advances(2)... 3,786,596 4,139,023 3,490,386 4,383,895 2,620,329 2,185,445 632,345
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 927,859 949,936 832,286 1,172,533 553,000 310,000 --
Note payable to related party........ -- -- -- -- -- -- 4,090
Long-term debt ("15.75% Notes").... -- -- -- -- -- -- 102,000
Senior Notes......................... 115,000 115,000 115,000 115,000 115,000 115,000 --
All other liabilities................ 352,969 387,415 410,217 448,283 320,766 516,020 373,715
---------- ---------- ---------- ---------- --------- --------- ---------
Total liabilities............ 10,248,228 10,554,695 9,995,834 11,301,931 8,373,299 7,965,853 6,022,910
---------- ---------- ---------- ---------- --------- --------- ---------
Minority interest -- Bank Preferred
Stock(3)........................... 185,500 185,500 185,500 185,500 85,500 85,500 --
Total stockholders' equity... 568,897 526,441 531,043 496,103 451,362 389,203 232,373
---------- ---------- ---------- ---------- --------- --------- ---------
Total liabilities, minority
interest, and
stockholders'
equity(4)................ $11,002,625 $11,266,636 $10,712,377 $11,983,534 $8,910,161 $8,440,556 $6,255,283
========== ========== ========== ========== ========= ========= =========
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income...................... $ 397,031 $ 421,221 $ 812,312 $ 746,759 $ 494,706 $ 482,490 $ 502,854
Interest expense..................... 264,742 309,289 584,778 552,760 320,924 300,831 348,291
---------- ---------- ---------- ---------- --------- --------- ---------
Net interest income.............. 132,289 111,932 227,534 193,999 173,782 181,659 154,563
Provision for credit losses.......... 11,219 5,850 16,469 24,293 6,997 4,083 21,133
---------- ---------- ---------- ---------- --------- --------- ---------
Net interest income after
provision for credit losses.... 121,070 106,082 211,065 169,706 166,785 177,576 133,430
Non-interest income
Net gains (losses)
Sales of single family
servicing rights and single
family warehouse loans..... 16,931 19,157 43,074 60,495 63,286 67,403 67,223
Securities and mortgage-backed securities.. 1,593 2,863 4,002 26 10,404 43,702 2,022
Other loans.................. 936 3,485 3,189 (1,210) 163 1,496 4,759
Sale of mortgage offices..... 3,998 --
Loan servicing fees and
charges........................ 27,859 22,107 44,230 43,508 31,741 21,780 20,823
Other............................ 9,704 6,997 15,541 12,162 13,295 12,310 8,963
---------- ---------- ---------- ---------- --------- --------- ---------
Total non-interest income........ 61,021 54,609 110,036 114,981 118,889 146,691 103,790
---------- ---------- ---------- ---------- --------- --------- ---------
Non-interest expense
Compensation and benefits........ 39,300 39,898 87,640 83,520 86,504 81,472 69,476
SAIF deposit insurance
premiums....................... 3,162 6,129 45,690 11,428 11,329 10,162 11,101
Amortization of intangibles...... 14,545 9,801 20,432 21,856 18,247 24,469 22,832
Restructuring charges............ -- -- 10,681 -- -- -- --
Other............................ 46,179 43,476 88,822 77,772 83,513 85,861 77,006
---------- ---------- ---------- ---------- --------- --------- ---------
Total non-interest expense....... 103,186 99,304 253,265 194,576 199,593 201,964 180,415
---------- ---------- ---------- ---------- --------- --------- ---------
Income before income taxes,
minority interest, and
extraordinary loss............. 78,905 61,387 67,836 90,111 86,081 122,303 56,805
Income tax expense (benefit)......... 30,413 25,278 (75,765) 37,415 (31,899) (26,153) 200
---------- ---------- ---------- ---------- --------- --------- ---------
Income before minority interest
and extraordinary loss......... 48,492 36,109 143,601 52,696 117,980 148,456 56,605
Less minority interest
Bank Preferred Stock
dividends(3)................... 9,126 9,126 18,253 10,600 8,653 6,537 --
Payments in lieu of
dividends(5)................... -- 224 6,413 377 357 -- --
---------- ---------- ---------- ---------- --------- --------- ---------
Income before extraordinary
loss........................... 39,366 26,759 118,935 41,719 108,970 141,919 56,605
Extraordinary loss(6)................ -- -- -- -- -- 14,549 --
---------- ---------- ---------- ---------- --------- --------- ---------
Net income(7).................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970 $ 127,370 $ 56,605
========== ========== ========== ========== ========= ========= =========
Net income applicable to common
shares......................... $ 39,366 $ 24,968 $ 113,327 $ 38,824 $ 102,519 $ 118,640 $ 52,406
========== ========== ========== ========== ========= ========= =========
Earnings per common share(8)
Income before extraordinary
loss........................... $ 1.25 $ 0.87 $ 3.87 $ 1.35 $ 3.55 $ 4.61 $ 1.85
Extraordinary loss............... -- -- -- -- -- 0.50 --
---------- ---------- ---------- ---------- --------- --------- ---------
Net income....................... $ 1.25 $ 0.87 $ 3.87 $ 1.35 $ 3.55 $ 4.11 $ 1.85
========== ========== ========== ========== ========= ========= =========
Book value per common share(8)....... $ 18.01 $ 18.24 $ 16.81 $ 17.19 $ 15.64 $ 13.48 $ 8.19
Dividends per common share........... 0.28 -- 3.46 -- -- -- --
Average number of common shares
outstanding(8)..................... 31,596 28,863 29,260 28,863 28,863 28,863 28,366
CERTAIN RATIOS AND OTHER DATA(9)
Operating earnings(10)............... $ 72,378 $ 55,039 $ 114,659 $ 91,295 $ 75,514 $ 77,105 $ 50,024
Regulatory capital ratios of the
Bank(11)
Tangible capital................. 6.87% 6.88% 6.57% 6.20% 6.01% 6.17% 4.24%
Core capital..................... 6.93 6.96 6.64 6.29 6.17 6.43 5.04
Total risk-based capital......... 12.68 14.20 13.09 13.45 14.02 14.87 12.19
Return on average assets(12)......... 0.90 0.46 1.28 0.50 1.42 1.83 0.89
Return on average common equity...... 14.36 10.45 23.06 8.80 26.32 44.87 28.18
Stockholders' equity to assets....... 5.17 4.67 4.96 4.14 5.07 4.61 3.71
Tangible stockholders' equity to
tangible assets.................... 5.06 4.48 4.81 3.93 4.68 4.14 2.58
Net yield on interest-earning
assets(13)......................... 2.58 2.04 2.10 1.92 2.20 2.61 2.60
Interest rate spread(13)............. 2.32 1.66 1.78 1.61 1.95 2.41 2.54
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CERTAIN RATIOS AND OTHER DATA --
CONTINUED(9)
Average interest-earning assets to
average interest-bearing
liabilities........................ 1.05 1.06 1.06 1.06 1.06 1.04 1.01
Non-interest expense to average total
assets............................. 1.91% 1.72% 2.26% 1.86% 2.41% 2.76% 2.85%
Net operating expense ratio(14)...... 0.78 0.77 1.28 0.76 0.97 0.76 1.21
Efficiency ratio(15)................. 54.24 60.16 74.97 59.50 66.38 65.11 63.98
Nonperforming assets to total
assets............................. 1.08 1.10 1.12 0.84 1.09 0.72 0.89
Net nonaccrual loans to total
loans.............................. 1.10 1.21 1.19 0.91 1.51 0.85 0.92
Allowance for credit losses to net
nonaccrual loans................... 49.44 38.00 44.24 48.74 30.73 71.71 74.04
Allowance for credit losses to
nonperforming assets............... 36.77 29.36 32.95 36.65 24.18 49.28 50.54
Allowance for credit losses to total
loans.............................. 0.54 0.46 0.52 0.44 0.46 0.61 0.68
Net loan charge-offs to average
loans.............................. 0.18 0.15 0.17 0.16 0.30 0.05 0.07
Full-time equivalent employees....... 1,504 2,642 2,310 2,663 2,894 3,122 2,720
Number of community banking
branches........................... 71 67 70 65 62 62 65
Number of commercial banking
origination offices................ 10 9 9 9 5 3 2
Number of mortgage origination
offices............................ 5 112 85 122 145 109 93
Single family servicing portfolio.... $14,285,123 $11,594,485 $13,246,848 $12,532,472 $8,920,760 $8,073,226 $7,187,000
Single family originations(16)....... 1,203,409 1,049,318 3,762,198 3,447,250 5,484,111 6,737,762 6,118,363
Loans purchased for held to maturity
portfolio.......................... 715,082 100,247 148,510 2,658,093 1,406,275 1,212,103 916,613
CERTAIN RATIOS AND OTHER DATA --
EXCLUDING NON-RECURRING AND CERTAIN
OTHER ITEMS(17)
Net income........................... $ 36,904 $ 26,759 $ 56,392 $ 41,719 $ 50,804 $ 97,736 $ 56,605
Net income applicable to common
shares............................. 36,904 24,968 53,295 38,824 47,585 91,461 52,406
Earnings per common share............ 1,17 0.87 1.82 1.35 1.65 3.17 1.85
Return on average assets(12)......... 0.85% 0.63% 0.67% 0.50% 0.72% 1.42% 0.89%
Return on average common equity...... 13.47 10.43 11.47 8.80 12.27 34.43 28.18
Efficiency ratio(15)................. 54.24 60.16 58.85 59.50 66.38 65.11 63.98
</TABLE>
- ------------

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

(2) FHLB advances with maturities greater than one year were $2,714,147 and
$323,916 as of March 31, 1997 and 1996, respectively. FHLB advances with
maturities greater than one year were $926,291, $1,992,010, $782,129,
$708,945, and $55,445 at September 30, 1996, 1995, 1994, 1993, and 1992,
respectively. See Note 9 to the Consolidated Financial Statements.

(3) During fiscal 1993, the Bank issued its Preferred Stock, Series A, and,
during fiscal 1995, the Bank issued its Preferred Stock, Series B. None of
the shares of Bank Preferred Stock are owned by the Company. All of the
outstanding shares of common stock of the Bank are owned by Holdings, a
wholly owned subsidiary of the Company.

(4) In August 1996, the Company filed a registration statement with the
Commission and 12,075,000 shares of Class A Common Stock were sold to the
public. The Company sold 910,694 shares and certain stockholders sold
11,164,306 shares. See "Management's Discussion and Analysis -- Capital
Resources and Liquidity -- Capital" and Note 16 to the Consolidated
Financial Statements.

(5) In connection with its Acquisition, the Bank issued to the FDIC-FRF the
warrant to acquire 158,823 shares of common stock of the Bank at an
exercise price of $0.01 per share. Payments in lieu of dividends related to
the Warrant. In August 1996, the FDIC-FRF surrendered a portion of the
Warrant for a cash payment of $6.1 million, exercised the remainder of the
Warrant and immediately exchanged the shares of common stock of the Bank it
received for 1,503,560 shares of Common Stock of the Company. The FDIC-FRF
sold all of these shares in the August Offering. See "Business -- The
Assistance Agreement -- Warrant Agreement".

(7) Net income for fiscal 1994, 1993, and 1992 included $23.1 million, $9.3
million, and $32.1 million, respectively, of financial assistance payments
received from the FRF. No such payments were received during fiscal 1997,
1996, or 1995 as a result of the termination of the Assistance Agreement in
December 1993. See "Business -- Assistance Agreement".

(8) Earnings per common share represents net income (adjusted for earnings on
the common stock equivalents attributable to the Bank's Warrant) 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 in
June 1996. See Notes 1 and 16 to the Consolidated Financial Statements.

(9) Ratio, yield, and rate information are based on weighted average daily
balances for fiscal 1993 and subsequent periods and average monthly
balances for fiscal 1992, with the exception of return on average common
equity, which is based on average monthly balances for all periods
presented. Interim periods are annualized.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

23
<PAGE>

(10) 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, other loans, and the sale of mortgage
offices and excludes certain non-recurring items in fiscal 1996. See note
17 herein and "Business -- General."

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

(12) Return on average assets represents income before minority interest and
extraordinary loss, divided by average total assets.

(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, other loans, and the sale
of mortgage offices.

(16) Includes $51.3 million, $31.0 million, $129.0 million, $135.3 million,
$100.3 million, $116.5 million, and $127.0 million of brokered and
purchased loans for the six months ended March 31, 1997 and 1996 and for
fiscal 1996, 1995, 1994, 1993, and 1992, respectively.

(17) Certain items have been excluded as they are deemed to be non-recurring and
not part of the routine core business operations of the Company. Non-
recurring items for the six months ended March 31, 1997 relate to the gain
on the sale of mortgage offices of $3,998 ($2,462 net of tax), or $0.08 per
common share. Non-recurring items for fiscal 1996 were comprised of: (i) a
one-time SAIF assessment charge of $33,657 ($20,729 net of tax); (ii)
compensation expense of $7,820 ($4,816 net of tax); (iii) charges totalling
$12,537 ($7,729 net of tax), related to the restructuring of and items
associated with the mortgage origination business; (iv) a contractual
payment to previous minority interests of $5,883; and (v) a tax benefit of
$101,700. Non-recurring items totalled $2.05 per common share for fiscal
1996. See Notes 13, 14, 15, 16, and 18 to the Consolidated Financial
Statements. During fiscal 1994, a tax benefit of $58,166 or $1.90 per
common share was recorded. During fiscal 1993, a tax benefit of $44,183 and
an extraordinary loss of $14,549 (see note 6 herein) were recorded,
totalling $0.94 per common share in fiscal 1993.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

DISCUSSION OF RESULTS OF OPERATIONS

OVERVIEW

SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1996. 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 "-- Mortgage Banking
Restructuring and Sale of Offices" and Note 18 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, other loans and the gain on the sale of the mortgage offices.
Management believes operating earnings facilitates trend analysis as it excludes
transactions that are typically considered opportunistic or non-recurring 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. 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 the provision for
credit losses and mortgage servicing amortization expense.

1996 COMPARED TO 1995. Net income was $118.9 million ($3.87 per share) for
fiscal 1996, compared to $41.7 million ($1.35 per share) for fiscal 1995. The
increase was primarily due to the recognition of a $101.7 million ($3.33 per
share) tax benefit for the expected utilization of NOLs. No such benefits were
recorded during fiscal 1995. Net income for fiscal 1996, excluding the $101.7
million tax benefit and certain non-recurring charges discussed below, was $56.4
million ($1.82 per share) compared to $41.7 million ($1.35 per share) in the
prior year. Higher levels of interest-earning assets and an increase in the
yield on interest-earning assets contributed to the increase in net income,
partially offset by lower gains on sales of single family MSRs and single family
warehouse loans and increased expenses attributable to the minority interests.
The single family loan servicing portfolio increased to $13.2 billion at
September 30, 1996.

Results for fiscal 1996 included several non-recurring charges: (i) a
one-time SAIF assessment charge of $33.7 million ($20.7 million after tax, or
$0.67 per share); (ii) charges totalling $12.5 million ($7.8 million after tax,
or $0.25 per share) relating to the restructuring of and items associated with
the mortgage origination business; (iii) $7.8 million of compensation expense
($4.8 million after tax, or $0.16 per share) relating to a management
compensation program adopted in connection with the August Offering; and (iv) a
$5.9 million contractual payment ($0.20 per share) to previous minority
interests.

Operating earnings were $114.7 million for fiscal 1996, compared to $91.3
million for fiscal 1995, a 26% increase. Operating earnings for fiscal 1996
excludes a one-time SAIF assessment, compensation expense related to the
adoption of a management compensation program, and charges related to the
restructuring of the Mortgage Banking Group because these items are considered
non-recurring. See Notes 13, 15, and 18 to the Consolidated Financial
Statements.

1995 COMPARED TO 1994. Net income was $41.7 million ($1.35 per share) for
fiscal 1995, compared to $109.0 million ($3.55 per share) for fiscal 1994. The
decrease primarily reflects the effect of a tax benefit of $58.2 million ($1.90
per share) recognized in fiscal 1994 for the expected utilization of NOLs under
SFAS No. 109, a lower net interest-rate spread, 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.

25
<PAGE>

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. See "Business -- Mortgage Banking Group" and Note 18 to the
Consolidated Financial Statements.

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. The net interest-rate spread is
affected by changes in general market interest rates, including changes in the
relationship between short- and long-term interest rates (the yield curve), the
effects of periodic caps on the Company's adjustable-rate mortgage and MBS
portfolios, and the interest rate sensitivity position or "gap". The Company
has traditionally managed its business to limit its overall exposure to changes
in interest rates. However, under current policies of the Company's Board of
Directors, 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. See "Business -- General" and
"Business -- Asset and Liability Management".

The Company 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 Company 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 offset 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.

26
<PAGE>
AVERAGE BALANCES AND AVERAGE YIELDS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX MONTHS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------------- ---------------------
1997 1996 1996
----------------------------- ----------------------------- ---------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST RATE(2) BALANCE INTEREST RATE(2) BALANCE INTEREST
---------- --------- ------ ---------- --------- ------ ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Short-term interest-earning
assets............................ $ 597,513 $ 17,537 5.81% $ 575,936 $ 17,360 5.93% $ 668,657 $ 39,302
Trading account assets.............. 1,194 35 5.86 1,148 35 6.10 1,154 67
Securities.......................... 76,555 2,196 5.75 84,659 2,112 4.99 76,637 3,917
Mortgage-backed securities.......... 1,576,883 53,336 6.76 2,177,645 70,699 6.49 1,968,230 128,143
Loans(1)............................ 7,847,869 318,400 8.11 8,092,849 323,930 8.01 7,889,828 627,940
FHLB stock.......................... 190,769 5,527 5.81 227,895 7,085 6.22 213,242 12,943
Covered Assets and related assets... -- -- -- -- -- -- -- --
---------- --------- ------ ---------- --------- ------ ---------- ---------
TOTAL INTEREST-EARNING ASSETS... 10,290,783 397,031 7.71 11,160,132 421,221 7.55 10,817,748 812,312
Non-interest-earning assets......... 567,641 379,397 411,683
---------- ---------- ----------
Total assets.................... $10,858,424 $11,539,529 $11,229,431
========== ========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Transaction accounts............ $ 216,880 1,159 1.07 $ 243,668 1,440 1.18 $ 218,859 2,593
Insured money fund accounts..... 1,430,580 38,730 5.43 1,316,051 33,013 5.02 1,464,577 69,100
Savings accounts................ 128,770 1,566 2.44 145,427 1,883 2.59 138,007 3,598
Certificates of deposit......... 3,275,107 87,919 5.38 3,358,442 102,174 6.08 3,244,291 196,929
---------- --------- ------ ---------- --------- ------ ---------- ---------
Total deposits................ 5,051,337 129,374 5.14 5,063,588 138,510 5.47 5,065,734 272,220
---------- --------- ------ ---------- --------- ------ ---------- ---------
FHLB advances....................... 3,721,496 105,302 5.60 4,346,960 136,501 6.18 4,073,297 247,093
Reverse repurchase agreements and
federal funds purchased........... 905,887 25,440 5.55 982,169 29,073 5.82 955,708 55,112
Senior Notes........................ 115,000 4,626 8.05 115,000 5,205 9.05 115,000 10,353
Other............................... -- -- -- -- -- -- -- --
---------- --------- ------ ---------- --------- ------ ---------- ---------
TOTAL INTEREST-BEARING
LIABILITIES................... 9,793,720 264,742 5.39 10,507,717 309,289 5.84 10,209,739 584,778
Non-interest-bearing liabilities and
stockholders' equity.............. 1,064,704 1,031,812 1,019,692
---------- --------- ---------- --------- ---------- ---------
Total liabilities and
stockholders' equity.......... $10,858,424 $11,539,529 $11,229,431
========== ========== ==========
Net interest income/interest rate
spread................................ $ 132,289 2.32% $ 111,932 1.71% $ 227,534
========= ====== ========= ====== =========
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 1.06
========== ========== ==========
<CAPTION>
1995 1994
----------------------------- ----------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------ ---------- --------- ------ --------- --------- ------
INTEREST-EARNING ASSETS
Short-term interest-earning
assets............................ 5.88% $ 466,276 $ 29,675 6.36% $ 461,530 $ 19,019 4.12%
Trading account assets.............. 5.81 1,079 62 5.75 1,026 (144) (14.04)
Securities.......................... 5.11 116,934 5,893 5.04 108,751 5,007 4.60
Mortgage-backed securities.......... 6.51 2,618,990 173,155 6.61 2,595,163 151,972 5.86
Loans(1)............................ 7.96 6,707,868 526,528 7.85 4,524,158 308,804 6.83
FHLB stock.......................... 6.07 180,416 11,446 6.34 132,277 5,558 4.20
Covered Assets and related assets... -- -- -- -- 74,547 4,490 6.02
------ ---------- --------- ------ --------- --------- ------
TOTAL INTEREST-EARNING ASSETS... 7.51 10,091,563 746,759 7.40 7,897,452 494,706 6.26
Non-interest-earning assets......... 345,500 386,175
---------- ---------
Total assets.................... $10,437,063 $8,283,627
========== =========
INTEREST-BEARING LIABILITIES
Deposits:
Transaction accounts............ 1.18 $ 225,799 3,384 1.50 $ 237,537 3,753 1.58
Insured money fund accounts..... 4.72 1,032,873 57,848 5.60 582,126 18,508 3.18
Savings accounts................ 2.61 171,308 4,715 2.75 284,885 7,311 2.57
Certificates of deposit......... 6.07 3,560,420 198,419 5.57 3,662,043 179,462 4.90
------ ---------- --------- ------ --------- --------- ------
Total deposits................ 5.37 4,990,400 264,366 5.30 4,766,591 209,034 4.39
------ ---------- --------- ------ --------- --------- ------
FHLB advances....................... 6.07 3,560,844 224,767 6.31 2,285,630 91,060 3.98
Reverse repurchase agreements and
federal funds purchased........... 5.77 888,453 53,220 5.99 274,666 10,574 3.85
Senior Notes........................ 9.00 115,000 10,407 9.05 115,000 10,177 8.85
Other............................... -- -- -- -- 3,350 79 2.36
------ ---------- --------- ------ --------- --------- ------
TOTAL INTEREST-BEARING
LIABILITIES................... 5.73 9,554,697 552,760 5.79 7,445,237 320,924 4.31
Non-interest-bearing liabilities and
stockholders' equity.............. 882,366 838,390
---------- --------- --------- ---------
Total liabilities and
stockholders' equity.......... $10,437,063 $8,283,627
========== =========
Net interest income/interest rate
spread................................ 1.78% $ 193,999 1.61% $ 173,782 1.95%
====== ========= ====== ========= ======
Net yield on interest-earning assets.... 2.10% 1.92% 2.20%
====== ====== ======
Ratio of average interest-earning assets
to average interest-bearing
liabilities........................... 1.06 1.06
========== =========
</TABLE>

- ------------
(1) Includes nonaccrual loans.

(2) Annualized.

27
<PAGE>
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,
------------------------------- -----------------------------------------------------
1997 VS. 1996 1996 VS. 1995 1995 VS. 1994
------------------------------- ------------------------------- --------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Short-term interest-earning
assets........................... $ 569 $ (392) $ 177 $ 12,015 $ (2,388) $ 9,627 $ 198 $ 10,458
Trading account assets............. 1 (1) -- 4 1 5 (7) 213
Securities......................... (215) 299 84 (2,057) 81 (1,976) 390 496
Mortgage-backed securities......... (20,197) 2,834 (17,363) (42,429) (2,583) (45,012) 1,418 19,765
Loans.............................. (9,645) 4,115 (5,530) 93,941 7,471 101,412 166,278 51,446
FHLB stock......................... (1,109) (449) (1,558) 2,002 (505) 1,497 2,453 3,435
Covered assets and related
assets........................... -- -- -- -- -- -- (4,490) --
--------- --------- --------- --------- --------- --------- --------- ---------
Total........................ (30,596) 6,406 (24,190) 63,476 2,077 65,553 166,240 85,813
--------- --------- --------- --------- --------- --------- --------- ---------
INTEREST EXPENSE
Deposits........................... (352) (8,784) (9,136) 4,189 3,665 7,854 10,219 45,113
FHLB advances...................... (18,883) (12,316) (31,199) 31,178 (8,852) 22,326 65,246 68,461
Reverse repurchase agreements and
federal funds purchased.......... (2,274) (1,359) (3,633) 3,906 (2,014) 1,892 34,151 8,495
Senior Notes....................... -- (579) (579) -- (54) (54) -- 230
Other.............................. -- -- -- -- -- -- (79) --
--------- --------- --------- --------- --------- --------- --------- ---------
Total........................ (21,509) (23,038) (44,547) 39,273 (7,255) 32,018 109,537 122,299
--------- --------- --------- --------- --------- --------- --------- ---------
NET CHANGE IN NET INTEREST
INCOME............................. $ (9,087) $ 29,444 $ 20,357 $ 24,203 $ 9,332 $ 33,535 $ 56,703 $ (36,486)
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
NET
---------
INTEREST INCOME
Short-term interest-earning
assets........................... $ 10,656
Trading account assets............. 206
Securities......................... 886
Mortgage-backed securities......... 21,183
Loans.............................. 217,724
FHLB stock......................... 5,888
Covered assets and related
assets........................... (4,490)
---------
Total........................ 252,053
---------
INTEREST EXPENSE
Deposits........................... 55,332
FHLB advances...................... 133,707
Reverse repurchase agreements and
federal funds purchased.......... 42,646
Senior Notes....................... 230
Other.............................. (79)
---------
Total........................ 231,836
---------
NET CHANGE IN NET INTEREST
INCOME............................. $ 20,217
=========

SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1996. 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.

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 FHLB advance rates and lower deposit rates, as higher rate deposits
matured and were replaced with lower rate deposits.

1996 COMPARED TO 1995. Net interest income increased $33.5 million, or
17%, to $227.5 million for fiscal 1996, compared to $194.0 million for fiscal
1995. The increase in net interest income is primarily attributable to a $726.2
million, or 7%, increase in average interest-earning assets and a 18 basis point
increase in the net yield.

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 fiscal 1996 can
be principally attributed to two single family loan purchases during the second
half of fiscal 1995, approximately $1.9 billion. The increase in average
interest-earning assets was funded primarily with FHLB advances and reverse
repurchase agreements.

28
<PAGE>
Approximately 78% of the Company's interest-earning assets at September 30,
1996 were adjustable-rate assets, a portion of which are tied to indices that
normally lag the changes in market interest rates. Substantially all of the
Company's adjustable-rate assets are subject to periodic and/or lifetime
interest rate caps. Periodic caps limit the amount by which the interest rate on
a particular mortgage loan may increase at its next interest rate reset date. In
a rising-rate environment, the interest rate spread may be negatively impacted
when the repricing of interest-earning assets is limited by caps on periodic
interest rate adjustments, compared to market interest rate movements.

During fiscal 1995, average market interest rates increased, and the
interest income from adjustable-rate loans and MBS increased more slowly than
the cost of deposits and borrowing because of the effect of periodic interest
rate caps applicable to the loans and MBS. During fiscal 1996, the negative
effect of the periodic interest rate caps decreased, and, as a result, the net
interest rate spread improved. The net interest rate spread was also positively
impacted during fiscal 1996 by 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 attributable 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 the cost of funds. The net interest rate
spread decreased 34 basis points as a 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 the net yield.

PROVISION FOR CREDIT LOSSES

SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31,
1996. 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. See "-- Asset Quality" and Note 5 to the Consolidated
Financial Statements.

1996 COMPARED TO 1995. The provision for credit losses decreased to $16.5
million for fiscal 1996 down from $24.3 million for fiscal 1995. Decreased loan
purchases during fiscal 1996 resulted in lower single family provisions of $6.8
million for fiscal 1996 compared to $18.5 million for fiscal 1995. Consumer loan
provisions increased to $7.8 million for fiscal 1996, compared to $4.2 million
for fiscal 1995, reflecting increased losses and charge-offs on the unsecured
consumer line of credit portfolio. 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 provisions on single family loans, which totalled $18.5
million for fiscal 1995 compared to $2.4 million for fiscal 1994. The single
family loan portfolio increased to $7.1 billion at September 30, 1995 from $4.2
billion at September 30, 1994, which included loan purchases totalling $2.7
billion and originations retained for portfolio of $1.0 billion during fiscal
1995. The growth in the consumer lending business and loss experience on the
unsecured consumer line of credit portfolio also increased consumer provisions
to $4.2 million for fiscal 1995, from $2.8 million for fiscal 1994. Consumer
loans increased to $123.1 million at September 30, 1995, from $108.2 million at
September 30, 1994, while consumer charge-offs increased to $2.8 million for
fiscal 1995, from $1.3 million for fiscal 1994. See "-- Asset Quality" and
Note 5 to the Consolidated Financial Statements.

29
<PAGE>
NON-INTEREST INCOME

Non-interest income primarily includes gains (losses) from sales of assets
and mortgage loan servicing fees and charges.

NON-INTEREST INCOME
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- -------------------------------------
1997 1996 1996 1995 1994
--------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing
rights......................... $ 1,736 $ -- $ 4,678 $ 34,080 $ 67,198
Single family warehouse loans.... 15,195 19,157 38,396 26,415 (3,912)
Securities and mortgage-backed
securities..................... 1,593 2,863 4,002 26 10,404
Other loans...................... 936 3,485 3,189 (1,210) 163
Sale of mortgage offices......... 3,998 -- -- -- --
Loan servicing fees and charges.... 27,859 22,107 44,230 43,508 31,741
Other.............................. 9,704 6,997 15,541 12,162 13,295
--------- ----------- ----------- ----------- -----------
Total non-interest income... $ 61,021 $ 54,609 $ 110,036 $ 114,981 $ 118,889
========= =========== =========== =========== ===========
PRINCIPAL SOLD
MSRs............................... $ 84,426 $ 875,235 $ 1,488,885 $ 2,854,114 $ 4,521,491
Single family warehouse loans...... 912,257 1,516,799 2,984,211 2,100,662 4,786,413
</TABLE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1996. Non-interest income increased $6.4 million in the six months ended March
31, 1997 compared to the six months ended March 31, 1996. A majority of this
increase was due to higher mortgage loan servicing fees and charges, which
primarily 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.
Net gains (losses) declined $2.0 million during the six months ended March 31,
1997 compared to the six months ended March 31, 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 "_-- Mortgage Banking
Restructurings and Sale of Offices."

1996 COMPARED TO 1995. Non-interest income was $110.0 million for fiscal
1996 compared to $115.0 million for fiscal 1995, a decrease of $5.0 million.
During fiscal 1996 and 1995, $1.5 billion and $2.9 billion, respectively, of
single family MSRs were sold. The decrease in single family MSR sales during
fiscal 1996 reflects management's decision to retain a greater portion of MSRs
in response to the implementation of Statement of Financial Accounting Standards
("SFAS") No. 122, "Accounting for Mortgage Servicing Rights, an Amendment of
Financial Accounting Standards Board Statement No. 65". See "Business -- Loan
Servicing Portfolio". Fiscal 1995 included substantial gains on sales of
servicing rights originated in prior years. Gains on sales of single family
warehouse loans were $38.4 million during fiscal 1996, compared to $26.4 million
during fiscal 1995, reflecting an increase in the volume of single family
warehouse loans sold. Excluding gains from sales of single family MSRs and
single family warehouse loans, non-interest income increased $12.5 million in
fiscal 1996 compared to fiscal 1995, primarily due to increased gains on sales
of securities and MBS and other loans.

Net gains on securities and MBS were $4.0 million and $26,000 for fiscal
1996 and 1995, respectively. During fiscal 1996, the net gains on MBS were from
the sale of $293.0 million of MBS. See " -- Discussion of Financial
Condition".

Net gains (losses) on other loans were $3.2 million and $(1.2) million for
fiscal 1996 and 1995, respectively. During fiscal 1996, the Company sold $98.1
million of single family loans held by the Financial Markets Group for a gain of
$608,000 and $178.4 million of multi-family loans for a gain of $2.7 million.
See " -- Discussion of Financial Condition".

30
<PAGE>
During fiscal 1996, loan servicing fees and charges increased $722,000, or
2% from the prior year. This increase is due primarily to an increase in the
portfolio of single family servicing for others, $9.5 billion at September 30,
1996, compared to $8.5 billion at September 30, 1995. Offsetting this increase
was a decrease in the average service fee rate due to a change in the mix of the
portfolio.

Other non-interest income was $15.5 million in fiscal 1996 compared to
$12.2 million in fiscal 1995. The increase was primarily due to growth in mutual
fund and annuity sales. The growth in the sale of these 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, for fiscal 1995 and 1994, respectively.

In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement required 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 was
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 were not restated.

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 also resulted in a decrease in originations. The
decrease in originations and the retention of a greater proportion of originated
loans for the Company'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 losses on single
family warehouse loans were $(8.2) million in fiscal 1995 and $(3.9) million in
fiscal 1994. Increased losses in fiscal 1995 reflect the increasingly
competitive pricing in the market during that period.

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 Company 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 servicing 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 servicing for others increased
to $8.5 billion at September 30, 1995, compared to $6.2 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 Company
until fiscal 1995 and were not included in the portfolio as of September 30,
1994. See Note 6 to the Consolidated Financial Statements.

31
<PAGE>
NON-INTEREST EXPENSE

Non-interest expense was comprised of the following significant items:

NON-INTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
--------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Compensation and benefits............ $ 39,300 $ 39,898 $ 87,640 $ 83,520 $ 86,504
Occupancy............................ 7,871 9,439 18,415 18,713 17,196
Data processing...................... 7,219 8,120 16,196 16,360 15,821
Advertising and marketing............ 4,150 4,053 8,025 9,262 10,796
Amortization of intangibles.......... 14,545 9,801 20,432 21,856 18,247
SAIF deposit insurance premiums...... 3,162 6,129 45,690 11,428 11,329
Furniture and equipment.............. 2,248 3,128 6,121 6,428 6,810
Restructuring charges................ -- -- 10,681 -- --
Other................................ 24,691 18,736 40,065 27,009 32,890
---------- --------- ---------- ---------- ----------
Total non-interest expense...... $ 103,186 $ 99,304 $ 253,265 $ 194,576 $ 199,593
========== ========= ========== ========== ==========
</TABLE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1996. 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%, respectively, of average total assets for those same periods. The
increase in non-interest expense reflects higher legal expense 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 reduced SAIF deposit insurance premiums and by reduced
expenses resulting from the sale and restructuring of the mortgage origination
business. See "-- Mortgage Banking Restructurings and Sale of Offices."
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.

1996 COMPARED TO 1995. Non-interest expense was $253.3 million for fiscal
1996 and $194.6 million for fiscal 1995, or 2.26% and 1.86%, respectively, of
average total assets for those same periods. Non-interest expense for fiscal
1996 included several non-recurring items including $7.8 million in compensation
expense, $33.7 million in SAIF deposit insurance premiums, and a $10.7 million
restructuring charge. Excluding these non-recurring items, non-interest expense
was $201.1 million for fiscal 1996 compared to $194.6 million for fiscal 1995,
or 1.79% and 1.86%, respectively, of average total assets for those same
periods. The $7.8 million compensation charge related to a management
compensation program adopted in June 1996 in connection with the August
Offering. This program provided, among other things, for a cash bonus and the
award of Company common stock to certain executives and officers of the Company.
See Note 13 to the Consolidated Financial Statements. Excluding the $7.8 million
charge, compensation and benefits decreased to $79.8 million in fiscal 1996
compared to $83.5 million in fiscal 1995. This decrease reflects a decrease in
the number of average full-time equivalent employees to 2,548 for fiscal 1996,
from 2,729 for fiscal 1995. The $33.7 million SAIF deposit insurance premium
charge reflects a one-time assessment on all SAIF-insured deposits aimed at
fully capitalizing the SAIF. The United States Congress passed legislation that
was signed into law on September 30, 1996 that mandated this assessment, which
was set at 65.7 basis points of SAIF-assessable deposits at March 31, 1995. See
"Business -- Regulation -- Charter, Supervision, and Examination -- Insurance
Assessments". The $10.7 million restructuring charge is discussed above in
" -- Mortgage Banking Restructurings and Sale of Offices". During fiscal 1996
and 1995, $878,000 and $11.2 million, respectively, of gains on sales of Real
Estate Owned ("REO") properties were recognized and included in other
non-interest expense.

32
<PAGE>
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 were $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, respectively, 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.

INCOME TAXES

Bank United Corp. is a savings and loan holding company (the "Parent
Company"), Holdings is a wholly owned, Delaware subsidiary, and the Bank is a
federal savings bank. 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
$30.4 million and $25.3 million for the six months ended March 31, 1997 and
1996, respectively, a net benefit of $75.8 million for fiscal 1996, an expense
of $37.4 million for fiscal 1995, and a net benefit of $31.9 million in fiscal
1994. In June 1996, the Certificate and By-Laws were restated with the intent to
preserve certain beneficial tax attributes limiting the disposition of certain
common stock and other interests in the Parent Company by certain of its
stockholders. The preservation of certain tax attributes 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 tax sharing agreement. This agreement
resulted in the recognition of a tax benefit for the expected utilization of the
Company's NOLs by the Bank. As a result of the tax sharing agreement and the
restatement of the Certificate and By-laws, a total tax benefit of $101.7
million was recognized in fiscal 1996 as a reduction of income tax expense and
an increase in the net deferred tax asset. For the six months ended March 31,
1997, no tax benefits were recorded by the Company or the Bank because the
criteria under SFAS No. 109 to recognize a tax benefit was not met. No tax
benefits were recorded in fiscal 1995 or the six months ended March 31, 1996 due
to limitations on NOLs if an Ownership Change had occurred. During fiscal 1994,
tax benefits of $58.2 million were recorded due to the expected utilization of
NOLs against future taxable income. See "Business -- Taxation" and Note 14 to
the Consolidated Financial Statements.

As of March 31, 1997, future taxable income of $598 million would fully
utilize the net deferred tax asset.

MINORITY INTEREST

Dividends on Bank Preferred Stock paid by the Bank increased to $18.3
million for fiscal 1996 from $10.6 million for fiscal 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. Payments in lieu
of dividends increased during fiscal 1996 due to the contractual payment of $5.9
million made to the FDIC-FRF in connection with the declaration of a $100
million dividend on the common stock of the Bank. See "Business -- The
Assistance Agreement -- Warrant Agreement" and Note 16 to the Consolidated
Financial Statements.

DISCUSSION OF CHANGES IN FINANCIAL CONDITION

OVERVIEW

The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. 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, however, the Company's management has
pursued a strategy designed to reduce its 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 and retention of commercial and consumer loans and increased the
level of lower cost transaction and commercial deposit accounts. In addition to
its efforts to

33
<PAGE>
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 acquisitions, while maintaining adequate capital.

The following table reflects activity in the MBS portfolio.

MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
------------------------- -------------------------------------
1997 1996 1996 1995 1994
----------- ------------ ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Beginning balance.................... $ 630,048 $ 2,051,304 $ 2,051,304 $ 2,394,978 $ 358,896
Loans securitized.................. -- -- -- -- 906,652
Purchases.......................... 2,134 3,841 3,841 38,515 83,854
Net change in unrealized gains
(losses) before tax.............. 759 1,869 2,841 162 (10,202)
Sales.............................. -- -- -- -- (38,252)
Repayments......................... (39,843) (135,527) (178,926) (390,364) (162,328)
Transfers.......................... (6,843) (1,244,945) (1,244,945) -- 1,260,971
Other.............................. (1,466) (2,054) (4,067) 8,013 (4,613)
----------- ------------ ----------- ----------- -----------
Ending balance....................... $ 584,789 $ 674,488 $ 630,048 $ 2,051,304 $ 2,394,978
=========== ============ =========== =========== ===========
AVAILABLE FOR SALE
Beginning balance.................... $ 1,027,860 $ 346,959 $ 346,959 $ 433,925 $ 1,817,029
Loans securitized.................. -- -- -- -- 275,520
Purchases.......................... -- -- -- 230 583,444
Net change in unrealized gains
(losses) before tax.............. 10,425 3,340 3,660 8,415 (61,613)
Sales.............................. -- (198,753) (292,990) (77,610) (174,702)
Repayments......................... (110,562) (115,954) (272,059) (16,346) (760,111)
Transfers.......................... 13,212 1,244,945 1,244,945 -- (1,260,971)
Other.............................. (638) (955) (2,655) (1,655) 15,329
----------- ------------ ----------- ----------- -----------
Ending balance....................... $ 940,297 $ 1,279,582 $ 1,027,860 $ 346,959 $ 433,925
=========== ============ =========== =========== ===========
</TABLE>
The unrealized gains on the MBS held to maturity portfolio were $690,000 at
March 31, 1997, $2.2 million at September 30, 1996, $14.5 million at September
30, 1995, and $1.8 million at September 30, 1994. The unrealized losses on the
MBS held to maturity portfolio were $23.3 million at March 31, 1997, $23.0
million at September 30, 1996, $34.6 million at September 30, 1995, and $56.0
million at September 30, 1994. The changes in the unrealized gains and losses in
the MBS held to maturity portfolio primarily relate to changes in market
conditions relating to MBS and also reflect the implementation of SFAS No. 125
in fiscal 1997. See Note 4 to the Consolidated Financial Statments. At March 31,
1997, the Company's MBS held to maturity portfolio was comprised primarily of
privately-issued and credit-enhanced MBS, of which 100% 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 March 31, 1997, none of the
MBS in the held to maturity portfolio were on credit watch for possible
downgrading by either of the rating agencies. See "Business -- Investment
Portfolio."

34
<PAGE>
The following table reflects activity in the loan portfolio.

LOANS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
------------------------ ----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Beginning balance.................... $ 7,227,153 $ 7,763,676 $ 7,763,676 $ 4,780,328 $ 3,434,440
Originations
Single family.................... 293,346 493,180 818,563 1,012,771 1,319,020
Single family construction....... 355,689 208,847 554,260 239,481 133,609
Consumer......................... 63,362 53,570 125,596 99,249 94,153
Multi-family, commercial real
estate, commercial, healthcare,
and small business............. 286,669 106,100 248,185 246,131 207,546
Purchases
Single family.................... 576,389 92,320 140,583 2,640,755 1,312,827
Consumer......................... 62,267 -- -- 68 24,982
Multi-family, commercial real
estate and small business...... 76,426 7,927 7,927 17,270 68,466
Net change in mortgage banker
finance line of credit........... 78,804 32,437 30,481 (38,124) (238,223)
Repayments......................... (1,189,716) (1,103,113) (2,298,915) (1,188,489) (807,574)
Securitized loans sold or
transferred...................... -- -- -- -- (1,125,050)
Transfers from (to) held for
sale............................. (317) (187,846) (104,235) 805 398,645
Sales.............................. (9,777) -- (4,420) (34,865) (26,930)
Other.............................. (38,184) (19,598) (54,548) (11,704) (15,583)
----------- ----------- ------------ ------------ ------------
Ending balance....................... $ 7,782,111 $ 7,447,500 $ 7,227,153 $ 7,763,676 $ 4,780,328
=========== =========== ============ ============ ============
HELD FOR SALE
Beginning balance.................... $ 292,335 $ 496,564 $ 496,564 $ 265,846 $ 1,427,939
Originations
Single family.................... 860,143 1,452,254 2,783,446 2,213,553 4,105,530
Multi-family, commercial real
estate, and small business..... 3,135 40,209 88,861 61,505 23,449
Purchases
Single family.................... 25,410 52,957 85,715 65,103 60,900
Multi-family, commercial real
estate, and small business..... 198,336 -- 57,594 38,823 --
Repayments......................... (7,889) (6,737) (15,581) (3,667) (54,846)
Securitized loans sold or
transferred(1)................... (967,132) (1,335,333) (2,669,406) (1,864,313) (4,470,275)
Transfers (to) from held to
maturity......................... 317 187,846 104,235 (805) (398,645)
Sales.............................. (160,131) (452,211) (642,559) (273,747) (430,342)
Other.............................. 5,507 (4,969) 3,466 (5,734) 2,136
----------- ----------- ------------ ------------ ------------
Ending balance....................... $ 250,031 $ 430,580 $ 292,335 $ 496,564 $ 265,846
=========== =========== ============ ============ ============
</TABLE>
- ------------

(1) Includes $794.9 million, $1.3 billion, $2.6 billion, $1.9 billion, and $4.4
billion of loans securitized by the Mortgage Banking Group and sold to third
parties during the six months ended March 31, 1997 and 1996, and fiscal
1996, 1995, and 1994, respectively.

1997 ACTIVITY. 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 reverse repurchase agreements.

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.

35
<PAGE>
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 MBF 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 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.

Deposits decreased $82.1 million, or 2%, during the six months ended March
31, 1997 primarily due to maturities of consumer certificates of deposit
("CDs") 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.

1996 ACTIVITY. Total assets decreased by $1.3 billion, or 11%, to $10.7
billion at September 30, 1996 down from $12.0 billion at September 30, 1995.
This decrease primarily resulted from loan and MBS sales and repayments.

Repurchase agreements and federal funds sold increased to $674.2 million at
September 30, 1996 from $471.1 million at September 30, 1995. The increase
primarily reflects the Company's decision to borrow and invest funds at a
positive spread on a short-term basis.

Securities decreased $51.5 million, to $64.5 million at September 30, 1996
from $116.0 million at September 30, 1995 reflecting the purchase of $22.4
million and the sale of $96.5 million in securities. During fiscal 1996, $58.0
million of Small Business Administration ("SBA") loans were purchased, a
portion of which were pooled into securities totalling $30.5 million. At
September 30, 1996, $6.5 million of the securities created remain in the
Company's portfolio.

MBS decreased $740.4 million during fiscal 1996, primarily due to sales and
repayments. During fiscal 1996, the Company sold $293.0 million in MBS for a
gain of $2.7 million, compared to $77.6 million in sales for a gain of $16,000
during fiscal 1995. The increase in repayments resulted from a decline in market
interest rates.

In November 1995, the Financial Accounting Standards Board ("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, and provided 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

36
<PAGE>
September 30, 1996 and 1995, the Company had unrealized losses on securities and
MBS available for sale, net of tax, of $2.2 million and $6.6 million,
respectively. See Note 4 to the Consolidated Financial Statements.

The increase in single family loan originations during fiscal 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 $1.2 billion
and $600.6 million, or 31% and 17% of total single family mortgage loan
originations during fiscal 1996 and 1995, respectively. Multi-family, commercial
real estate, and business credit loan originations increased $29.4 million
during fiscal 1996 as compared to fiscal 1995. The increase in multi-family,
commercial real estate, and business credit loan originations, as well as the
increase in residential construction loan originations during fiscal 1996, as
compared to fiscal 1995, reflects the geographic expansion of the offering of
these products. Increased consumer loan originations during fiscal 1996 as
compared to fiscal 1995 are primarily due to increased home improvement loan
originations resulting from increased marketing efforts.

As a result of the decline in market interest rates during fiscal 1996, the
Mortgage Banker Finance ("MBF") line of credit portfolio increased $30.5
million to $139.9 million at September 30, 1996.

Single family loan purchases were $226.3 million during fiscal 1996,
compared to $2.7 billion during fiscal 1995. The decrease in purchases reflects
a decrease in products available at attractive yields.

During fiscal 1996, total loans decreased $740.8 million, primarily due to
sales and repayments. During this period, the Company sold $98.1 million of
single family portfolio loans for a gain of $608,000 and $178.4 million of
multi-family loans for a gain of $2.7 million.

MSRs increased $48.3 million to $123.4 million at September 30, 1996 from
$75.1 million at September 30, 1995. During fiscal 1996, the Company purchased
servicing rights associated with $1.2 billion of single family loans at a
premium of $23.5 million.

In the aggregate, FHLB advances, reverse repurchase agreements, and federal
funds purchased decreased $1.3 billion to $4.3 billion at September 30, 1996
from $5.6 billion at September 30, 1995, reflecting a reduction in the Company's
asset base.

The decrease in deposits is primarily due to maturities of consumer and
wholesale CDs that were not renewed. These decreases were partially offset by
increased consumer checking and insured money fund deposits, reflecting the
Company's emphasis on high levels of customer service and innovative products.

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
Company'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 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.

37
<PAGE>
During fiscal 1995, loans increased $3.2 billion, primarily as a result of
the retention of single family adjustable-rate loan originations for the
Company'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 Company 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 Group. 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 Company's single family loan portfolio increased as a
result of purchases from third parties. 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.

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
Company'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 this offering.

ASSET QUALITY

The Company 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 Company has a Credit Committee
comprised of senior officers, that continually monitors the loan and REO
portfolios for potential problems and reports to the Board of Directors at
regularly scheduled meetings. The Company also has established an Asset
Classification Committee comprised of senior management. This committee reviews
the classification of assets and reviews the allowance for credit losses. This
committee reviews all assets and periodically reports its findings directly to
the Board of Directors. The Company also has an Asset Review Department, the
function of which is to provide to the Board of Directors an independent ongoing
review and evaluation of the quality of assets.

Nonperforming assets consist of nonaccrual loans and REO (at fair value,
less estimated costs to sell). 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. At September 30, 1994 and 1993, nonaccrual
loans included $5.7 million and $9.0 million, respectively, 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, 1997,
September 30, 1996, 1995, and 1992. At September 30, 1995, single family
nonaccrual loans included $10.2 million of loans which were contractually
current pursuant to the borrowers' court-approved bankruptcy

38
<PAGE>
plans. At March 31, 1997 and September 30, 1996, $10.7 million and $10.6
million, respectively, of such loans were excluded from single family nonaccrual
loans.

NONPERFORMING ASSETS
<TABLE>
<CAPTION>
AT AT SEPTEMBER 30,
MARCH 31, ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NONACCRUAL LOANS
Single family(1)................ $ 85,764 $ 92,187 $ 83,954 $ 85,722 $ 61,451 $ 60,209
Single family construction...... -- -- 505 -- -- 672
Consumer........................ 950 1,039 563 506 427 --
Multi-family.................... 2,281 144 213 3,802 3,233 --
Commercial real estate and small
business...................... 121 350 -- 2,342 -- --
---------- ---------- ---------- ---------- ---------- ----------
89,116 93,720 85,235 92,372 65,111 60,881
---------- ---------- ---------- ---------- ---------- ----------
DISCOUNTS
Accretable(2)................... (473) (286) (560) (669) (781) (1,524)
Non-accretable(3)............... (147) (3,791) (9,167) (15,384) (22,684) (21,250)
---------- ---------- ---------- ---------- ---------- ----------
(620) (4,077) (9,727) (16,053) (23,465) (22,774)
---------- ---------- ---------- ---------- ---------- ----------
Net nonaccrual loans....... 88,496 89,643 75,508 76,319 41,646 38,107
REO, primarily single family
properties......................... 30,497 30,730 24,904 20,684 18,954 17,722
---------- ---------- ---------- ---------- ---------- ----------
Total nonperforming
assets................... $ 118,993 $ 120,373 $ 100,412 $ 97,003 $ 60,600 $ 55,829
========== ========== ========== ========== ========== ==========
</TABLE>
- ------------

(1) Originated single family nonaccrual loans to total single family nonaccrual
loans were 35.78%, 33.04%, 20.64%, and 13.66% at March 31, 1997, September
30, 1996, 1995, and 1994, 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 0.59% and 0.73% at March 31,
1997 and September 30, 1996, respectively.

(3) The loan principal amount related to the non-accretable discounts were
$218,000, $29.5 million, $33.7 million, $60.2 million, $41.4 million, and
$43.1 million at March 31, 1997, September 30, 1996, 1995, 1994, 1993, and
1992, respectively.

39
<PAGE>
SELECTED ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
AT OR
FOR THE
SIX MONTHS
ENDED AT OR FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Allowance for credit losses to net
nonaccrual loans
Single family................... 36.71% 32.46% 39.74% 22.70% 39.69% 41.61%
Total........................... 49.44 44.24 48.74 30.73 71.71 74.04
Allowance for credit losses to
nonperforming assets............... 36.77 32.95 36.65 24.18 49.28 50.54
Allowance for credit losses and
non-accretable discounts to net
nonaccrual loans................... 49.60 48.47 60.88 50.89 126.18 129.80
Allowance for credit losses to total
loans.............................. 0.54 0.52 0.44 0.46 0.61 0.68
Nonperforming assets to total
assets............................. 1.08 1.12 0.84 1.09 0.72 0.89
Net nonaccrual loans to total
loans.............................. 1.10 1.19 0.91 1.51 0.85 0.92
Nonperforming assets to total loans
and REO............................ 1.47 1.59 1.21 1.91 1.23 1.35
Net loan charge-offs to average
loans -- Annualized
Single family................... 0.13 0.12 0.08 0.04 0.05 0.07
Total........................... 0.18 0.17 0.16 0.30 0.05 0.07
</TABLE>
PORTFOLIO OF GROSS NONACCRUAL LOANS BY STATE AND TYPE
AT MARCH 31, 1997
<TABLE>
<CAPTION>
% OF
STATE SINGLE FAMILY OTHER TOTAL TOTAL
- ------------------------------------- ------------- ------ --------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
California........................... $48,811 $ -- $ 48,811 54.77%
Texas................................ 5,515 3,229 8,744 9.81%
Florida.............................. 5,901 102 6,003 6.74%
Illinois............................. 4,102 -- 4,102 4.60%
New York............................. 3,361 -- 3,361 3.77%
New Jersey........................... 2,770 21 2,791 3.13%
Pennsylvania......................... 2,510 -- 2,510 2.82%
Connecticut.......................... 1,562 -- 1,562 1.75%
Minnesota............................ 1,314 -- 1,314 1.47%
Virginia............................. 1,091 -- 1,091 1.22%
Other................................ 8,827 -- 8,827 9.92%
------------- ------ --------- ------
Total........................... $85,764 $3,352 $ 89,116 100.00%
============= ====== ========= ======
% of Total...................... 96.24% 3.76% 100.00%
============= ====== =========
</TABLE>
The 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 resulted from the charge-off of $10.1 million in
fiscal 1994 and $3.4 million in fiscal 1995 related to a single large commercial
real estate loan which reduced the amount of the reserve. The ratio decreased to
44.24% at September 30, 1996 primarily due to loan originations and purchases in
the latter half of 1995. The ratio increased to 49.44% at March 31, 1997
primarily due to increased provisions caused by single family purchases as well
as changes in the composition of the loan portfolio.

The allowance for credit losses to net nonaccrual loans was 44.24% at
September 30, 1996 and 48.74% at September 30, 1995. This compares to ratios for
peer institutions (thrifts with assets over $5.0 billion) of 87.36% and 81.66%
at September 30, 1996 and 1995, respectively. The Company's charge-off ratios
were 0.17% and

40
<PAGE>
0.16% in fiscal 1996 and 1995, respectively, compared to 0.54% and 0.54% for the
twelve months ended September 30, 1996 and 1995, respectively, for peer
institutions. Because 98% of the Company's nonaccrual loans at September 30,
1996 are single family mortgages, its allowance is lower than is typical of its
peers. The Company believes that because of its underwriting standards and
substantial purchase discounts, historical charge-offs on its single family
loans have been lower in the aggregate than the corresponding aggregate net
gains from the sales of the underlying collateral. The Company believes that its
allowance levels approximate the allowances for future potential losses. At
September 30, 1996 and 1995 the Company's single family loan portfolio
represented 81.2% and 84.7%, respectively, of gross loans outstanding compared
to 73.45% and 72.22% for peer institutions.

Nonperforming assets decreased $1.4 million, or 1.15%, to $119 million at
March 31, 1997 compared to $120.4 million at September 30, 1996. Single family
nonaccrual loans decreased $6.4 million, 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 REO. The portion of the purchase discount attributable to
potential credit risk on certain acquired single family loans is treated as
non-accretable discount. The Company believes that these purchase discounts have
been historically sufficient to cover losses from these portfolios and to
provide a market rate of return. These non-accretable discounts are recognized
into income upon obtaining sufficient seasoning, payoffs, and stabilizing
delinquencies. During the six months ended March 31, 1997, the Company
recognized $4.1 million of such discounts as a yield adjustment.

Nonperforming assets increased $20.0 million to $120.4 million at September
30, 1996 from $100.4 million at September 30, 1995. The single family nonaccrual
loans increased $8.2 million, reflecting, in part, the effects of the loan
purchases which occurred in the second half of 1995. The non-accretable discount
on nonaccrual loans decreased $5.4 million to $3.8 million at September 30, 1996
from $9.2 million at September 30, 1995. This decrease resulted primarily from
loan sales and loans being foreclosed upon and transferred to REO. At September
30, 1996, total non-accretable discount was $7.1 million, of which $3.8 million
related to nonaccrual loans. The non-accretable discount will reduce future REO
losses. REO increased $5.8 million to $30.7 million at September 30, 1996 from
$24.9 million at September 30, 1995. This increase primarily resulted from
higher levels of delinquencies on a larger loan portfolio.

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. 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.

The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, an amendment of SFAS No. 114",
effective October 1, 1995. These statements address the accounting by creditors
for impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
At March 31, 1997 and September 30, 1996, the recorded investment in impaired
loans, pursuant to SFAS No. 114, totalled $3.6 million and $3.9 million,
respectively. 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 recorded investments in the loans.

41
<PAGE>
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, 1997

<TABLE>
<CAPTION>
NONPERFORMING PERFORMING TOTAL
------------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Criticized assets
Special Mention
Multi-family....................... $ -- $ 12,337 $ 12,337
Commercial real estate and small
business......................... -- 2,510 2,510
------------- ---------- ----------
Total criticized assets....... -- 14,847 14,847
------------- ---------- ----------
Classified
Substandard
Single family...................... 85,764 -- 85,764
Single family construction......... -- 967 967
Consumer........................... 825 -- 825
Multi-family....................... 2,259 11,489 13,748
Commercial real estate and small
business......................... 121 2,454 2,575
Real estate owned.................. 30,497 -- 30,497
------------- ---------- ----------
119,466 14,910 134,376
Doubtful
Multi-family....................... -- 325 325
Commercial real estate and small
business......................... -- 269 269
------------- ---------- ----------
-- 594 594
Loss.................................. -- -- --
Total classified assets....... 119,466 15,504 134,970
------------- ---------- ----------
Total criticized and
classified assets........... $ 119,466 $ 30,351 $ 149,817
============= ========== ==========
Total classified assets as a %
of total gross loans........ 1.67%
Total allowance for credit
losses as a % of total
classified assets........... 32.41%
</TABLE>

The allowance for credit losses is established 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 credit management systems have resulted in a very low loss experience, there
can be no assurance that such results will continue in the future. The allowance
for credit losses is based principally on delinquency status and historical loss
experience.

The following table presents the allowance for credit losses. See Note 5 to
the Consolidated Financial Statements for activity in the allowance for credit
losses by loan type.

ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED SEPTEMBER
ENDED MARCH 31, 30,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance....................... $ 39,660 $ 36,801 $ 36,801 $ 23,454 $ 29,864
Provision.......................... 11,219 5,850 16,469 24,293 6,997
Charge-offs, net of recoveries..... (7,131) (6,162) (13,610) (10,946) (13,407)
--------- --------- --------- --------- ---------
Ending balance.......................... $ 43,748 $ 36,489 $ 39,660 $ 36,801 $ 23,454
========= ========= ========= ========= =========
</TABLE>

42
<PAGE>
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Single family........................ $ 31,313 $ 28,799 $ 28,645 $ 29,594 $ 15,905
Single family construction........... 996 483 693 361 399
Consumer............................. 5,014 3,339 5,219 3,247 1,822
Multi-family......................... 4,616 2,998 4,118 2,855 2,329
Multi-family construction............ 247 231 232 199 127
Commercial real estate, small
business and healthcare............ 874 183 314 97 2,112
Mortgage Banker Finance line of
credit............................. 639 412 412 410 684
Single family warehouse.............. 49 44 27 38 76
--------- --------- --------- --------- ---------
Total........................... $ 43,748 $ 36,489 $ 39,660 $ 36,801 $ 23,454
========= ========= ========= ========= =========
</TABLE>
The allowance for credit losses increased to $43.7 million at March 31,
1997 from $39.7 million at September 30, 1996. The increased allowance for
credit losses resulted from single family purchases as well as changes in the
composition of the loan portfolio. Single family loan purchases were $601.8
million for the six months ended March 31, 1997. The commercial and consumer
loan portfolios increased 81% and 92%, respectively, from March 31, 1996 to
March 31, 1997.

The allowance for credit losses increased to $39.7 million at September 30,
1996 from $36.8 million at September 30, 1995. The single family allowance for
credit losses decreased to $28.6 million at September 30, 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 consumer
allowance for credit losses increased to $5.2 million at September 30, 1996 from
$3.2 million at September 30, 1995. This increase primarily resulted from
increased losses related to the unsecured line of credit portfolio. The
multi-family allowance for credit losses increased to $4.1 million at September
30, 1996 from $2.9 million at September 30, 1995. This increase primarily
resulted from an increase in the multi-family held to maturity portfolio.

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.
The consumer allowance for credit losses increased to $3.2 million at September
30, 1995 from $1.8 million at September 30, 1994, reflecting increased losses
related to the unsecured consumer line of credit portfolio.

The Company 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.

43
<PAGE>
The components of charge-offs and recoveries by property type for the
periods indicated are as follows:

NET LOAN CHARGE-OFFS

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ----------------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CHARGE-OFFS
Single family................... $ (4,096) $ (3,242) $ (7,751) $ (4,840) $ (1,722)
Consumer........................ (2,970) (3,008) (5,995) (2,847) (1,365)
Single family construction...... (73) -- -- -- --
Multi-family.................... (148) -- -- -- (233)
Commercial real estate and small
business...................... -- -- (39) (3,389) (10,145)
Single family warehouse......... -- -- -- (2) --
--------- --------- ---------- ---------- ----------
Total charge-offs.......... (7,287) (6,250) (13,785) (11,078) (13,465)
--------- --------- ---------- ---------- ----------
RECOVERIES
Single family................... 17 18 31 36 20
Consumer........................ 136 70 144 94 38
Multi-family.................... -- -- -- 2 --
Commercial real estate and small
business...................... 3 -- -- -- --
--------- --------- ---------- ---------- ----------
Total recoveries........... 156 88 175 132 58
--------- --------- ---------- ---------- ----------
Total net charge-offs...... $ (7,131) $ (6,162) $ (13,610) $ (10,946) $ (13,407)
========= ========= ========== ========== ==========
Net loan charge-offs to
average loans............ 0.18% 0.15% 0.17% 0.16% 0.30%
</TABLE>
Net loan charge-offs for all loan types increased to $7.1 million for the
six months ended March 31, 1997 from $6.2 million for the six months ended March
31, 1996. The loan portfolio consists primarily of single family mortgage loans.
Net charge-offs on the single family portfolio increased to $4.1 million for the
six months ended March 31, 1997 from $3.2 million for the six months ended March
31, 1996. This resulted in annualized net charge-offs as a percentage of single
family loans on average of 0.13% and 0.09%, respectively, for the six months
ended March 31, 1997 and 1996.

Net loan charge-offs for all loan types increased to $13.6 million for
fiscal 1996 from $10.9 million for fiscal 1995. The loan portfolio consists
primarily of single family mortgage loans. Net charge-offs on the single family
portfolio increased to $7.7 million for fiscal 1996 from $4.8 million for fiscal
1995. This resulted in net charge-offs as a percentage of single family loans on
average of 0.12% and 0.08%, respectively, for fiscal 1996 and 1995. Net single
family REO gains of $17.6 million exceeded net single family charge-offs of
$16.4 million for the four years ended September 30, 1996. REO gains have
historically been significant because of discounts attributable to the original
loan purchases. Net charge-offs on the consumer loan portfolio increased to $5.9
million for fiscal 1996 from $2.8 million for fiscal 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-offs in
fiscal 1994 resulted primarily from a $10.1 million charge-off related to a
single commercial real estate loan. The charge-offs in fiscal 1995 included an
additional $3.4 million charge related to the sale of the 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%,

44
<PAGE>
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.

The only credit product that has had charge-offs higher than its original
formula reserves is the unsecured consumer line of credit, which was first
offered in fiscal 1993. This product has loans outstanding at March 31, 1997 of
$48.4 million, for which allowances for credit losses were recently increased
from 4% to 7.5% of loans outstanding. Due to the initial growth and loss
experience in this portfolio, underwriting, approval and collection processes
were modified. 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 and
borrowings payable on demand or with remaining maturities of one year or less.
The Bank's average daily liquidity ratio for March 1997 was 6.4%, 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 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, 1997, these instruments generally comprised
repurchase agreements, federal funds sold, trading account assets, and MBS and
securities available for sale. These instruments totalled $1.5 billion at March
31, 1997, and $1.8 billion, $933.2 million, and $905.4 million at September 30,
1996, 1995, and 1994, 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. Management
believes that the Bank has adequate resources to fund all of its commitments.
See Notes 8, 9, 10, and 12 to the Consolidated Financial Statements.

In December 1996, the Company contributed all of the outstanding stock of
its subsidiary, the Bank, to Holdings, and Holdings assumed the obligations of
the Senior Notes. The Company's and Holdings' 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 21 to the Consolidated Financial Statements.

The Bank currently has outstanding 7,420,000 shares of the Bank Preferred
Stock, stated value $25 per share, or $185.5 million in the aggregate. Total
aggregate annual dividend requirements on the Bank Preferred Stock are $18.25
million. While the Bank Preferred Stock is noncumulative, common stock dividends
may not be paid by the Bank 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, Holdings would not receive any cash dividends from the
Bank until four full quarterly dividends on the Bank Preferred Stock had been
paid. While it is the present intention of the Board of Directors of the Bank to
declare dividends in an amount sufficient to provide the cash flow necessary to
meet debt service obligations in respect of the Senior Notes and to pay
dividends to the holders of the Company's 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. At March 31, 1997, the Bank had $164.3 million of available capacity for
the payment of dividends on its capital stock without prior approval of the OTS,
and at April 1, 1997, $78.8 million was available for payment of dividends on
Common Stock under the covenants of the Senior Notes. See
"Business -- Regulation -- Safety and Soundness Regulations -- Capital
Requirements -- Capital Distributions" and Notes 11, 15, 16 and 21 to the
Consolidated Financial Statements.

45
<PAGE>
DEPOSITS

Deposits have provided the Company with a source of relatively stable and
low cost funds. Average deposits funded 47% of average total assets for the six
months ended March 31, 1997, 45% of average total assets for fiscal 1996, 48%
for fiscal 1995, and 58% for fiscal 1994. 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 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 ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consumer accounts
Checking accounts (including
interest-bearing and
non-interest bearing).......... $ 39,032 $ 33,995 $ 43,541 $ 4,984 $ 5,467
Savings accounts................. (3,235) (6,798) (17,762) (83,089) (97,286)
Money market accounts............ 105,566 87,129 171,064 (24,028) (1,275)
Time deposits.................... (152,355) (193,275) (231,656) 35,425 (389,465)
---------- ---------- ---------- ---------- ----------
Total consumer activity..... (10,992) (78,949) (34,813) (66,708) (482,559)
Commercial deposits.................. (34,525) (134,763) (45,682) 482,726 384,387
Wholesale deposits................... (120,357) (91,450) (125,859) (157,019) (108,196)
---------- ---------- ---------- ---------- ----------
Total activity before
interest credited......... (165,874) (305,162) (206,354) 258,999 (206,368)
Interest credited.................... 83,733 86,263 172,079 159,017 131,184
---------- ---------- ---------- ---------- ----------
Net change in deposits...... $ (82,141) $ (218,899) $ (34,275) $ 418,016 $ (75,184)
========== ========== ========== ========== ==========
</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, 1997, September 30,
1996, 1995, and 1994, these deposits totalled $855.4 million, $879.3 million,
$911.8 million, and $402.5 million, respectively. The Company also raises
wholesale deposits from institutional customers through its Financial Markets
Group. These deposits tend to be interest rate sensitive and are subject to
withdrawal if the rates paid on these deposits are not competitive with other
market rates. While the Company does not generally solicit brokered deposits,
the Company may accept brokered deposits when permitted by regulation and
available at favorable rates.

BORROWINGS

The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. Borrowings were the primary source of funds for the recent asset growth
and accounted for 43% of the funding of average assets for the six months ended
March 31, 1997, 45% for fiscal 1996, 43% for fiscal 1995, and 31% for fiscal
1994. Fixed and adjustable-rate advances are obtained from the FHLB Dallas under
a security and pledge agreement that restricts the amount of borrowings to the
greater of 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, 1997, these limitations were 65% and 45%, respectively. 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 those reverse
repurchase agreements. At March 31, 1997, the Company

46
<PAGE>
had $1.1 billion in such collateral, $963.1 million of which was collateralizing
such reverse repurchase agreements. See Notes 9 and 10 to the Consolidated
Financial Statements.

NOTES PAYABLE

In May 1993, the Company issued $115 million of Senior Notes at an initial
rate of 8.05% and repaid long-term debt (the "15.75% Notes") and a note
payable to a related party. 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. An exchange offer ("Exchange Offer") was consummated in
August 1996, which satisfied the condition of the Senior Notes pursuant to which
the interest rate on the Senior Notes reverted from 9.05% to 8.05% PER ANNUM in
September 1996. In May 1997, the Company issued $220 million of fixed-rate
subordinated notes due 2007 with a stated rate of 8.875%. A portion of the
proceeds were used to retire the Company's Senior Notes. See Notes 11 and 21 to
the Consolidated Financial Statements.

COMMITMENTS

At March 31, 1997, the Company had mandatory forward delivery contracts for
single family loans of $107.5 million and had warehouse loans and commitments to
originate single family mortgage loans (the "mortgage pipeline") of $145.5
million and $105.6 million, respectively, available to fill these contracts. At
March 31, 1997 the Company had $1.1 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 twelve months following March 31, 1997, total $1.6
billion and $2.0 billion, respectively. Management believes that the Company has
adequate resources to fund all of its commitments.

CAPITAL

On May 6, 1996, the Bank paid a $100 million dividend to the Company on the
common stock of the Bank and on the same day, the Company paid a dividend on its
common stock in the amount of $100 million.

Prior to June 1996, the Company was a subsidiary of Hyperion Holdings,
which in turn was a subsidiary of Hyperion Partners. In June 1996, the following
actions were taken: (i) Hyperion Holdings exhanged shares of a newly created
class of its nonvoting common stock for certain shares of its voting common
stock held by Hyperion Partners; (ii) Hyperion Partners then distributed the
Hyperion Holdings common stock owned by it to its limited and general partners
in accordance with the terms of the limited partnership agreement of Hyperion
Partners in the Distribution; and (iii) following the Distribution, the Merger
was consummated pursuant to which Hyperion Holdings was merged with and into the
Company. As a result of the Merger, the common stockholders of Hyperion Holdings
(i.e. the limited and general partners of Hyperion Partners) received shares of
Class A voting and Class B nonvoting common stock of the Company. As of the date
of the Merger, Hyperion Holdings had no significant assets, liabilities or
business other than its investment in the Company. The Merger was accounted for
in a manner similar to a pooling of interests. Due to the immaterial nature of
the assets, liabilities, and operations of Hyperion Holdings prior to the
Merger, prior period results were not restated.

Prior to June 1996, the Company had 13,238 shares of Class A and 2,797
shares of Class C Common Stock outstanding. The June 1996 Merger and
Restructuring discussed above included a 1,800 to one stock conversion and the
conversion of all Class C and certain Class A shares to Class B shares. The
Class C shares were then cancelled. Also in June 1996, 318,342 shares of Class B
Common Stock with restrictions on its transferability for a period of three
years from its issuance ("Restricted Stock") were awarded as part of the
management compensation program. See Note 13 to the Consolidated Financial
Statements.

In August 1996, the Company filed a registration statement with the
Commission and 12,075,000 shares of the Company Class A Common Stock were sold
to the public. The Company sold 910,694 shares and Selling Stockholders sold
11,164,306 shares. The net proceeds to the Company, proceeds to the Selling
Stockholders, and the underwriting discount were $14.0 million, $210.4 million,
and $13.9 million, respectively. The net proceeds to the Company from the August
Offering was contributed to the capital of the Bank in the first quarter of
fiscal 1997 for general corporate purposes.

Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into the warrant agreement ("Warrant Agreement"), dated December
30, 1988, pursuant to which the FSLIC was granted the Warrant to purchase up to
158,823 shares of common stock of the Bank at an exercise price of $0.01 per
share. In August 1996, the FDIC surrendered a portion of the Warrant for a cash
payment of $6.1 million and

47
<PAGE>
exercised the remainder of the Warrant. The FDIC immediately exchanged the
shares of common stock of the Bank it received for 1,503,560 shares of Common
Stock. The FDIC sold all of the 1,503,560 shares of Common Stock of the Company
in the August Offering.

At September 30, 1996, after the 1,800 to one stock conversion, the
issuance of Restricted Stock, the August Offering, and the Warrant conversion,
the Company had a total of 31,595,596 shares of Common Stock (par value $0.01)
outstanding as follows: Class A (voting) -- 27,735,934 shares and Class B
(nonvoting) -- 3,859,662 shares. During fiscal 1997, 618,342 shares of Class B
Common Stock were converted to Class A, Common Stock and at March 31, 1997, the
Company had 28,354,276 shares of Class A and 3,241,320 shares of Class B Common
Stock outstanding. The authorized stock of the Company consists of the
following: Class A Common Stock -- 40,000,000 shares, Class B Common
Stock -- 40,000,000 shares, and preferred stock -- 10,000,000 shares. Class B
Common Stock may be converted to Class A Common Stock subject to certain
restrictions.

In December 1996, the Company contributed all of the outstanding common
stock of its subsidiary, the Bank, to Holdings, and Holdings assumed the
obligations of the Senior Notes.

REGULATORY MATTERS

The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations. The Bank's capital level at March 31, 1997 and
September 30, 1996 and 1995 qualified it as "well-capitalized", the highest of
five tiers under applicable regulatory definitions. See
"Business -- 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.

REGULATORY CAPITAL RATIOS

AT SEPTEMBER 30,
AT MARCH 31, -------------------------------
1997 1996 1995 1994
------------ --------- --------- ---------
Tangible capital........... 6.87% 6.57% 6.20% 6.01%
Core capital............... 6.93 6.64 6.29 6.17
Tier I capital............. 11.99 12.40 12.82 13.44
Total risk-based capital... 12.68 13.09 13.45 14.02

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.

The United States Congress passed legislation that was signed into law on
September 30, 1996, which resulted in an assessment on all SAIF-insured deposits
in such amounts that fully capitalized the SAIF at a reserve ratio of 1.25% of
SAIF-insured deposits. This one-time assessment was set at 65.7 basis points of
SAIF-assessable deposits at March 31, 1995. The Bank's assessment of $33.7
million, $20.7 million net of tax, was recorded in the fourth quarter of fiscal
1996 and was paid in the first quarter of fiscal 1997.

As a result of this one-time assessment, the SAIF met its designated
reserve ratio at October 1, 1996. For the first quarter of fiscal 1997, a
special interim rate of 18 to 27 basis points applies to pay interest on the
Financing Corporation ("FICO") obligations. Effective January 1, 1997, well
capitalized SAIF institutions that are in the most favorable supervisory
category such as the Bank will pay a base assessment rate of 0 basis points and
FICO assessments of 6.48 basis points. Other SAIF institutions will pay deposit
insurance assessment rates from 3 to 27 basis points, plus the FICO assessment.

CONTINGENCIES AND UNCERTAINTIES

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 approving the Acquisition, which involved substantially all
the Bank's initial assets and liabilities. 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. See "Legal
Proceedings".

48
<PAGE>
On December 8, 1995, Maxxam 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 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 this proceeding but may file a
Motion to Intervene in the District Court case at a later date.

The Bank, in its various operations, is subject to substantial statutory
and regulatory compliance obligations. See "Business -- 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 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".

As of March 31, 1997, the Company had NOLs of $768 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 "Business -- 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 during
fiscal 1994 as follows:

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

FRF assistance on Covered Assets (as defined herein) 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 (as defined herein), 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".

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

49
<PAGE>
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 October 1, 1996, the Company adopted 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 will disclose pro forma fair value information
as prescribed by SFAS No. 123. See Note 13 to 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 MSRs and the related loans at the time
of the loan sale or securitization, 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. See Note 3 to the Consolidated Financial Statements
for certain reclassifications made pursuant to the implementation of SFAS No.
125. 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.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, SEPTEMBER 30,
--------------- -------------------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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

50
<PAGE>
loans; changes in the availability of funds; changes in local economic and
business conditions; changes in availability of residential mortgage loans
orginated by other financial institutions or the Company's ability to purchase
such loans on favorable terms; transactions in the Common Stock that might
result in an Ownership Change triggering an annual limitation on the use of the
Company's NOLs under Section 382 of the Code; 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 eligiblity 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".

51
<PAGE>
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. The Company operates a 71 branch community banking network serving
nearly 210,000 households and businesses, ten regional commercial banking
offices, five wholesale mortgage origination offices, a mortgage servicing
business, and a financial markets business. At March 31, 1997, the Company had
assets of $11.0 billion, deposits of $5.1 billion and stockholders' equity of
$568.9 million and was the largest publicly traded depository institution
headquartered in Texas, in terms of both assets and deposits.

The operating structure below reflects the Company's business strategy at
March 31, 1997, with four business groups in two business segments.

[PASTEUP ORGANIZATIONAL CHART]

ACTIVITIES

o Deposit Gathering
o Consumer Lending
o Small Business Banking
o Investment Product Sales
o Retail Mortgage Originations

o Mortgage Banker Finance
o Multi-Family Lending
o Residential Construction Lending
o Healthcare Lending
o Commercial Real Estate Lending

o Loan Acquisitions
o Wholesale Mortgage Originations
o Wholesale Fundings
o Investment Portfolio Management
o Securitization of Loans
<PAGE>
The tables below present an overview of the operating results of the
Company and its business segments for fiscal 1997, 1996, 1995, and 1994. The
Mortgage Banking Segment activity subsequent to February 1, 1997 is comprised of
the Company's mortgage servicing business only due to the sale and restructuring
of its mortgage origination business. See "-- Mortgage Banking Group". The
wholesale mortgage origination offices that were retained have been integrated
into the existing Financial Markets Group, and therefore the Banking Segment, as
of the same date. Prior period segment information has not been restated. See
"Management's Discussion and Analysis -- Discussion of Results of Operations"
and Note 18 to the Consolidated Financial Statements.

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

<TABLE>
<CAPTION>
MORTGAGE PARENT COMPANY
BANKING BANKING AND TOTAL
SEGMENT SEGMENT HOLDINGS(1) ELIMINATIONS(2) EARNINGS
------- -------- -------------- --------------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Six months ended March 31,
1997............................... $ 75.4 $ 9.9 $ 2.7 $ (9.1) $78.9
1996............................... 64.1 3.0 (1.9) (3.8) 61.4
Years ended September 30,
1996............................... 82.4 (3.1) 97.5 (109.0) 67.8
1995............................... 82.1 19.4 (5.0) (6.4) 90.1
1994............................... 73.8 24.4 (0.7) (11.4) 86.1

OPERATING EARNINGS (LOSS) BY BUSINESS SEGMENT
<CAPTION>
MORTGAGE PARENT COMPANY TOTAL
BANKING BANKING AND OPERATING
SEGMENT SEGMENT HOLDINGS(1) ELIMINATIONS(2) EARNINGS
------- -------- -------------- --------------- ---------
(IN MILLIONS)
Six months ended March 31,
1997............................... $ 72.9 $ 5.9 $ 2.7 $ (9.1) $ 72.4
1996............................... 58.3 2.4 (1.9) (3.8) 55.0
Years ended September 30,
1996............................... 114.4 11.8 97.5 (109.0) 114.7
1995............................... 83.3 19.4 (5.0) (6.4) 91.3
1994............................... 63.2 24.4 (0.7) (11.4) 75.5
</TABLE>

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

(1) Principally dividends received by the Company and Holdings from the Bank,
net of interest expense on the Senior Notes. In May 1996, the Bank paid a
$100 million dividend on its common stock. See Notes 16 and 18 to the
Consolidated Financial Statements.

(2) Reflects the elimination of dividends received by the Company and Holdings
from the Bank.

Operating earnings represents 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, other loans and the sale of mortgage offices in fiscal 1997.
See "-- Mortgage Banking Group.". Operating earnings for fiscal 1996 excludes
a one-time SAIF assessment charge of $33.7 million, compensation expense of $7.8
million related to the adoption of a management compensation program, and
charges totalling $12.5 million related to the restructuring of the Mortgage
Banking Group because these items are considered non-recurring. See Notes 13,
15, and 18 to the Consolidated Financial Statements. Management believes
operating earnings reflects the revenues and expenses of the Company's business
segments and facilitates trend analysis as it excludes transactions that are
typically considered opportunistic or non-recurring 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.

53
<PAGE>
COMMUNITY BANKING GROUP

The Community Banking Group's principal activities include deposit
gathering, consumer lending, small business banking, and investment product
sales. The Community Banking Group, which has marketed itself under the name
"Bank United" since 1993, operates a 71 branch community banking network, a
24-hour telephone banking center, and a 68-unit ATM network, which together
serve as the platform for the Company's consumer and small business banking
activities. The community banking 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, as well as a branch and credit
card processing center in Phoenix, Arizona. Through this branch network, the
Company maintains over 461,000 accounts with an estimated 210,000 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 and 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, 1997, the Community
Banking Group maintained approximately 350,000 deposit accounts with $4.1
billion in deposits.

CONSUMER LENDING

Since 1992, the Community Banking Group has engaged in consumer lending for
its own portfolio. At March 31, 1997, consumer loans outstanding totalled $247.5
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. In addition, while the Company has offered
its customers credit cards since 1990, the Company began credit card lending for
its own portfolio in fiscal 1997. 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 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 can 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 SBA loans. These loans
are offered with both fixed and adjustable-rates on a term basis, and
adjustable-rate 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 cash flow of the
business. Additionally, the Company requires borrowers to provide periodic
financial information for review and assessment. At March 31, 1997, the
Community Banking Group had approximately 450 small business loans outstanding,
totalling approximately $36.1 million and also had approximately $19.5 million
in unfunded commitments and another $12.2 million in pending applications for
small business 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

54
<PAGE>
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 are generally made on a secured basis; however, the value of the
accounts receivable and inventory collateral often fluctuates with local
economic conditions. Small business equipment loan 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. SBA 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 Company's
underwriting guidelines for conventional loan products. However, SBA loans
generally carry guarantees from the SBA for up to 75% of the loan balance.

INVESTMENT PRODUCT SALES

Since 1993, a subsidiary of the Bank has been marketing investment products
to the Company's consumer customer base. At March 31, 1997, the investment
product sales force was comprised of 29 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. Investment product sales were $68.0 million
for the six months ended March 31, 1997 and $70.8 million for the six months
ended March 31, 1996, and increased to $157.2 million for fiscal 1996 from $81.0
million for fiscal 1995. Gross fee revenue from such sales were $3.4 million and
$2.6 million for the six months ended March 31, 1997 and 1996, respectively, and
$5.4 million and $3.6 million for fiscal 1996 and 1995, respectively.

RETAIL MORTGAGE ORIGINATIONS

Beginning in February 1997, the Company began offering mortgages through
its community banking branch network.

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. 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
healthcare lending, and other industrial and commercial loan products.

MORTGAGE BANKER FINANCE

The Commercial Banking Group provides small- and medium-sized mortgage
companies with credit facilities, including warehouse lines of credit,
repurchase agreements, term loans secured by MSRs, and working capital credit
lines, as well as cash management services. The credit facilities provided to
these mortgage companies are generally collateralized by single family mortgages
or related servicing rights. The Company lends based on a percentage of the
market value of the collateral. At March 31, 1997, the Company had $212.6
million in unfunded commitments and $219.0 million of MBF loans outstanding.
Since 1994, the Commercial Banking Group 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 totalled $855.4
million at March 31, 1997. MBF 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. MBF loans are also generally made to borrowing entities
that have lower capital levels 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

55
<PAGE>

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, 1997, the Multi-Family Lending unit had
$266.7 million in unfunded multi-family commitments and $630.4 million in such
loans outstanding ($558.8 million in permanent loans and $71.6 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, 1997, the multi-family servicing portfolio
totalled $797.0 million, of which $546.4 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 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 to two
years. 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 reviewing individual builders'
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 1995 and 1994, the Company expanded into several other major markets
outside of Texas, including Atlanta, Chicago, Denver, Orlando, Phoenix, and
Philadelphia. The Company opened offices in San Francisco and in Washington D.C.
in fiscal 1997. Current markets in Texas include Houston, Dallas, Austin, and
San Antonio. At March 31, 1997, the Company had $214 million in unfunded
commitments for single family construction loans and $306.1 million of such
loans outstanding.

HEALTHCARE LENDING

The Commercial Banking Group makes construction and permanent loans for the
development and operation of long-term care facilities to select experienced
operators of senior housing and long-term care facilities. Such loans are
subject to risks specific to the industry such as occupancy and competition. At
March 31, 1997, the Company had $52.3 million in loan commitments for healthcare
loans. The Company applies competitive marketplace underwriting guidelines in
evaluating the credit-worthiness of these loans.

COMMERCIAL REAL ESTATE LENDING

The Commercial Banking Group is engaged in commercial real estate lending
for specific products, emphasizing permanent mortgages on income producing
properties, such as retail shopping centers. At March 31, 1997, the Company had
$74.3 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.
Competitive marketplace underwriting guidelines are applied in evaluating each
loan transaction.

FINANCIAL MARKETS GROUP

The Financial Markets Group manages the Company's asset portfolio
activities, including loan acquisition and management, the securitization of
loans and began originating wholesale mortgages in February 1997. Additionally,
under the supervision of the ALCO, the Financial Markets Group is responsible
for the Company's investment portfolio, for interest rate risk hedging
strategies, and for securing funding sources other than consumer and commercial
deposits. See " -- Asset and Liability Management".

56
<PAGE>
LOAN ACQUISITIONS/ORIGINATIONS

The Financial Markets Group acquires residential loans, primarily single
family loans, through traditional secondary market sources (mortgage companies,
financial institutions, and investment banks). Since September 1992, the Company
has closed more than 77 loan acquisition transactions representing more than
$5.9 billion in loans. 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. At March 31, 1997, a majority of the
$7.8 billion of loans held to maturity by the Company were managed by the
Financial Markets Group.

WHOLESALE MORTGAGE ORIGINATIONS

In February 1997, the wholesale mortgage origination offices that were not
sold or closed in the restructuring of the Mortgage Banking Group were
integrated into the Financial Markets Group. See " -- Mortgage Banking Group".
These wholesale offices primarily originate loans for the Company's portfolio
and originated $176.7 million of loans in February and March 1997.

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, borrowings on securities sold under reverse
repurchase agreements, and brokered CDs. At March 31, 1997, wholesale activities
provided $4.8 billion in funding. See "Management's Discussion and
Analysis -- 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 totalled nearly $2.1 billion at March 31, 1997. 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 " -- Investment
Portfolio", "-- Asset and Liability Management", and Notes 2, 3, and 4 to the
Consolidated Financial Statements.

SECURITIZATION OF LOANS

From time to time, the Financial Markets Group evaluates the Company's loan
portfolio for securitization opportunities and, when appropriate, creates
securities and retains the master servicing. During the past four 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 MBS created, thus enhancing the Bank's risk-based capital
ratios and credit quality. During fiscal 1996, the Financial Markets Group
participated in the structuring and issuance of a multi-family MBS totalling
$152.7 million. During fiscal 1996, the Financial Markets Group purchased $58
million in SBA loans, a portion of which was pooled into seven securities
totalling $30.5 million. During the six months ended March 31, 1997, $198.3
million in SBA loans were purchased, a portion of which were pooled into
fourteen securities totalling $167.3 million. These securitization activities
are separate from the secondary marketing activities of the Mortgage Banking
Group.

MORTGAGE BANKING GROUP

The Mortgage Banking Group currently services first mortgage loans for
single family residences for both the Company's portfolio and for investors. The
Company's servicing portfolio at March 31, 1997 was $14.3 billion.

Historically, the Mortgage Banking Group's principal activities were
comprised of retail and wholesale mortgage originations. Consistent with the
increasing emphasis on its community and commercial banking business, the
Company evaluated 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 implemented
a profitability improvement plan. As a result of this plan, in June 1996 the
Company recorded a restructuring

57
<PAGE>
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 the 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
mortgage 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. 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. See Note 18 to the Consolidated Financial
Statements.

RETAIL MORTGAGE OPERATIONS

The Mortgage Banking Group offered a variety of fixed and adjustable-rate
mortgage products for consumers through a network of retail mortgage origination
offices in Texas. For the six months ended March 31, 1997 and fiscal 1996, the
Mortgage Banking Group originated $590.1 million and $2.1 billion, respectively,
in retail mortgage loans. The retail mortgage origination offices outside of
Texas and one located in El Paso, Texas were sold effective February 1, 1997.
The retail mortgage origination offices not sold in this transaction were
subsequently closed. Retail mortgage products are now offered through the
community banking branches.

WHOLESALE MORTGAGE OPERATIONS

The Mortgage Banking Group provided qualified mortgage brokers nationwide
with a variety of fixed and adjustable-rate mortgage products through its
network of wholesale mortgage origination offices. Effective February 1, 1997,
the Company sold four of its twelve wholesale offices. Subsequently, the Company
closed three offices and retained five offices, which were integrated in to the
Financial Markets Group. For the six months ended March 31, 1997, and fiscal
1996, the Mortgage Banking Group originated $567.8 million and $1.7 billion,
respectively, in mortgage loans through its wholesale operations.

MORTGAGE SERVICING OPERATIONS

The Mortgage Banking Group services residential mortgage loans owned by the
Company and by others, including the GNMA, the FNMA, the FHLMC, and private
mortgage investors. At March 31, 1997, the Mortgage Banking Group serviced over
$14.3 billion in mortgage loans, including $3.6 billion for the Company's
portfolio and $10.7 billion for others. 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. 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. See " -- Loan Servicing Portfolio".

58
<PAGE>
LOAN PORTFOLIO

The Company has focused in recent years on originating and servicing
commercial banking assets. However, the loan portfolio still reflects the Bank's
origins as a thrift institution, with single family mortgage originations
constituting a majority of loans made. The following tables set out loan
origination levels, as well as the product and geographic distribution of the
loan portfolio. See the loan table in "Management's Discussion and
Analysis -- Discussion of Financial Condition" and see Note 5 to the
Consolidated Financial Statements.

LOAN ORIGINATIONS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------- ----------------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Single family........................ $ 1,153,489 $ 1,945,434 $ 3,602,009 $ 3,226,324 $ 5,424,550
Commercial........................... 645,493 355,156 891,306 547,117 364,604
Consumer............................. 63,362 53,570 125,596 99,249 94,153
------------ ------------ ------------ ------------ ------------
Total...................... $ 1,862,344 $ 2,354,160 $ 4,618,911 $ 3,872,690 $ 5,883,307
============ ============ ============ ============ ============
</TABLE>
LOAN PORTFOLIO
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------
1997 1996 1995 1994
------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Single family........................ $6,283,830 $ 6,152,504 $ 7,061,088 $ 4,203,614
Single family construction........... 306,117 242,525 115,436 57,786
Consumer............................. 247,463 173,518 123,096 108,179
Multi-family......................... 558,752 479,833 444,368 268,897
Multi-family construction............ 71,642 31,355 35,430 20,437
Commercial real estate, commercial,
healthcare, and small business..... 249,276 96,427 38,326 61,919
Mortgage banker finance line of
credit............................. 218,963 139,872 109,339 147,754
Single family warehouse.............. 145,471 260,745 411,287 252,153
------------- ------------ ------------ ------------
8,081,514 7,576,779 8,338,370 5,120,739
Allowance for credit losses.......... (43,748) (39,660) (36,801) (23,454)
Accretable unearned discount......... (3,136) (15,307) (38,460) (50,650)
Net deferred loan origination fees... (2,488) (2,324) (1,727) (461)
Unrealized losses.................... -- -- (1,142) --
------------- ------------ ------------ ------------
Total loans................ $8,032,142 $ 7,519,488 $ 8,260,240 $ 5,046,174
============= ============ ============ ============
</TABLE>
59
<PAGE>
GEOGRAPHIC DISTRIBUTION OF REAL ESTATE LOAN PORTFOLIO
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------
STATE 1997 1996 1995 1994
- ---------------------------------------- ------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
California.............................. $3,327,799 $ 3,404,731 $ 3,958,293 $ 1,764,531
Texas................................... 1,307,426 1,245,459 1,259,306 1,131,225
Florida................................. 466,216 436,338 479,379 456,812
Illinois................................ 205,370 166,783 190,801 138,072
Arizona................................. 168,751 139,264 115,260 30,142
New Jersey.............................. 149,470 108,113 118,825 80,727
Georgia................................. 140,048 120,881 94,413 56,442
Washington.............................. 138,277 98,243 81,005 32,899
Pennsylvania............................ 135,020 125,876 128,693 68,728
Virginia................................ 128,395 100,565 107,420 92,704
Other states............................ 1,377,080 1,088,044 1,202,943 827,480
Other -- single family warehouse........ 145,470 260,745 411,287 252,153
------------- ------------ ------------ ------------
Total real estate loans............ 7,689,322 7,295,042 8,147,625 4,931,915
Mortgage banker finance line of
credit................................ 218,963 139,872 109,339 147,754
Small business.......................... 72,935 55,588 7,320 --
Non-real estate consumer................ 102,322 93,352 89,509 72,987
------------- ------------ ------------ ------------
8,083,542 7,583,854 8,353,793 5,152,656
Non-accretable unearned discounts....... (2,028) (7,075) (15,423) (31,917)
------------- ------------ ------------ ------------
Total.............................. $8,081,514 $ 7,576,779 $ 8,338,370 $ 5,120,739
============= ============ ============ ============
</TABLE>
GEOGRAPHIC AND PRODUCT DISTRIBUTION OF LOAN PORTFOLIO
AT MARCH 31, 1997
<TABLE>
<CAPTION>
SINGLE COMMERCIAL
FAMILY SINGLE REAL SINGLE TOTAL NON-REAL
AND FAMILY MULTI- ESTATE AND FAMILY REAL ESTATE ESTATE
STATE CONSUMER CONSTRUCTION FAMILY HEALTHCARE WAREHOUSE LOANS LOANS
- ---------------------------------------- --------- ------------ -------- ---------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
California.............................. $3,262,788 $ -- $ 48,741 $ 16,269 $ -- $3,327,798 $ 46
Texas................................... 842,516 151,934 243,259 69,717 -- 1,307,426 139,068
Florida................................. 388,019 43,458 19,993 14,746 -- 466,216 83
Illinois................................ 182.574 13,857 1,925 7,013 -- 205,369 --
Arizona................................. 104,386 21,699 37,397 5,270 -- 168,752 19
New Jersey.............................. 149,470 -- -- -- -- 149,470 --
Georgia................................. 75,567 30,509 31,197 2,775 -- 140,048 --
Washington.............................. 62,179 -- 71,263 4,836 -- 138,278 --
Pennsylvania............................ 117,214 10,948 6,858 -- -- 135,020 --
Virginia................................ 116,396 -- 1,979 10,020 -- 128,395 2
Other................................... 1,128,269 33,712 167,862 47,694 145,471 1,523,008 254,544
--------- ------------ -------- ---------- --------- ----------- --------
Total............................... $6,429,378 $306,117 $630,474 $178,340 $145,471 $7,689,780 $393,762
========= ============ ======== ========== ========= =========== ========
% of Total.............................. 79.54% 3.79% 7.80% 2.20% 1.80 % 95.13% 4.87%
========= ============ ======== ========== ========= =========== ========
</TABLE>
% OF
STATE TOTAL TOTAL
- ---------------------------------------- --------- ------

California.............................. $3,327,844 41.17%
Texas................................... 1,446,494 17.89%
Florida................................. 466,299 5.77%
Illinois................................ 205,369 2.54%
Arizona................................. 168,771 2.09%
New Jersey.............................. 149,470 1.85%
Georgia................................. 140,048 1.73%
Washington.............................. 138,278 1.71%
Pennsylvania............................ 135,020 1.67%
Virginia................................ 128,397 1.59%
Other................................... 1,777,552 21.99%
--------- ------
Total............................... $8,083,542 100.00%
========= ======
% of Total.............................. 100.00%
=========

LOAN SERVICING PORTFOLIO

At March 31, 1997, the Mortgage Banking Group serviced $3.6 billion in
residential mortgage loans owned by the Company and $10.7 billion in mortgages
owned by others. 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 these
servicing rights was $17.8 billion. Since March 31, 1997, an additional $7.0
billion in mortgage loan servicing rights were acquired. Mortgage loan servicing
consists of collecting and accounting for principal and interest payments from
borrowers, remitting principal and interest

60
<PAGE>
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 Company may be obligated to make timely payment of principal
and interest to security holders, whether or not such payments have been made by
borrowers on the underlying mortgage loans. With respect to mortgage loans
securitized under GNMA programs, the Company is insured by the FHA against
foreclosure loss on FHA loans, and by the VA through guarantees on VA loans.
Although the GNMA, the FNMA, and the FHLMC are obligated to reimburse the
Company for principal and interest payments advanced by the Company as a
servicer, the funding of delinquent payments or the exercise of foreclosure
rights involves costs to the Company that may not be fully reimbursed or
recovered.

The following table sets forth information on the Mortgage Banking Group's
single family servicing portfolio.

SINGLE FAMILY SERVICING PORTFOLIO

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------- ---------------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning servicing portfolio........ $ 13,246,848 $ 12,532,472 $ 12,532,472 $ 8,920,760 $ 8,073,226
------------ ------------ ------------ ------------ -----------
Add: Servicing acquisitions
transferred in(1).................. 1,405,434 77,626 1,189,387 3,730,401 567,010
Servicing on loans purchased by
the
Company....................... 5,467 944 21,192 439,834 97,681
Servicing originated............ 1,181,578 1,979,543 3,689,994 3,338,628 5,406,548
Subservicing acquired........... 2,698 23,679 22,538 254,959 --
------------ ------------ ------------ ------------ -----------
Total additions............. 2,595,177 2,081,792 4,923,111 7,763,822 6,071,239
------------ ------------ ------------ ------------ -----------
Less: Prepayments.................... 742,226 823,115 1,600,195 937,509 1,050,849
Foreclosures.................... 49,142 52,395 104,572 79,790 40,764
Servicing
released / transferred(1)....... 582,121 1,985,920 2,130,004 2,840,244 3,913,243
Amortization.................... 183,413 158,349 373,964 294,567 218,849
------------ ------------ ------------ ------------ -----------
Total reductions............ 1,556,902 3,019,779 4,208,735 4,152,110 5,223,705
------------ ------------ ------------ ------------ -----------
Ending servicing portfolio........... $ 14,285,123 $ 11,594,485 $ 13,246,848 $ 12,532,472 $ 8,920,760
============ ============ ============ ============ ===========
COMPOSITION OF ENDING SERVICING
PORTFOLIO BY TYPE
Conventional..................... $ 9,608,763 $ 9,203,012 $ 9,663,715 $ 9,442,600 $ 6,143,604
Government....................... 4,676,360 2,391,473 3,583,133 3,089,872 2,777,156
------------ ------------ ------------ ------------ -----------
Total servicing portfolio............ $ 14,285,123 $ 11,594,485 $ 13,246,848 $ 12,532,472 $ 8,920,760
============ ============ ============ ============ ===========
COMPOSITION OF ENDING SERVICING
PORTFOLIO BY OWNER
Company.......................... $ 3,610,560 $ 3,956,134 $ 3,752,060 $ 4,010,700 $ 2,714,291
Others........................... 10,674,563 7,638,351 9,494,788 8,521,772 6,206,469
------------ ------------ ------------ ------------ -----------
Total servicing portfolio............ $ 14,285,123 $ 11,594,485 $ 13,246,848 $ 12,532,472 $ 8,920,760
============ ============ ============ ============ ===========
</TABLE>

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

(1) Represents loans transferred into the servicing portfolio during the fiscal
year. The actual release or transfer of servicing does not necessarily take
place during the same period as the related sale or purchase of MSRs.

61
<PAGE>

During the six months ended March 31, 1997 and 1996, and for fiscal 1996,
1995, and 1994, the Mortgage Banking Group purchased MSRs associated with loan
principal amounts of $5.2 billion, $78.2 million, $1.2 billion, $594.7 million,
and $3.9 billion at premiums of $85.3 million, $949,000, $23.5 million, $12.5
million, and $50.9 million, respectively. 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. Certain MSR purchase transactions that
occurred at or near year-end in fiscal 1994 were not transferred in until fiscal
1995. See "Management's Discussion and Analysis -- Discussion of Results of
Operations -- Non-Interest Income" and Note 6 to the Consolidated Financial
Statements.

Gains on the sale of MSRs are affected by changes in interest rates as well
as the amount of MSRs capitalized at the time of loan origination or MSR
acquisition. Purchasers of MSRs analyze a variety of factors, including
prepayment sensitivity, to assess the purchase price they are willing to pay.
Lower market interest rates prompt an increase in prepayments as consumers
refinance their mortgages at lower rates of interest. As prepayments increase,
the life of the servicing portfolio is reduced, decreasing the servicing fee
revenue that will be earned over the life of that portfolio and the price
third-party purchasers are willing to pay. The fair value of servicing is also
influenced by the supply and demand of servicing available for purchase at any
point in time. Conversely, as interest rates rise, prepayments generally
decrease, resulting in an increase in the value of the servicing portfolio as
well as the gains on sales of MSRs. As indicated in the table above, prepayments
increased in fiscal 1996 as compared to fiscal 1995 reflecting the lower market
interest rates experienced during fiscal 1996. In addition, the valuation of
MSRs incorporates market assumptions regarding expected prepayment speeds. There
was no MSR valuation allowance at March 31, 1997 or September 30, 1996.

In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement required 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. On
January 1, 1997, the Company adopted SFAS No. 125. This statement superseded
SFAS No. 122 and requires, among other things, that the book value of loans be
allocated between MSRs and related loans at the time of the loan sale or
securitization, if servicing is retained.

Prior to fiscal 1996, the Company sold substantially all of its originated
MSRs ("OMSRs") related to non-portfolio loans. After the implementation of
SFAS No. 122, the Company began evaluating which of its OMSRs to retain for
portfolio and which of its OMSRs to sell based on the returns available and the
corresponding risks associated with the different types of servicing rights. The
Company may also 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. See "Management's Discussion and
Analysis -- Discussion of Results of Operations -- Non-Interest Income".

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

<TABLE>
<CAPTION>
AT MARCH 31, 1997
-----------------------------------------------------------------------
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........................... 6.0% 13.6% 9.6% 2.8% 0.5% 0.2% 0.1%
Conventional......................... 6.4 26.4 26.5 5.9 1.3 0.4 0.3
--------- --------- --------- ------ ------ ------ -------
Total........................... 12.4% 40.0% 36.1% 8.7% 1.8% 0.6% 0.4%
========= ========= ========= ====== ====== ====== =======
</TABLE>
The weighted average interest rate in the single family servicing portfolio
has decreased from 9.57% at September 30, 1991 to 8.10% at March 31, 1997,
principally as a result of the origination of mortgage loans with increasingly
lower rates during fiscal 1991 to 1997, the prepayment and refinance of higher
rate mortgages, and purchases of MSRs on loans originated by others at lower
rates. At March 31, 1997, the weighted average

62
<PAGE>

contractual maturity (remaining years to maturity) of the loans in the
residential mortgage loan servicing portfolio was 23.5 years.

At March 31, 1997, the single family servicing portfolio was secured by
properties located in the following states:

STATE PERCENT
- ------------------------------------- -------
California........................... 26.2%
Texas................................ 16.3
Illinois............................. 6.0
Florida.............................. 5.4
New Jersey........................... 4.7
Arizona.............................. 4.2
Other states, individually less than
3%................................. 37.2
-------
Total........................... 100.0%
=======

Of the approximately 188,000 loans serviced by the Mortgage Banking Group,
at March 31, 1997, 4.86% were delinquent and an additional 0.85% 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, ----------------------
1997 1996 1995 1994
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
30-59 Days Past Due.................. 3.7% 3.3 % 2.7 % 2.3 %
60-89 Days Past Due.................. 0.6 0.6 0.6 0.5
90+ Days Past Due.................... 0.6 0.5 0.9 0.8
Loans in foreclosure................. 0.8 0.6 0.6 0.7
--- ---- ---- ----
Total........................... 5.7% 5.0 % 4.8 % 4.3 %
=== ==== ==== ====
</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, ----------------------------------------
1997 1996 1995 1994
--------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities purchased under agreements
to resell and federal funds sold... $ 538,455 $ 674,249 $ 471,052 $ 358,710
Trading account assets............... 1,190 1,149 1,081 1,011
Securities........................... 28,010 64,544 116,013 114,115
Mortgage-backed securities........... 1,525,086 1,657,908 2,398,263 2,828,903
--------------- ------------ ------------ ------------
Total........................... $2,092,741 $ 2,397,850 $ 2,986,409 $ 3,302,739
=============== ============ ============ ============
</TABLE>

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

63
<PAGE>
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, 1997
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES FAIR VALUE VALUE
------------ ---------- ---------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD TO MATURITY
Agency
Fixed-rate......................... $ 2,133 $ -- $ -- $ 2,133
CMOs--fixed-rate................ 529 -- 1 528
Non-agency
Adjustable-rate................. 485,621 635 17,757 468,499
CMOs--fixed-rate................ 96,798 -- 5,572 91,226
Other.............................. (292) 55 -- (237)
------------ ---------- ---------- ------------
Held to maturity........... 584,789 $ 690 $ 23,330 562,149 $584,789
========== ========== ========
------------ ------------
AVAILABLE FOR SALE
Agency
Fixed rate...................... 31 $ 248 $ -- 279
Adjustable-rate................. 280,855 3,724 9 284,570
CMOs--adjustable-rate........... 213,888 1,386 311 214,963
Non-agency
Fixed-rate...................... 55,640 1,328 -- 56,968
Adjustable-rate................. 328,584 1,533 569 329,548
CMOs--fixed-rate................ 11,687 7,471 192 18,966
CMOs--adjustable-rate........... 35,150 263 572 34,841
Other.............................. 162 -- -- 162
------------ ---------- ---------- ------------
Available for sale......... 925,997 $ 15,953 $ 1,653 940,297 $940,297
========== ========== ========
------------ ------------
Total mortgage-backed
securities............... $ 1,510,786 $ 1,502,446
============ ============
</TABLE>
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, 1997, 98% of the non-agency MBS in
the held to maturity and available for sale portfolios 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 securities purchased under repurchase agreements outstanding at March
31, 1997 and September 30, 1996 were collateralized by single family,
multi-family, and commercial real estate loans, and MBS. The loans and MBS
underlying the repurchase agreements are held by the counterparty in safekeeping
for the account of the Company or by a third-party custodian for the benefit of
the Company. All of the investments in repurchase agreements and federal funds
sold at March 31, 1997 matured on or before April 25, 1997 and those outstanding
at September 30, 1996 matured on or before October 21, 1996. The repurchase
agreements provide for the same loans and MBS to be delivered to the repurchase
counterparty at maturity.

64
<PAGE>
As a result of the implementation of SFAS No. 125 on January 1, 1997, the
Company reclassified $6.8 million from MBS held to maturity and $15.5 million
from other assets to MBS and securities available for sale. An unrealized gain
of $8.2 million, or $5.1 million after tax, was recorded in stockholders'
equity. 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 its 71 branch community banking
network located primarily in the Houston and Dallas/Ft. Worth areas. Currently,
the principal methods used by the Company to attract and retain deposit accounts
include offering generally competitive interest rates, having branch locations
in these major Texas markets, and offering a variety of services for the
Company's customers. The Company uses traditional marketing methods to attract
new customers and savings deposits, including newspaper, radio, and television
advertising. The Company offers a traditional line of deposit products that
currently includes checking, commercial checking, money market, savings
accounts, and CDs. These deposit products are specifically tailored to meet the
needs of the Company's consumer and small business banking customers.

The following table illustrates the levels of deposits gathered by the
Company's community banking network at March 31, 1997.

COMMUNITY BANKING NETWORK

AVERAGE
DEPOSITS
NUMBER OF DEPOSITS PER
LOCATION BRANCHES OUTSTANDING BRANCH
- ------------------------------------- --------- ------------ ---------
(DOLLARS IN THOUSANDS)
Houston area......................... 37 $ 2,485,699 $ 67,181
Dallas/Ft. Worth area................ 29 1,388,688 47,886
Other................................ 5 232,383 46,477
--
------------
Total deposits.................. 71 $ 4,106,770 57,842
== ============

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, 1997, these deposits totalled
$855.4 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.

65
<PAGE>
The following table sets forth, by account types, the aggregate amount and
weighted average rate of the Company's deposits.

DEPOSITS

DEPOSIT MATURITIES
<TABLE>
<CAPTION>
CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
------------------------------------------------------------------
STATED RATE 1998 1999 2000 2001 2002 THEREAFTER TOTAL
----------------- --------- --------- --------- --------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
2.99% and below...................... $ 4,413 $ -- $ -- $ -- $ -- $-- $ 4,413
3.00% to 3.99%....................... 10,156 114 -- -- -- 3 10,273
4.00% to 4.99%....................... 296,029 38,968 4,930 2,478 25 -- 342,430
5.00% to 5.99%....................... 1,053,005 551,500 68,143 22,927 44,606 343 1,740,524
6.00% to 6.99%....................... 223,466 261,531 86,127 12,468 82,539 442 666,573
7.00% to 7.99%....................... 8,826 3,591 25,057 818 12,197 131 50,620
8.00% to 8.99%....................... 929 2,263 4,177 715 121 25 8,230
9.00% to 9.99%....................... 2,596 7,380 158 155 -- 308 10,597
10.00% to 10.99%..................... 11,927 22,509 77 688 -- 228 35,429
Over 10.99%.......................... 32,881 -- 296 -- -- -- 33,177
--------- --------- --------- --------- --------- ---------- ---------
$1,644,228 $ 887,856 $ 188,965 $ 40,249 $ 139,488 $1,480 $2,902,266
========= ========= ========= ========= ========= ========== =========
</TABLE>
66
<PAGE>

The following table sets forth the amount of the Company's CDs that are
$100,000 or greater by time remaining until maturity at March 31, 1997.

TIME DEPOSITS GREATER THAN $100,000

NUMBER OF DEPOSIT
ACCOUNTS AMOUNT
---------- --------
(DOLLARS IN THOUSANDS)
Three months or less.................... 543 $ 59,044
Over three through six months........... 652 68,500
Over six through twelve months.......... 1,184 124,393
Over twelve months...................... 2,088 220,103
---------- --------
4,467 $472,040
========== ========

BORROWINGS

The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. Borrowings were the primary source of funds for the recent asset growth
and accounted for 43% of the funding of average assets for the six months ended
March 31, 1997, 45% for fiscal 1996, 43% for fiscal 1995, and 31% for fiscal
1994. Fixed and adjustable-rate advances are obtained from the FHLB Dallas under
a security and pledge agreement that restricts the amount of borrowings to the
greater of 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, 1997, these limitations were 65% and 45%, respectively. 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 these reverse
repurchase agreements. At March 31, 1997, the Company had $1.1 billion in such
collateral, $963.1 million of which was collateralizing such reverse repurchase
agreements. See Notes 9 and 10 to the Consolidated Financial Statements.

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

BORROWINGS
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE YEAR ENDED SEPTEMBER
SIX MONTHS ENDED 30,
MARCH 31, -------------------------------------
1997 1996 1995 1994
------------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FHLB ADVANCES
Balance outstanding period-end........ $3,786,596 $ 3,490,386 $ 4,383,895 $ 2,620,329
Maximum outstanding at any
month-end........................... 3,936,551 4,384,798 4,386,605 2,697,829
Daily average balance................. 3,721,496 4,073,297 3,560,844 2,285,630
Average interest rate................. 5.60% 6.07% 6.31% 3.98%
REVERSE REPURCHASE AGREEMENTS
Balance outstanding at period-end..... $ 927,859 $ 832,286 $ 1,172,533 $ 553,000
Fair value of collateral at
period-end.......................... 963,081 1,020,405 1,239,527 673,000
Maximum outstanding at any
month-end........................... 1,038,086 1,096,508 1,355,540 553,000
Daily average balance................. 905,475 955,681 887,932 273,899
Average interest rate................. 5.55% 5.77% 5.99% 3.85%
FEDERAL FUNDS PURCHASED
Balance outstanding at period-end..... $ -- $ -- $ -- $ --
Maximum outstanding at any
month-end........................... -- -- -- 15,000
Daily average balance................. 412 27 521 767
Average interest rate................. 5.28% 6.02% 5.95% 3.73%
</TABLE>

67
<PAGE>
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 Company, in accordance with policies approved by the Company's
Board of Directors. The ALCO formulates strategies based on appropriate levels
of interest rate risk. In determining the appropriate level of interest rate
risk, the ALCO considers the impact on earnings and capital of the current
outlook on interest rates, potential changes in interest rates, regional
economies, liquidity, business strategies, and other factors. The ALCO meets
regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market values of assets and
liabilities, unrealized gains and losses, purchase and sale activity, the
mortgage pipeline, and the maturities of investments and borrowings.
Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of
deposits, consumer and commercial deposit activity, current market conditions,
and interest rates on both a local and national level.

The "interest rate sensitivity gap" is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to affect net interest income
adversely, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest rates, a negative gap would
tend to result in an increase in net interest income, while a positive gap would
tend to affect net interest income adversely. Different types of assets and
liabilities with the same or similar maturities may react differently to changes
in overall market rates or conditions, thus changes in interest rates may affect
net interest income positively or negatively even if an institution were
perfectly matched in each maturity category. The Company's one year cumulative
interest rate gap position at March 31, 1997 was negative $340.8 million or
3.10% of total assets. 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 movements. 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 Company's Board of Directors on an
ongoing basis. The Company has traditionally managed its business to reduce its
overall exposure to changes in interest rates. However, under current policies
of the Company's Board of Directors, 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.

The Company 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 Company does not enter into instruments such
as leveraged derivatives or structured notes for the purposes of reducing
interest rate risk. 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 offset 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.

68
<PAGE>

The following table sets forth the expected repricing characteristics of
the Company's consolidated assets and liabilities at March 31, 1997, 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
THREE BUT WITHIN BUT WITHIN BUT WITHIN AFTER NON-
MONTHS SIX MONTHS ONE YEAR FIVE YEARS FIVE YEARS REPRICING
---------- ----------- ----------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS(1)
Cash and investment
securities(2).................... $ 816,066 $ -- $ -- $ -- $ 35,539 $ --
Adjustable-rate loans and
mortgage-backed securities....... 3,907,395 1,801,621 1,047,328 835,317 57,196 --
Fixed-rate loans and
mortgage-backed securities....... 52,755 51,643 100,114 684,304 791,909 --
Single family warehouse............ 145,473 -- -- -- -- --
Other assets....................... -- -- -- -- -- 675,965
---------- ----------- ----------- ---------- ---------- ---------
Total assets................... $4,921,689 $1,853,264 $1,147,442 $1,519,621 $884,644 $ 675,965
========== =========== =========== ========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Certificates of deposit............ $ 372,446 $ 460,183 $ 814,633 $1,253,623 $ 1,380 $ --
Checking and savings(3)............ 2,163,539 -- -- -- -- --
---------- ----------- ----------- ---------- ---------- ---------
Total deposits................. 2,535,985 460,183 814,633 1,253,623 1,380 --
Senior Notes....................... -- -- -- 115,000 -- --
FHLB advances and other
borrowings....................... 4,108,432 520,000 65,000 21,245 -- --
Other liabilities.................. -- -- -- -- -- 352,747
Minority interest.................. -- -- -- -- -- 185,500
Stockholders' equity............... -- -- -- -- -- 568,897
---------- ----------- ----------- ---------- ---------- ---------
Total liabilities, minority
interest, and stockholders'
equity....................... $6,644,417 $ 980,183 $ 879,633 $1,389,868 $ 1,380 $1,107,144
========== =========== =========== ========== ========== =========
Gap before off-balance-sheet
financial instruments.............. $(1,722,728) $ 873,081 $ 267,809 $ 129,753 $883,264 $(431,179)
OFF-BALANCE-SHEET(4)
Interest rate swap
agreements -- pay floating....... 241,000 -- -- (205,500 ) (35,500) --
---------- ----------- ----------- ---------- ---------- ---------
Gap.................................. $(1,481,728) $ 873,081 $ 267,809 $ (75,747 ) $847,764 $(431,179)
========== =========== =========== ========== ========== =========
Cumulative gap....................... $(1,481,728) $ (608,647 ) $(340,838)
========== =========== ===========
Cumulative gap as a percentage of
total assets....................... (13.47)% (5.53 )% (3.10)%
========== =========== ===========
</TABLE>
TOTAL
----------
ASSETS(1)
Cash and investment
securities(2).................... $ 851,605
Adjustable-rate loans and
mortgage-backed securities....... 7,648,857
Fixed-rate loans and
mortgage-backed securities....... 1,680,725
Single family warehouse............ 145,473
Other assets....................... 675,965
----------
Total assets................... $11,002,625
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Certificates of deposit............ $2,902,265
Checking and savings(3)............ 2,163,539
----------
Total deposits................. 5,065,804
Senior Notes....................... 115,000
FHLB advances and other
borrowings....................... 4,714,677
Other liabilities.................. 352,747
Minority interest.................. 185,500
Stockholders' equity............... 568,897
----------
Total liabilities, minority
interest, and stockholders'
equity....................... $11,002,625
==========
Gap before off-balance-sheet
financial instruments..............
OFF-BALANCE-SHEET(4)
Interest rate swap
agreements -- pay floating.......
Gap..................................
Cumulative gap.......................
Cumulative gap as a percentage of
total assets.......................

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

(1) Fixed-rate loans and MBS are distributed based on their contractual maturity
adjusted for anticipated prepayments, and adjustable-rate loans and MBS are
distributed based on the interest rate reset date and contractual maturity
adjusted for anticipated 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 18%.

(2) Investment securities include repurchase agreements, federal funds sold,
trading account assets, securities, and FHLB stock.

(3) Checking and savings deposits are presented in the earliest repricing period
since amounts in these accounts are subject to withdrawal upon 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.

69
<PAGE>
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. 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. 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

At March 31, 1997, the Company had no direct subsidiaries other than
Holdings, which has one direct subsidiary, 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 innercity 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,
1997, the Bank was authorized to have a maximum investment of approximately
$329.4 million in its subsidiaries.

BNKU HOLDINGS, INC.

In December 1996, the Company formed a new, wholly owned, Delaware
subsidiary, Holdings. After acquiring all the common stock of Holdings, the
Company contributed all the common stock of the Bank to Holdings, and Holdings
assumed the obligations of the Company's Senior Notes. As a result of these
transactions, Holdings is the sole direct subsidiary of the Company and the Bank
is the sole direct subsidiary of Holdings.

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 community banking 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. UFM changed its name to Bank
United Securities Corp. effective April 1, 1997.

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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, 1997, the Company employed 1,385 full-time employees and
224 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 13 to the Consolidated Financial Statements.

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 and
which set forth certain mutual, interdependent commitments of the parties with
respect to the Acquisition. 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
FHLBB, 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 a 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 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".

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,

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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".

Pursuant to the Assistance Agreement and the Settlement Agreement, the Bank
received substantial payments from the FRF during fiscal 1994 as follows:

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

WARRANT AGREEMENT

Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into the Warrant Agreement, pursuant to which the FSLIC was
granted the Warrant to purchase up to 158,823 shares of Bank Common Stock 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.

Pursuant to the Settlement Agreement, all disputes with respect to the
Warrant were resolved, and the parties agreed that the Bank was to 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 was 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.

In August 1996, the FDIC surrendered a portion of the Warrant for a cash
payment of $6.1 million, exercised the remainder of the Warrant for Bank Common
Stock, and immediately 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 August Offering, the FDIC-FRF sold all of such shares of Class B Common
Stock. Following the consummation of the August Offering, all rights and
obligations under the Warrant and the Warrant Agreement were terminated, and the
FDIC-FRF no longer owned 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. 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

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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.

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. The
lawsuit 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. 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.

Following a number of status conferences Chief Judge Loren Smith of the
United States Court of Federal Claims has 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 the four WINSTAR plaintiffs, and allowed
Glendale Federal to assert several alternative damages 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
judgement 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 also unable to predict the outcome of its suit
against the United State 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.

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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 -- Investment Authority -- QTL Test". Every subsidiary savings
association of a savings and loan holding company must give the OTS not less
than 30 days of advance notice of proposed dividend declarations.

SAFETY AND SOUNDNESS REGULATIONS

CHARTER, SUPERVISION, AND EXAMINATION

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

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

The OTS prescribes regulations for the collection of fees in order to
recover the expenses of the agency, the cost of supervision of savings
associations, the examination of savings associations and their subsidiaries,
and the processing of applications, filings, notices, and certain other requests
of savings associations filed with the OTS. The OTS adopted a two-pronged
sliding scale approach in 1990 by which all institutions pay a general
assessment and troubled institutions pay an additional premium assessment. The
Bank has never been subject to a premium assessment. The Bank's general
assessments amounted to approximately $715,000, $1.5 million and $1.2 million in
the aggregate during the six months ended March 31, 1997, fiscal 1996 and 1995,
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, provided, however, that the FDIC may not collect more than is
necessary to reach or maintain the SAIF's designated reserve ratio ("DRR") and
must rebate any excess collected. 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

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capital" ratio (the ratio of total capital to risk-weighted assets), a 6%
"tier 1 risk-based capital" ratio (the ratio of tier 1 (core) capital to
risk-weighted assets) and a 5% "leverage capital" ratio (the ratio of core
capital to adjusted total assets). An "adequately capitalized" institution has
at least an 8% total risk-based capital ratio, a 4% tier 1 (core) risk-based
capital ratio and a 4% leverage capital ratio. An "undercapitalized"
institution is one that does not meet either the definition of well-capitalized
or adequately capitalized.

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

SUPERVISORY SUBGROUP
-------------------------------
A B C
-- -- --
Meets numerical standards for:
Well-capitalized................ 0 3 17
Adequately capitalized.......... 3 10 24
Undercapitalized................ 10 24 27

For purposes of assessments of FDIC insurance premiums, as of March 31,
1997, 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, 1997, and fiscal 1996 and 1995 were $3.2 million, $12.0
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. The assessment rates
schedules for SAIF and BIF are established independently of one another, and
banks and savings associations with the same assessment base may pay assessments
at different rates. The first SAIF and BIF assessment rate schedules established
by the FDIC, effective January 1, 1993, were identical, and assessments ranged
from a low of 0.23% to a high of 0.31%. As a result of the BIF reaching the
1.25% level, on August 16, 1995, the FDIC lowered the deposit insurance premium
assessment rate for BIF members to between 0.04% and 0.31% of insured deposits,
while retaining the assessment rate of 0.23% to 0.31% 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 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. The assessment rates for savings
associations were not lowered because SAIF had not reached the DRR, in large
part because a portion of the payments into SAIF were required by law to be used
to pay interest on bonds issued by FICO and necessary to resolve numerous
savings associations that failed during the late 1980s and early 1990s. 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, and the continuing obligation of savings associations, but not banks,
to pay interest on the FICO bonds, SAIF members were at a competitive
disadvantage to BIF members with respect to the pricing of loans and deposits
and the ability to achieve lower operating costs.

On September 30, 1996, President Clinton signed into law the Economic
Growth and Paperwork Reduction Act of 1996 (the "1996 Act"). The 1996 Act
required the FDIC to impose a one-time assessment on institutions holding SAIF
deposits in an amount sufficient to increase the SAIF's net worth to 1.25% of
SAIF-insured deposits, as of October 1, 1996. The special assessment, which was
collected on November 27, 1996, was 65.7 basis points times the amount of
deposits held by an institution as of March 31, 1995. The special assessment is
deductible in the tax year paid.

As a result of the special assessment, the SAIF is deemed to have met its
DRR as of October 1, 1996. Effective October 1, 1996, the FDIC established new
risk-based assessments for SAIF-insured institutions. Beginning January 1, 1997,
the SAIF base assessment rates effectively range from 0 to 27 basis points as
set forth in the schedule above.

ASSESSMENTS TO PAY FICO BONDS. The 1996 Act also obligates banks, for the
first time, to pay assessments to be used to service the FICO bonds. For the
last calendar quarter of 1996, a special interim schedule of

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assessment rates ranging from 18 to 27 basis points applied to SAIF-insured
savings associations, reflecting the assessments necessary to pay interest on
the FICO bonds. Any excess assessments collected under the prior assessment
schedule will be refunded or credited in one or more installments, with
interest. Thus, except to the extent of FICO assessments, SAIF and BIF
institutions have the same assessment schedule as of January 1, 1997.

Under the 1996 Act, during the period beginning January 1, 1997 through
December 31, 1999, SAIF-insured institutions will pay 6.48 basis points toward
FICO bonds and BIF-insured institutions will pay 1.296 basis points. Starting in
the year 2000, BIF and SAIF institutions will begin sharing the FICO burden on a
pro rata basis until termination of the FICO obligation in 2017, thus
eliminating all assessment disparities.

TERMINATION OF INSURANCE. The FDIC may terminate the deposit insurance of
any insured depository institution if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, or order, or any condition imposed in writing by, or
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 implementing
statutory annual independent audit 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 assertions, except the procedures employed by management to detect
and report violations of designated laws. 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
individuals designated as "large customers" of the institution. In some cases,
the institution's responsibilities under these rules may be fulfilled by its
holding company. The 1996 Act authorizes the appropriate Federal banking agency
to permit the independent audit committee to contain inside as well as outside
directors if the institution has encountered hardships in recruiting and
retaining outside directors to serve on the committee, and a majority of the
committee are outside directors.

FEDERAL RESERVE BOARD. The Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") requires all depository institutions
(including savings associations) to maintain reserves against their deposit
accounts (primarily transaction accounts and nonpersonal time deposits) and
Eurocurrency liabilities. Reserves of 3% must be maintained against net
transaction accounts of $49.3 million or less. In addition, if net transaction
accounts exceed $49.3 million, institutions must maintain reserves equal to 10%
on the excess. The reserve requirement for nonpersonal time deposits and
Eurocurrency liabilities is 0%. Reserve requirements are subject to adjustment
by the Federal Reserve Board, and must be adjusted at least annually. 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 a Federal Reserve Bank. The Federal Reserve
Banks are not obligated to lend to any depository institution, and are
restricted in the extensions of credit that they may make to any institution
that is not at least adequately capitalized.

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

CAPITAL REQUIREMENTS

REQUIREMENTS AND STANDARDS. The OTS capital regulations have three
components: a leverage limit, a tangible capital requirement, and a risk-based
capital requirement. See Note 15 to the Consolidated Financial Statements for
compliance with the regulatory capital requirements. 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, 1997, the Bank's core capital
included $201.6 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, 1997, the Bank's tangible
capital ratio was 6.87%.

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 Office of the
Comptroller of the Currency ("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

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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, 1997, the Bank's core capital and total capital ratios were 6.93% and
12.68%, respectively.

In determining the amount of risk-weighted assets, savings associations
must assign balance sheet assets to one of four risk-weight categories,
reflecting the relative credit risk inherent in the asset. Off-balance-sheet
items are assigned to one of the four risk-weight categories after a "credit
conversion factor" is applied.

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. Specifically, savings associations with IRR exposure in excess of
2% (measured in accordance with an OTS Model and Guidelines) must deduct an IRR
component from total capital prior to calculating their risk-based capital
ratios. 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. This deduction will have the effect of requiring savings
associations with IRR exposures of more than 2% to hold more capital than those
with IRR exposure of 2% or less.

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 may be subject to enforcement actions by the
OTS or the FDIC. The OTS must limit the asset growth of any undercapitalized
association and require the association to develop and implement a capital
restoration plan. 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 OTS 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 but that is less than the amount of its fully
phased-in capital requirement, 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 -- Capital Resources and Liquidity -- Regulatory Matters".

Upon 30 days' written 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 make capital distributions in excess of the foregoing limitations if, after
written notice to the OTS, the OTS does not 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.

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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.

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 (up to 20% of
assets, the last 10% of which must be small business loans), (iii) consumer
loans (subject to certain percentage of asset limitations), and (iv) credit card
loans. The lending authority of federally chartered associations is subject to
various OTS requirements, including, as applicable, requirements governing
amortization, term, loan-to-value ratio, percentage-of-assets limits, and loans
to one borrower limits. In September of 1996, the OTS substantially revised its
investment and lending regulations eliminating 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; (xi) loans on the security of liens upon residential real property;
(xii) credit card loans; and (xiii) education loans. Federally chartered savings
associations may invest in secured or unsecured loans for commercial, corporate,
business, or agricultural purposes, up to 20% of assets, provided that the last
10% is invested in small business loans. 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. Federally chartered savings associations are also authorized by the
HOLA to make investments in consumer loans, 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 borrower or group of
related 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

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general lending limits, a savings association may make loans to one borrower for
any purpose 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. The OTS may
also impose more stringent limits on an association's loans to one borrower, if
it determines that such limits are necessary to protect the safety and soundness
of the association.

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

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

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

In December 1996, the OTS adopted substantial revisions to its regulations
governing subsidiaries. The revised regulations, 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 qualified thrift
lender ("QTL") test for, among other things, future eligibility for FHLB
advances. A savings association is a QTL if it either meets the Code test for
being a domestic building and loan association, as that term is defined in
Section 7701(a)(19) of the Code; or has invested at least 65% of its portfolio
assets in qualified thrift investments and maintains 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; certain obligations of the FDIC and certain other related
entities; and education, small business, and credit card loans. 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

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churches, schools, nursing homes and hospitals; and (vi) personal, family, or
household loans (other than education, small business, or credit card loans).

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 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, and is subject to
national bank limits for payment of dividends, and it may not establish a branch
office at any location at which a national bank located in the savings
association's home state could not establish a branch.

LIQUIDITY. The Bank is required to maintain an average daily balance of
"liquid assets" (cash, certain time deposits, bankers' acceptances, highly
rated corporate debt securities and commercial paper, securities of certain
mutual funds, reserves maintained pursuant to Federal Reserve Board
requirements, and specified government, state or federal agency obligations)
equal to a certain percentage of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. Currently, OTS regulations require a savings
association, such as the Bank, to maintain liquid assets equal to not less than
5% of its net withdrawable deposit accounts and borrowings payable in one year
or less, and short-term liquid assets of not less than 1%. Penalties may be
imposed for failure to meet the liquidity requirements.

MERGERS AND ACQUISITIONS

RESTRICTIONS ON ACQUISITIONS. As previously described, the Bank is
controlled by the Company. The Company must obtain approval from the OTS before
acquiring control of any other savings association. Such acquisitions are
generally prohibited if they result in a savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in supervisory acquisitions of failing savings associations. The Company may
acquire up to 5%, in the aggregate, of the voting stock of any non-subsidiary
savings association or savings and loan holding company. It may not acquire more
than 5% unless it takes 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. There is a rebuttable presumption of
control if a person or company 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 or company, the percentage of
debt and/or equity of the association or holding company controlled by the
person or company, agreements giving the person or company 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 company,
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.

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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 or director of a savings
association, 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"); to any related interests of such persons (I.E., any company
controlled by such executive officer, director, or Principal Shareholder); or to
any political or campaign committee, the funds or services of which will benefit
such executive officer, director or Principal Shareholder, or which is
controlled by such executive officer, director or Principal Shareholder, are
subject to Sections 22(g) and 22(h) of the Federal Reserve Act (the "FRA") and
the regulations promulgated thereunder. Among other things, such loans must be
made on terms substantially the same as those prevailing on comparable
transactions made to unaffiliated individuals, and may not involve more than the
normal risk of repayment or present other unfavorable features. 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) establishes additional limitations
on loans to executive officers.

CHANGES IN DIRECTORS AND SENIOR EXECUTIVE OFFICERS. Section 32 of the
FDIA, as amended by the 1996 Act, 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 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, or low quality assets from 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.

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

ENFORCEMENT

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

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

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

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

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

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

ADMINISTRATIVE ENFORCEMENT AUTHORITY. The OTS exercises extensive
enforcement authority over all savings associations and their
"institution-affiliated parties" (I.E., officers, directors, controlling
shareholders, employees, as well as attorneys, appraisers or accountants if such
consultants or contractors 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

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ensure safe and sound practices. Except under certain narrow circumstances,
public disclosure of final enforcement actions by the federal banking agencies,
including the OTS, is required.

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

CONSUMER PROTECTION REGULATIONS

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

MORTGAGE AND CONSUMER LENDING

THE TRUTH IN LENDING ACT ("TILA"). 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, including the OTS with regard to the Bank, 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

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finance charge, with a minimum of $200 and a maximum of $2,000 for closed end
loans secured by real property or a dwelling. If successful, the borrower is
entitled to reasonable attorneys' fees and the costs of bringing the action. The
TILA also provides for class actions for actual damages and for statutory
damages of the lesser of $500,000 or 1% of the creditor's net worth, plus court
costs and attorneys' fees.

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

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

THE FAIR HOUSING ACT ("FH 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"). The
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 ("ECOA"). 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. Federal Reserve Board 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.

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THE REAL ESTATE SETTLEMENT PROCEDURES ACT ("RESPA"). 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. HUD Regulation X, which implements RESPA, also establishes
escrow accounting procedures and mandates the use of aggregate accounting for
determining the maximum dollar amount that may be collected in connection with
escrow accounts.

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

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

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

THE HOME MORTGAGE DISCLOSURE ACT ("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 ("CRA"). 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

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deposit-taking office or cluster of offices, including any low- or
moderate-income neighborhoods within that area.

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

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

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

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

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

While the Bank is strongly committed to serving all of its CRA communities,
including its low- and moderate-income neighborhoods, the OTS might determine
the Bank's CRA-related programs to be insufficient. The Bank was last examined
for CRA compliance by its primary regulator, the OTS, on December 2, 1996 and
received a CRA assessment rating of "outstanding". The Bank's previous CRA
assessment rating, as of October 24, 1994, 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

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

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

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

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

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

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

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

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

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

The 1996 Act repeals the civil liability provisions of the TISA effective
September 30, 2001.

THE AMERICANS WITH DISABILITIES ACT ("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 a retail branch office of the Bank, 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

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court may impose civil penalties of $50,000 for a first violation and $100,000
for any subsequent violation or certain other remedies.

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

LEGISLATION

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

On September 30, 1996, President Clinton signed into law the 1996 Act. The
1996 Act, among other things imposed a special assessment on SAIF deposits held
as of March 31, 1995, to capitalize the SAIF.

TAXATION

FEDERAL TAXATION

The Parent Company is a savings and loan holding company, Holdings is a
wholly owned, Delaware subsidiary, and the Bank is a federal savings bank. All
are subject to provisions of the Code, in the same manner, with certain
exceptions, as other corporations. The Parent Company, Holdings, 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 Parent Company, Holdings, 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 Parent Company's,
Holdings', and the Bank's taxable income for the six months ended March 31, 1997
and 1996, and for fiscal 1996, 1995, and 1994. 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 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 14 to the
Consolidated Financial Statements.

ENACTED LEGISLATION

The Small Business Job Protection Act of '96 ("The Small Business Act")
was signed into law on August 20, 1996. The legislation requires 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 are met. Under the Small Business Act, thrift institutions, which
are treated as banks for computing bad debt, with over $500 million in assets
("Large Banks"), will be required to use the specific charge-off method to
account for bad debts. The Small Business Act also repeals the ability of thrift
institutions to use NOLs to offset income from a residual interest in a Real
Estate Mortgage Investment Conduit ("REMIC") that meets a significant value
test.

The effective date of the enacted legislation for the Bank is fiscal 1997.
The amendment to a thrift's ability to utilize NOLs against residual income from
a REMIC with significant value does not apply to any residual interest held by
the taxpayer on November 1, 1995 and at all times thereafter. All residual
interests held by the Bank that meet a significant value test are grandfathered
under this clause. See " -- Residual Interest".

The Bank will not have the opportunity to defer recapture of the bad debt
reserve because it has been determined the residential loan requirements will
not be met. There will be no financial statement impact on the Company from this
recapture as a deferred tax liability has already been provided for on the
Bank's post-1987

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tax bad debt reserves. At September 30, 1996, the Bank had approximately $89
million of post-1987 tax bad debt reserves. The current tax liability resulting
from recapture of this reserve will be reduced by NOLs available to offset this
income.

The pre-1988 reserve will be required to be recaptured into income under
certain circumstances, including any distribution in redemption of stock of the
Bank (with certain exceptions for preferred stock); partial or complete
liquidation of the Bank following the merger or liquidation; or a dividend
distribution in excess of certain earnings and profits. If a thrift with a
pre-1988 reserve is merged, liquidated tax free, or acquired by another
depository institution, the remaining institution will inherit the thrift's
pre-1988 reserve and post-1951 earning and profits. Because management believes
the circumstances requiring recapture of the pre-1988 reserve in the amount of
$52 million are not likely to occur, deferred taxes of $18 million have not been
provided.

Legislation was signed into law on September 30, 1996, which resulted in an
assessment on all SAIF-insured deposits in such amounts that fully-capitalized
the SAIF at a reserve ratio of 1.25% of SAIF-insured deposits. See
" -- Regulation -- Charter, Supervision, and Examination -- Insurance
Assessments" and Note 15 to the Consolidated Financial Statements. This
one-time assessment was tax-deductible in the first quarter of fiscal 1997, when
paid. The deduction associated with the one-time assessment was deferred at
September 30, 1996 with the tax effect included as a deferred tax asset.

RESIDUAL INTEREST

The Bank is a holder of residual interests in 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
fiscal 1994.

Enacted legislation repeals the ability of a thrift institution to use a
NOL to offset its income from a residual interest in a REMIC. This does not
apply to any residual interest in a REMIC held by a taxpayer on November 1,
1995, and at all times thereafter. See "-- Enacted Legislation".

DOMESTIC BUILDING AND LOAN ("DBL") TEST

Savings institutions such as the Bank that meet the definitional DBL test
prescribed by the Code may benefit from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. The DBL test consists of a supervisory test, a business operations
test, and an asset test. If the Bank fails to meet these tests, the transition
from the reserve method to the direct charge-off method of tax accounting for
bad debts would result in a recapture of this reserve into taxable income. At
September 30, 1996, the Bank was in excess of the minimum thresholds. Enacted
legislation has repealed the reserve method of accounting for bad debts by large
thrifts for taxable years beginning after 1995; thereby eliminating the Bank's
requirement to meet the definitional DBL test for fiscal 1997 and thereafter.
See "-- Enacted Legislation".

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. Enacted legislation has repealed the
bad debt reserve deduction for Large Banks effective for taxable years beginning
after December 31, 1995.

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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. For
the six months ended March 31, 1996 and for fiscal 1996, 1995 and 1994, the Bank
computed its bad debt deduction pursuant to the experience method. Due to
enacted legislation, the Bank's post-1987 bad debt reserve of approximately $89
million is required to be recaptured ratably over a six year period into taxable
income with the specific charge-off method being used to account for bad debts
for taxable years beginning with fiscal 1997. See "-- Enacted Legislation".

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 "-- 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, 1997 and 1996 and for fiscal 1996 and 1995, AMTI was
incurred that was offset by the utilization of AMT NOLs. However, corporations
may offset only 90% of their AMTI with the related NOLs. For fiscal 1994, an AMT
liability was not incurred.

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. The environmental tax imposed by the Code applies to taxable years
beginning after December 31, 1986 and before January 1, 1996, therefore, for
fiscal 1997, this tax does not apply.

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 "-- 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 Bank) has been amended several times in recent years.
Payments to the Bank pursuant to the Assistance Agreement were subject to the
applicable provisions of the Code that were in effect in 1988, the year of the
Acquisition. Payments from the FRF to the Bank pursuant to the Assistance
Agreement were not included in the Bank's taxable income, and the Bank was not
required to reduce its basis in the Covered Assets by the amount of such
financial assistance; however, certain writedowns and losses were 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 required the Bank 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.

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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 by approximately $259 million.

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

FOR THE YEAR ENDED
SEPTEMBER 30, SAVINGS (COSTS)
- ------------------------------------- ---------------
1991............................ $(1.7)
1992............................ (2.8)
1993............................ 10.5
1994............................ 3.6
1995............................ 31.4
1996............................ 19.8

FOR THE SIX
MONTHS ENDED
MARCH 31,
- -------------------------------------
1997............................ $10.9

NET OPERATING LOSSES

The Company's total NOLs at March 31, 1997 were $768 million, of which $705
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. The Company's total NOLs of $768
million are attributable to operations for fiscal 1989 to 1994, and will begin
expiring in fiscal 2004 if not utilized. These NOLs may be utilized against the
taxable income of the other companies within the consolidated group of which the
Parent Company and the Bank are members. See Note 14 to the Consolidated
Financial Statements.

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 5.5% for March 1997). 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 maximum of approximately $51 million based
on the closing market price at March 31, 1997.

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 August 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 August Offering, sales
pursuant to the Offering, the conversion of the Warrant, and the issuance of
stock options during fiscal 1996 did not cause an Ownership Change. In addition,
events could occur in future periods that are beyond the control of the Company
which could result in an Ownership Change.

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In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and the 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 Transfers are deemed prohibited by the Certificate, 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's Board of Directors
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 has utilized a substantial portion of its available
ownership limitation in connection with the August 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.

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

In fiscal 1995, the Bank publicly issued 4,000,000 shares, $25 liquidation
preference per share, of Preferred Stock, Series B. In fiscal 1993, the Bank
publicly issued 3,420,000 shares, $25 liquidation preference per share, of
noncumulative Preferred Stock, Series A. 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 Parent Company, Holdings, and the Bank 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 $718 million.
See " -- Net Operating Losses".

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<PAGE>
TAX SHARING AGREEMENT

The Parent Company, Holdings, and the Bank are parties to a tax sharing
agreement pursuant to which the Bank will pay to the Parent Company and Holdings
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 Parent 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 affiliated group.

ACCOUNTING FOR INCOME TAXES

Effective October 1, 1992, the Company adopted SFAS No. 109, "Accounting
for Income Taxes", which changed 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 APB No. 11, "Accounting for Income Taxes", did not require
these amounts to be recognized previously.

In June 1996, the Certificate and By-Laws were restated with the intent to
preserve certain beneficial tax attributes limiting the disposition of certain
common stock and other interests in the Company by certain of its stockholders.
The preservation of certain tax attributes allowed the recognition of tax
benefits of $85.2 million by the Bank in June 1996 for the expected utilization
of $365 million of NOLs against future taxable income. 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 tax sharing agreement. This agreement resulted in the recognition
of a tax benefit of $16.5 million by the Parent Company for the expected
utilization of $47 million of the Parent Company's NOLs by the Bank. The 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, in accordance with SFAS
No. 109. For the six months ended March 31, 1997, no tax benefits were recorded
by the Parent Company or the Bank because the criteria under SFAS No. 109 to
recognize a tax benefit was not met.

For the six months ended March 31, 1996 and in fiscal 1995, no tax benefits
were recorded by the Parent Company or the Bank. The Parent Company recognized
no benefit for its stand alone NOLs as it did not generate taxable income to
offset such losses and it was not party to a federal tax sharing agreement with
the Bank at that time. The Bank recognized no tax benefits due to limitations on
the utilization of its NOLs if an Ownership Change had occurred.

In fiscal 1994, no tax benefits were recorded by the Parent Company due to
circumstances similar to those described in the preceding paragraph. The Bank
recognized a $58.2 million tax benefit in fiscal 1994 for the expected
utilization of $249 million of its NOLs against future taxable income.

STATE TAXATION

The Parent Company, Holdings, 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, 1997 and 1996, and for fiscal 1996, 1995, and 1994. See Note 14
to the Consolidated Financial Statements.

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<PAGE>
PROPERTIES

Effective December 1996, the headquarters of the Company were relocated to
leased premises in Houston, Texas in conjunction with the formation of Holdings.

The leases for the Company's headquarters have terms expiring from two to
four years, with annual rental expenses of $4.6 million, subject to increases
under certain circumstances. The following table sets forth the number and
location of the community banking, commercial banking, and mortgage banking
offices of the Company as of March 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF OFFICES
------------------------------------------------------------
COMMUNITY
BANKING WHOLESALE
BRANCHES COMMERCIAL MORTGAGE
--------------- BANKING ORIGINATION
LOCATION OWNED LEASED OFFICES LEASED OFFICES LEASED TOTAL
- ------------------------------------- ----- ------ -------------- -------------- -----
<S> <C> <C> <C> <C>
Houston Area......................... 14 23 1 -- 38
Dallas/Ft. Worth Area................ 12 17 1 -- 30
Other Texas.......................... -- 4 -- -- 4
California........................... -- -- 1 2 3
Other U.S............................ -- 1 7 3 11
----- ------ -- -- -----
Total............................ 26 45 10 5 86
===== ====== == == =====
</TABLE>
A majority of leases outstanding at March 31, 1997 expire within five years
or less. See Note 17 to the Consolidated Financial Statements.

Net investment in premises and equipment totalled $37.7 million at March
31, 1997.

LEGAL PROCEEDINGS
MAXXAM, INC.

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 30, 1988 and
involved substantially all the Bank's initial assets and liabilities. See
"Business -- Assistance Agreement". 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. 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-FRF, pursuant to Section
7(a)(2) of the Assistance Agreement.

The Company is not a party to either of these proceedings. The Bank
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court case at a later date. 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.

REGULATORY ACTIONS

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 "Business -- Regulation -- Consumer Protection Regulations". During
the past several years, numerous individual claims and purported consumer class
action claims were commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking civil statutory
and actual damages and rescission under the TILA, as well as remedies for
alleged violations of various state unfair trade practices laws and restitution
or unjust enrichment in connection with certain mortgage loan

96
<PAGE>
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.

WINSTAR-BASED CLAIMS

On July 25, 1995, 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
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 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 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.

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<PAGE>
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
judgement 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 also 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 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 any
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.

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.

<PAGE>
MANAGEMENT

DIRECTORS

The Board of Directors of the Company consists of 12 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, Chairman........... 50 1988 1988 2000
Barry C. Burkholder.................. 57 1996 1991 2000
Lawrence Chimerine................... 56 1996 1990 2000
David M. Golush...................... 52 1996 1988 1998
Paul M. Horvitz...................... 61 1996 1990 1999
Alan E. Master....................... 57 1996 1995 2000
Anthony J. Nocella................... 55 1996 1990 1998
Salvatore A. Ranieri................. 48 1988 1988 1998
Scott A. Shay........................ 39 1988 1988 1999
Patricia A. Sloan.................... 53 1996 1988 1999
Michael S. Stevens................... 47 1996 1996 1999
Kendrick R. Wilson III............... 50 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 ("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 and Hyperion Partners II. 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, an investment partnership formed to make investments
primarily in the financial and real estate sectors of the economy. He is a
director of Delphi Financial Group, Inc. and also serves as Chairman of the
Board and a director of American Marine Holdings, Inc. ("American Marine").

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 mortgage-backed
securities 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.

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. 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

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<PAGE>
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. 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. He
was manager of economic research for the IBM Corporation from 1965 to 1979. 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 a director
of Transworld Home Healthcare, Inc., as well as an officer of direct and
indirect subsidiaries of Hyperion Partners and Hyperion Partners II, and has an
economic interest in Hyperion Partners and Hyperion Partners II. Mr. Golush was
employed by 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 Benefit 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
Massachusetts Institute of Technology.

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 past 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.

100
<PAGE>
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 KPMG 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.

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 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 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.

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

MICHAEL S. STEVENS. Mr. Stevens has been a Director of the Company since
August 1996, and a Director of the Bank since October 1996. Mr. Stevens is
Chairman of Michael Stevens Interests, Inc. In 1981,

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<PAGE>
Mr. Stevens founded the companies that now constitute this real estate
investment and management company. Since its inception, the firm has developed,
acquired, or managed over 70 real estate projects valued at over $300 million
and representing over 8.5 million square feet of building area and apartment
units. From 1974 to 1981, Mr. Stevens was an executive, board member, and
significant shareholder of Insyte Corporation, a diversified public holding
company with extensive real estate interests, and from 1973 to 1974, he was an
Associate of John McClelland and Associates, a financial consulting firm. Mr.
Stevens currently serves as first Assistant to the Mayor of the City of Houston
on Housing and Inner-City Revitalization, as well as the President of the
Housing Finance Corporation for the City of Houston. He plays a major role in
leading Houston's affordable housing program, HOMES FOR HOUSTON. Mr. Stevens
serves as Chairman of the National Advisory Council of FNMA and of the Houston
International Sports Committee, a non-profit organization working to bring the
Olympic Games to Houston, and he is a deacon at Second Baptist Church. He
graduated from the University of Houston in 1973 with a Bachelors of Business
Administration.

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, 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. There are no existing arrangements or
understandings between a director and any other person pursuant to which such
person was elected a director.

COMMITTEES OF THE BOARD OF DIRECTORS

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

AUDIT 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 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 meet alone with the Audit Committee and have unrestricted access to
the Audit Committee. The Audit Committee consists of Drs. Chimerine and Horvitz
and Mr. Master, none of whom is an employee of the Company with Dr. Horvitz
serving as Chair.

COMPENSATION COMMITTEE. The Compensation Committee's functions include
administering management incentive compensation plans and making recommendations
to the 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 consists of all directors except Mr.
Burkholder and Mr. Nocella, with Mr. Lewis Ranieri serving as Chair.

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. Mr. Burkholder and Mr. Nocella have excused themselves
from Board deliberations regarding their compensation and it is anticipated that
this practice will continue.

COMPENSATION OF DIRECTORS

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

102
<PAGE>
retainer of $2,000. Directors who are employees of the Company or any subsidiary
do not receive additional compensation for service as directors, including
participation in the Director Stock Plan. See also "The Director Stock
Compensation Plan" and "Certain Relationships and Related Transactions".

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The following table sets forth information concerning executive officers of
the Company and executive officers of the Bank who do not serve on the Board of
Directors of the Company. All executive officers of the Company and the Bank are
elected by the Board of Directors of the Company 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>
Jonathon K. Heffron.................. 44 Executive Vice President and General Counsel of the
Company since July 15, 1996 and of the Bank since
May 1990. Chief Operating Officer of the Company
since July 15, 1996 and of the Bank since May 1994.
Prior to joining the Bank, Mr. Heffron served for
two years as President and CEO of First Northern
Bank, Keene, New Hampshire. Prior to joining First
Northern Bank, Mr. Heffron served for more than 10
years in several capacities at the FHLB Board,
Washington, D.C. and at the FHLB Dallas, including
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
Board of the Texas Conference for Homeowners' Rights
and he is a member of the Government Affairs
Steering Committee and the FHLB System Committee of
America's Community Bankers.

Ronald D. Coben...................... 39 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 Commerce Banc-
shares, Mr. Coben served as the Director of Market
Research for ComputerCraft, Inc. and Foley's De-
partment 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.

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<PAGE>
NAME AGE POSITION AND OCCUPATION
- ------------------------------------- ---- ----------------------------------------------------
Leslie H. Green...................... 59 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
Associates, 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 from 1983. 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 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.

104
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------ -------------------------
OTHER SECURITIES PAYOUTS(7)
ANNUAL UNDERLYING -------
COMPEN- RESTRICTED OPTIONS/ LTIP
SALARY BONUS(1)(2) SATION(4) STOCK(5) SAR(6) PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------------------------- ---- ------- ----------- -------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Barry C. Burkholder.................. 1996 375,000 2,552,000 -- 1,578,051 491,327 --
President and 1995 375,000 594,000 -- -- -- --
Chief Executive Officer 1994 375,000 607,500 -- -- -- --

Anthony J. Nocella................... 1996 315,000 874,000 -- 508,103 157,959 --
Executive Vice President and 1995 315,000 235,000 -- -- -- --
Chief Financial Officer 1994 315,000 200,000 -- -- -- --
Financial Markets/Treasury
Commercial Banking

Jonathon K. Heffron.................. 1996 225,000 804,000 -- 508,103 157,959 --
Executive Vice President, 1995 225,000 200,000 -- -- -- --
General Counsel, and 1994 225,000 175,000 -- -- -- --
Chief Operating Officer

Ronald D. Coben(3)................... 1996 200,000 160,000 -- 79,115 24,534 --
Executive Vice President 1995 144,000 30,000 -- -- -- --
Community Banking 1994 144,000 25,000 -- -- -- --

Leslie H. Green...................... 1996 175,000 165,000 -- 79,115 24,534 --
Senior Vice President 1995 175,000 75,000 -- -- -- --
Operations & Technology 1994 175,000 70,000 -- -- -- --
</TABLE>
ALL
OTHER
COMPEN-
SATION(8)
NAME AND PRINCIPAL POSITION ($)
- ------------------------------------- --------
Barry C. Burkholder.................. 6,706
President and 9,240
Chief Executive Officer 9,240
Anthony J. Nocella................... 7,919
Executive Vice President and 9,402
Chief Financial Officer 8,878
Financial Markets/Treasury
Commercial Banking
Jonathon K. Heffron.................. 9,458
Executive Vice President, 9,402
General Counsel, and 8,984
Chief Operating Officer
Ronald D. Coben(3)................... 6,130
Executive Vice President 3,240
Community Banking 2,874
Leslie H. Green...................... 5,433
Senior Vice President 4,620
Operations & Technology 4,615
- ------------
(1) For all named executives, the bonus column for 1996 includes payments from:
(i) the Executive Management Compensation Plan and (ii) the Bank's annual
bonus plan.

(2) 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 for 1994 and 1995 represent the amount paid in
the respective fiscal year. Mr. Burkholder's 1996 bonus amount included two
bonus payments pursuant to his employment contract: one payment of $550,000
for the 12-month period ended April 9, 1996 and a second payment of $300,000
for the period April 10, 1996 through September 30, 1996. The latter amount
was made to change Mr. Burkholder's performance cycle to correspond to the
Bank's fiscal year. See "-- Management Employment Arrangements". All other
management bonuses were paid as determined by the Compensation Committee of
the Bank's Board of Directors and were based on the Bank's financial and
individual performance for the respective fiscal year. 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.

(3) Mr. Coben was promoted to Executive Vice President, Community Banking
effective July 1, 1996.

(4) Messrs. Burkholder, Coben, Nocella, and Heffron are each provided an auto
allowance and a country club and dining club memberships. However, in no
case does the aggregate 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 this table.

(5) A total of 236,265 shares of Class B Common Stock were awarded to the named
executive officers in June 1996 and these shares were subsequently converted
into Class A Common Stock of the Company. Such shares are subject to
restrictions on transfer, which lapse on August 8, 1999 ("Officers
Restricted Stock"). As there was no public market for the Common Stock at
the date of grant, the fair market value of the shares at that date was
estimated by the Company. Based on the last reported sale price of the Class
A Common Stock on the NASDAQ on September 30, 1996, these shares had an
aggregate fair market value of $5,877,092 ($24.875 per share), without
giving effect to the diminution of value attributable to the restrictions on
such stock. Dividends will be paid on the Officers Restricted Stock at the
same rate as all other shares of Common Stock.

(6) In August 1996, the Company issued 856,313 options to the named executives
pursuant to management option agreements under the Executive Management
Compensation Plan.

(7) Represents the dollar value of all payouts pursuant to long-term incentive
plans ("LTIP"). An LTIP is any plan providing compensation intended to
serve as incentive for performance to occur over a period longer than one
fiscal year, whether such performance is measured by reference to financial
performance of the registrant or an affiliate, the registrant's stock price,
or any other measure, but excluding restricted stock, stock option and stock
appreciation right ("SAR") plans. The Bank made no such payments for the
periods presented.

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

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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
individual grants of options under the Executive Management Compensation Plan
that were made during fiscal 1996 to the executive officers named in the Summary
Compensation Table. This table is intended to allow stockholders to ascertain
the number and size of option grants made during the fiscal year, the expiration
date of the grants, and the grant date present value of such options under
specified assumptions. All options granted in fiscal 1996 have an exercise price
no less than the fair market value at the date of grant.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT VALUE
NAME (#) YEAR(1) ($/SH) DATE $(2)
- ------------------------------------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Barry C. Burkholder.................. 491,327 42.6 20.125 8/8/06 3,173,972
Anthony J. Nocella................... 157,959 13.7 20.125 8/8/06 1,020,415
Jonathon K. Heffron.................. 157,959 13.7 20.125 8/8/06 1,020,415
Ronald D. Coben...................... 24,534 2.1 20.125 8/8/06 158,490
Leslie H. Green...................... 24,534 2.1 20.125 8/8/06 158,490
</TABLE>
- ------------

(1) Based upon 1,154,520 options to purchase Class A Common Stock granted in
fiscal 1996.

(2) The $6.46 per share value is based on the Black-Scholes Option pricing
model. The calculation included the following assumptions: estimated
volatility of 27.0% (based on 2-year stock prices of comparable companies);
risk-free interest rate of 6.55 percent (based on returns available through
U.S. Treasury bonds); dividend yield of 3.0 percent (assumes dividend yield
paid through expiration); and 3,612 days to expiration of options. Option
values are dependent on general market conditions and the performance of the
Common Stock. There can be no assurance that the values in this table will
be realized.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES. The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information with respect to the
aggregate amount of options exercised during fiscal 1996, any value realized
thereon, the number of unexercised options at the end of the fiscal year
(exercisable and unexercisable) and the value with respect thereto.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FISCAL YEAR END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C>
Barry C. Burkholder.................. -- -- -- 491,327 -- 2,333,803
Anthony J. Nocella................... -- -- -- 157,959 -- 750,305
Jonathon K. Heffron.................. -- -- -- 157,959 -- 750,305
Ronald D. Coben...................... -- -- -- 24,534 -- 116,537
Leslie H. Green...................... -- -- -- 24,534 -- 116,537
</TABLE>
- ------------
(1) Total value of options based on a fair market value of $24.875 per share as
of September 30, 1996, the last reported sale price of the Class A Common
Stock as reported by the NASDAQ on that date.

EXECUTIVE MANAGEMENT COMPENSATION PROGRAM

In June 1996, the Board of Directors of the Company 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 A Common Stock; and (iii) the issuance of 1,154,520 options upon
consummation of the August 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 of
$20.125 per share which approximated the fair market value of such stock on the
date of grant; (II) such options vest ratably over

106
<PAGE>

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 seven current executive officers -- Messrs. Burkholder, Nocella,
Heffron, Coben, Green, Lyles and Hartnett -- one former executive officer -- Mr.
Bender -- and three directors -- Drs. Chimerine and Horvitz and Mr. Master --
participated in the Compensation Program. The remaining twelve individuals who
participated are other key officers and employees of the Bank. In connection
with the February 1997 sale of mortgage offices, 33,718 of these options became
fully vested. See "Business -- Mortgage Banking Group". Mr. Burkholder
received $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 each received $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 each received $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 each received $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 received $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 satisfied
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 Board of Directors
of the Company, or any other designated committee of the Board of Directors of
the Company, the Company employees, including employees who are members of the
Board of Directors of the Company, 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 Board of Directors of the Company has provided
for the 1996 Stock Incentive Plan to remain in effect for 10 years, to 2006. In
December 1996, the Company granted options to purchase 147,500 shares of Common
Stock, at the market price on the date of grant, to 30 employees of the Bank,
none of whom were the executive officers named herein.

The description below is intended as a summary of material terms only.

GENERAL

The 1996 Stock Incentive Plan is administered by the Compensation Committee
of the Board of Directors of the Company or, at the discretion of the Board of
Directors of the Company, 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) 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 Committee may also be exercised by the full
Board of Directors of the Company, 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 Securities Exchange Act of 1934 ("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) of the Code
exemption. To the extent that any permitted action taken by the Board of
Directors of the Company conflicts with action taken by the Committee, the Board
of Directors of the Company 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

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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 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 herein)), 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 Board of Directors of the Company 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 SARs 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 non-qualified 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.

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

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"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.

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 herein), (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 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 Board of Directors of the Company 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 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.

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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 certain affiliates will be matchable
with market purchases within less than six months before or after such sales.

THE DIRECTOR STOCK COMPENSATION PLAN

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

GENERAL

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

Pursuant to the terms of the Director Stock Plan, non-employee directors of
the Company (each an "Eligible Director") will be eligible to participate in
the Director Stock Plan. A maximum of 250,000 shares of Class A Common Stock
will be available 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 Board of
Directors of the Company or the designated committee may make such substitution
or adjustments in the aggregate number and

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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, each Eligible Director may make an
annual irrevocable election prior to the beginning of the fiscal year 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 will 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. The Parent Company
granted 10,000 Director Options during fiscal 1996 and 10,000 Director Options
in the quarter ended March 31, 1997.

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.

AMENDMENTS

The Director Stock Compensation Plan may be amended by the Board of
Directors of the Company, 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.

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TERMINATION

The Director Stock Compensation Plan may be terminated at any time by
either the Board of Directors of the Company 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, 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.

MANAGEMENT EMPLOYMENT ARRANGEMENTS

Effective as of the date of the consummation of the August Offering, the
Company entered into employment agreements with the following four executives
which superseded all prior employment arrangements.

Mr. Burkholder's agreement with the Company provides for his employment for
three years at an annual base salary of not less than $375,000 and a
discretionary bonus. Mr. Nocella's agreement with the Company provides 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 provides for
his employment for three years at an annual base salary of not less than
$225,000 and a discretionary bonus. Mr. Coben's agreement with the Company
provides for his employment for three years at an annual base salary of not less
than $200,000 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

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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
Board of Directors of the Company, 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 Board of Directors of the Company, (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 Board of Directors of the Company 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 Board of Directors of the Company.

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.
Nocella, Heffron, and Coben) (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. Nocella, Heffron, and Coben), and (c) receive in a lump sum a
supplemental pension amount based on three years (for Mr. Burkholder) or two
years (for Messrs. Nocella, Heffron, and Coben) 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.

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 covered the period of August 11,
1995 to December 31, 1995. In subsequent years, the SESP Plan coincides 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. As of
March 31, 1997, the monies deferred earn interest at a rate approximately equal
to the Bank's five-year borrowing 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, 1997, there were 13
participants in the SESP, and a total amount of deferrals and interest equaled
approximately $244,850, and of September 30, 1996, there were 12 participants in
the SESP, and the total amount of deferrals and interest equaled approximately
$433,629. The rate of interest for the SESP was 6.64% and 5.12% as of March 31,
1997 and September 30, 1996, respectively.

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 covered the period of

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August 1, 1995 to December 31, 1995. In subsequent years the Plan year coincides
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 five-year
borrowing 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, 1997 and September
30, 1996, there were three participants in the DSSP and the total amount of
deferrals and interest equaled approximately $96,202 and $47,080, respectively.
The rate of interest for the DSSP was 6.64% and 5.12% as of March 31, 1997 and
Sepember 30, 1996, respectively.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors of the Company
determines the compensation of the Company's executive officers. The
Compensation Committee consists of all of the directors of the Company other
than Barry C. Burkholder and Anthony J. Nocella. No other member of the Bank
Compensation Committee is an officer or employee of the Company or the Bank.
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, or entities controlled by, Hyperion
Partners and, in the case of Lewis S. Ranieri, Scott A. Shay and David M.
Golush, of subsidiaries of, or entities controlled by, Hyperion Partners II as
well.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of the date hereof, the outstanding capital stock of the Company
consists of 28,354,276 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 3,241,320 shares of Class B Common Stock,
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
(as defined herein). Conversion of such shares of Class B Common Stock by a
holder thereof to shares of Class A Common Stock has 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. See "Description of Capital
Stock -- Common Stock -- Conversion".

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information, as of the date of this
Prospectus, about certain persons who own beneficially more than 5% of the
Company's voting 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 Certificate 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>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OWNED
- ---------------------------------------- -------------------- ----------------- ------------
<S> <C> <C>
The Prudential Insurance Company
of America............................ Class B Common Stock 2,441,137 7.7
LW-SP1, L.P. and LW-SP2, L.P............ Class A Common Stock 2,146,748 6.8
</TABLE>
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Under the terms of the Letter Agreement, The Prudential Insurance Company
of America may sell its shares of Common Stock beginning August 14, 1999 and
LW-SP1, L.P. and LW-SP2, L.P. may sell a limited number of their shares
beginning August 8, 1998, and the balance on August 14, 1999.

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

CLASS A COMMON STOCK

NUMBER OF SHARES
AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------- ----------------------- --------
Lewis S. Ranieri, Chairman........... 1,263,561(2) 4.46%
Barry C. Burkholder.................. 139,455 *
Lawrence Chimerine................... 6,138 *
David M. Golush...................... 342,340 1.21
Paul M. Horvitz...................... 4,138 *
Alan E. Master....................... 1,630(3) *
Anthony J. Nocella................... 43,614 *
Salvatore A. Ranieri................. 759,543(4) 2.68
Scott A. Shay........................ 764,910(5) 2.70
Patricia A. Sloan.................... 156,745 *
Michael S. Stevens................... -- *
Kendrick R. Wilson III............... 227,311(6) *
Ronald D. Coben...................... 6,791 *
Leslie H. Green...................... 6,791 *
Jonathon K. Heffron.................. 43,614 *
Directors and executive officers as a
group (17 persons)................. 3,779,287 13.33%

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

* 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 of shares owned indirectly arises from shared voting
and investment power, unless otherwise indicated.

(2) Includes 1,210,933 shares held by LSR Hyperion Corp., a corporation that is
wholly owned by Mr. Ranieri and 43,403 shares owned by Hyperion Funding
Corp., a corporation of which Mr. Ranieri is a stockholder and a director.
Excludes 608 shares held as custodian for minors, as to which Mr. Ranieri
disclaims beneficial ownership.

(3) Includes 1,380 shares held by Mr. Master's wife.

(4) All shares are held by SAR Hyperion Corp., a corporation that is wholly
owned by Mr. Ranieri. Excludes 6,078 shares held as trustee for a minor, as
to which Mr. Ranieri disclaims beneficial ownership.

(5) Includes 759,543 shares held by SAS Hyperion Corp., a corporation that is
wholly owned by Mr. Shay. Excludes 4,058 shares held as trustee for minor
children, as to which Mr. Shay disclaims beneficial ownership.

(6) All shares are held by KRW Hyperion Corp., a corporation that is wholly
owned by Mr. Wilson.

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PRINCIPAL STOCKHOLDERS, BANK PREFERRED STOCK

The following table sets forth with respect to the Bank's Preferred Stock,
Series A and Series B, as of the date hereof: (i) shares beneficially owned by
all directors; (ii) each of the executive officers named in the Summary
Compensation Table set forth herein; and (iii) shares beneficially owned by all
directors, and executive officers as a group.

PREFERRED STOCK

<TABLE>
<CAPTION>
SERIES A SERIES B
------------------------------------ ------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
AND NATURE OF PERCENT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP(1) OF CLASS BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------- ----------------------- --------- ----------------------- ---------
<S> <C> <C> <C> <C>
Lewis S. Ranieri, Chairman........... -- * -- *
Barry C. Burkholder.................. 8,000 * -- *
Lawrence Chimerine................... 1,000 * 1,000 *
David M. Golush...................... 2,100 * -- *
Paul M. Horvitz...................... 400(2) * -- *
Alan E. Master....................... 600 * 2,000 *
Anthony J. Nocella................... 1,000 * 2,000 *
Salvatore A. Ranieri................. -- * -- *
Scott A. Shay........................ -- * -- *
Patricia A. Sloan.................... -- * -- *
Michael S. Stevens................... -- * -- *
Kendrick R. Wilson III............... -- * -- *
Ronald D. Coben...................... 200 * -- *
Leslie H. Green...................... 1,000 * 1,000 *
Jonathon K. Heffron.................. 1,400(3) * -- *
Directors and executive officers as a
group (17 persons)................. 16,070 * 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.

(2) 200 shares held directly and 200 shares owned by Dr. Horvitz's spouse.

(3) 1,000 shares held directly and 400 shares held as custodian for Mr.
Heffron's minor children.

CERTAIN RELATIONSHIPS AND RELATED 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 has had no loans to directors or executive
officers outstanding during fiscal 1997, 1996, 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, 1997, or in fiscal 1996, 1995, or 1994. At March 31,
1997, September 30, 1996, 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.

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<PAGE>
The disinterested directors of the Bank have approved an agreement with a
subsidiary of Hyperion
Partners II, Cardholder Management Services L.P. ("CMS"), an affilate of the
Bank, whereby CMS acts 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.

In August 1996, the Company entered into a consulting agreement pursuant to
which Lewis S. Ranieri serves 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. Mr. Ranieri is paid an Annual Retainer and meeting fees for his
service as a director of the Company and of the Bank.

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

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. See "Legal Proceedings". 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.

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 "Prospectus Summary -- Background of the Offering".

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<PAGE>

SELLING STOCKHOLDERS

The Selling Stockholders consist of the general partners and certain of the
limited partners of Hyperion Partners, and three other entities with which an
affiliate of Hyperion Partners has a fiduciary relationship. The Selling
Stockholders 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 and the number of shares of Class A Common Stock offered
hereby.
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK OWNED THE OFFERING CLASS A COMMON STOCK
PRIOR TO OFFERING AVAILABLE FOR SALE OWNED AFTER OFFERING
----------------------- -------------------------- -----------------------
PERCENT FEBRUARY 10, AUGUST 14, PERCENT
HOLDER SHARES OF CLASS 1997(8) 1997(8) SHARES OF CLASS
- ---------------------------------------- ----------- -------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
LSR Hyperion Corp.(1)................... 1,210,933 4.27% -- 198,184 1,012,749 3.57%
SAR Hyperion Corp.(2)................... 759,543 2.68 -- 759,543 -- *
SAS Hyperion Corp.(3)................... 759,543 2.68 -- 759,543 -- *
Hyperion Funding Corp.(4)............... 43,403 * -- 43,403 -- *
Lewis S. Ranieri........................ 9,225 * 9,225 -- -- *
Ranieri Bros. Shay & Co. Inc.(5)........ 19,506 * 19,506 -- -- *
KRW Hyperion Corp.(6)................... 227,311 * -- 227,311 -- *
CJK Hyperion Corp.(7)................... 183,343 * -- 183,343 -- *
David M. Golush......................... 342,340 1.21 -- 342,340 -- *
Patricia A. Sloan....................... 156,745 * -- 156,745 -- *
David W. Marcus......................... 142,866 * -- 142,866 -- *
Jeffrey P. Cheesman..................... 128,813 * 2,630 126,183 -- *
Robert A. Perro......................... 79,386 * -- 79,386 -- *
Equitable Deal Flow Fund LP............. 733,774 2.59 733,774 -- -- *
Equitable Capital Partners LP........... 877,908 3.10 877,908 -- -- *
Equitable Capital Partners (Retirement
Fund) LP............................... 432,403 1.53 432,403 -- -- *
Salvatore A. Ranieri Cust. for Margaret
Ranieri, NY UGMA Age 21................ 6,078 * 6,078 -- -- *
Lewis S. Ranieri A/C/F Eric Jimenez NJ
UTMA -- 21............................. 304 * 304 -- -- *
Lewis S. Ranieri A/C/F Jason Jimenez NJ
UTMA -- 21............................. 304 * 304 -- -- *
Ranieri Family Trust F/B/O -- Claudia L.
Ranieri U/A 7/1/93..................... 3,994 * 3,994 -- -- *
Ranieri Family Trust F/B/O -- Angela S.
Ranieri U/A 7/1/93..................... 3,994 * 3,994 -- -- *
Trust F/B/O Dara Jen Golush U/A
12/20/84............................... 2,496 * 2,496 -- -- *
Trust F/B/O Jason Reid Golush U/A
12/20/84............................... 2,170 * 2,170 -- -- *
Gail W. Marcus.......................... 1,845 * 1,845 -- -- *
Janet L. Perro.......................... 867 * 867 -- -- *
The Sweater Trust....................... 520,908 1.84 520,908 -- -- *
Sun America Life Insurance Company...... 868,181 3.06 868,181 -- -- *
Marilyn B. Arison....................... 694,545 2.45 694,545 -- -- *
Masco Capital Corp...................... 434,091 1.53 434,091 -- -- *
Leslie Wexner........................... 347,273 1.22 347,273 -- -- *
The Airlie Group, L.P................... 347,273 1.22 347,273 -- -- *
Julius Berman........................... 53,570 * 53,570 -- -- *
FAME Associates......................... 65,260 * 65,260 -- -- *
Institutional Interests................. 266,993 * 266,993 -- -- *
Houston Fireman's Relief & Retirement
Fund................................... 434,091 1.53 434,091 -- -- *
Alpine Investment Partners.............. 173,636 * 173,636 -- -- *
Mortimer Zuckerman...................... 17,363 * 17,363 -- -- *
Edward Linde............................ 17,363 * 17,363 -- -- *
Connie S. Maniatty...................... 17,363 * 17,363 -- -- *
Micha Astrachan......................... 53,571 * 53,571 -- -- *
Scott A. Shay........................... 5,367 * 5,367 -- -- *
Trust F/B/O Benjamin Jacob Shay U/A
7/23/93................................ 2,254 * 2,254 -- -- *
Trust F/B/O Ariel Rebecca Shay U/A
7/23/93................................ 2,254 * 2,254 -- -- *
Henry Reichman.......................... 144,704 * 144,704 -- -- *
Alan & Carol Charity Fund Inc........... 1,891 * 1,891 -- -- *
Barbara & Mark Kronman Foundation....... 1,757 * 1,757 -- -- *
United Congregation Mesorah............. 486,596 1.72 486,596 -- -- *
CHESED Congregations of America......... 135,961 * 135,961 -- -- *
</TABLE>
- ------------
* Less than 1%.

(1) All stock owned by Lewis S. Ranieri.
(2) All stock owned by Salvatore A. Ranieri.
(3) All stock owned by Scott A. Shay.
(4) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay and
Kendrick R. Wilson III.
(5) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay,
David M. Golush, Patricia A. Sloan, David W. Marcus and Jeffrey P. Cheesman.
(6) All stock owned by Kendrick R. Wilson III.
(7) All stock owned by Clinton J. Kendrick.

(8) Represents all shares held by Selling Stockholders that are registered
pursuant to the Registration Statement of which this Prospectus forms a
part. Additional restrictions on sales of such Shares may apply. See
" -- Selling Stockholder Letter Agreement" and "Description of Capital
Stock -- Restrictions on Transfers of Stock".

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<PAGE>
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 on Form
S-1 (File No. 333-06229) filed by the Company with the Commission on August 7,
1996.

Each of the Selling Stockholders 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 consented to the Distribution
and agreed to hold the common stock of Hyperion Holdings received pursuant to
the Distribution according to the terms of such Letter Agreement. Also, each
Selling Stockholder (including those who prior to the Merger held voting shares
of capital stock of Hyperion Holdings and those who prior to the Merger held
shares of Class C Common Stock), by executing the Letter Agreement and agreeing
to be bound thereby, consented to and approved of, for purposes of Section 228
of the DGCL and otherwise, the Merger Agreement, dated as of June 17, 1996, by
and between Hyperion Holdings and the Company (the "Merger Agreement"), and
the Merger.

Pursuant to the Letter Agreement, each Selling Stockholder acknowledged (i)
that under the By-Laws of Hyperion Holdings, it is not permitted to Transfer any
shares of capital stock of Hyperion Holdings except pursuant to the Merger
Agreement and (ii) that, under the By-Laws, after the Distribution and prior to
the consummation of the August 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. An IPO was completed in August 1996 (the
"August Offering").

Each Selling Stockholder who retained shares of Common Stock was not
permitted to sell such shares for (1) one year after the August Offering, if
such stock was received in respect of general partnership interests in Hyperion
Partners or (2) six months after the August 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 Board of Directors of the
Company based upon advice of the underwriters to improve the marketability of
the shares of Common Stock sold in the August Offering, each 5% Stockholder was
permitted to sell up to 45% of such holder's shares of Common Stock in the
August Offering, except for LW-SP1 and LW-SP2, affiliates of Lehman Brothers
Inc., which were prohibited from selling any shares until August 8, 1998, and
any other Selling Stockholder was permitted to sell up to 16% of its shares in
the August Offering (subject to increase pro rata in the discretion of the Board
of Directors of the Company if the 5% Stockholders elected to sell fewer than
the maximum number of shares they are permitted to sell in the August Offering).
Each Selling Stockholder acknowledged that, except for shares that could have
been sold pursuant to the August 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 August 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 Board of Directors of the Company 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 in the August Offering.

Pursuant to the Letter Agreement, in January 1997, the Company filed and is
obligated to use best efforts to cause to promptly become effective, a
registration statement under the Securities Act with respect to shares of Class
A or Class B Common Stock then held by any Selling Stockholder. The Company is
also obligated to take action to keep such registration statement effective
(subject to occasional periods of suspension of such

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<PAGE>
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 Registration Statement of which this Prospectus forms a part is
being filed by the Company to satisfy this obligation.

Pursuant to the terms of the Letter Agreement, this Prospectus covers all
of the Shares received by the Selling Stockholders in the Restructuring and not
sold in the August Offering. This Prospectus enables the Selling Stockholders to
sell the Shares held by them upon the expiration of the restrictions on sale and
transfer to which such Shares are subject. The table above sets forth the Shares
held by each Selling Stockholder covered by this Prospectus and also indicates
the time when the Shares held by each of the Selling Stockholders have or will
become available for sale: Februarynb]10, 1997 or August 14, 1997. The sale of
Shares may also be subject to additional restrictions on sale and transfer
contained in the Certificate and By-Laws. See "Description of Capital
Stock -- Common Stock -- Restrictions on Transfer of Stock". The Letter
Agreement also restricts the conversion rights of holders of Class B Common
Stock. See "Description of Capital Stock -- Common Stock -- Conversion".

PLAN OF DISTRIBUTION

All or part of the Shares may be offered by the Selling Stockholders from
time to time in transactions on the Nasdaq, in privately negotiated
transactions, through the writing of options on the Shares or a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The methods by which the Shares may be sold or
distributed may include, but not be limited to, the following: (a) a cross or
block trade in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(e) privately negotiated transactions; (f) short sales or borrowings, returns
and reborrowings of the Shares pursuant to stock loan agreements to settle short
sales; and (g) delivery in connection with the issuance of securities by
issuers, other than the Company that are exchangeable for (whether optional or
mandatory), or payable in, such Shares (whether such securities are listed on a
national securities exchange or otherwise) or pursuant to which such Shares may
be distributed, and (h) a combination of any such methods of sale or
distribution. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Stockholders or
from the purchasers in amounts to be negotiated immediately prior to the sale.
The Selling Stockholders may also sell such shares in accordance with Rule 144
under the Securities Act. If Shares are sold in an underwritten offering, the
Shares may be acquired by the underwriters for their own account and may be
further resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The names of the underwriters with respect to
any such offering and the terms of the transactions, including any underwriting
discounts, concessions or commissions and other items constituting compensation
of the underwriters and broker-dealers, if any, will be set forth in a
Prospectus Supplement relating to such offering. Any public offering price and
any discounts, concessions or commissions allowed or reallowed or paid to
broker-dealers may be changed from time to time. Unless otherwise set forth in a
Prospectus Supplement, the obligations of the underwriters to purchase the
Shares will be subject to certain conditions precedent and the underwriters will
be obligated to purchase all of the Shares specified in such Prospectus
Supplement if any such Shares are purchased. This Prospectus also may be used by
donees of the Selling Stockholders or by other persons acquiring Shares,
including brokers who borrow the Shares to settle short sales of shares of the
Common Stock, and who wish to offer and sell such Shares under circumstances
requiring or making desirable its use.

From time to time the Selling Stockholders may engage in short sales, short
sales against the box, puts and calls and other transactions in securities of
the Company or derivatives thereof, and may sell and deliver the shares in
connection therewith. From time to time Selling Stockholders may pledge their
Shares pursuant to the margin provisions of their respective customer agreements
with their respective brokers or otherwise. Upon a

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<PAGE>
default by a Selling Stockholder, the broker or pledgees may offer and sell the
pledged shares of Class A Common Stock from time to time.

The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Shares being offered hereunder 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.

None of the proceeds from the sales of the Shares by the Selling
Stockholders will be received by the Company. No underwriting commissions or
discounts will be paid by the Company in connection with the Offering. The
Company has agreed to bear certain expenses in connection with the registration
of the Shares being offered by the Selling Stockholders. The Company has agreed
to indemnify the Selling Stockholders and any underwriters, brokers, dealers or
agents (and controlling persons) against certain liabilities, including certain
liabilities under the Securities Act.

The Selling Stockholders and any broker-dealers who act in connection with
the sale of Shares hereunder may be deemed to be "underwriters" as that term
is defined in the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.

No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus, and any information or representation not
contained or incorporated herein must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, by any person in any jurisdiction in which
it is unlawful for such person to make such offer or solicitation. Neither the
delivery of this Prospectus at any time nor any sale made hereunder shall, under
any circumstances, imply that the information herein is correct as of any date
subsequent to the date hereof.

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 on Form S-1
(File No. 333-06229) filed by the Company with the Commission on August 7, 1996.

AUTHORIZED CAPITAL STOCK

The Company's authorized capital stock consists 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.
As of the date of this Prospectus, 28,354,276 shares of Class A Common Stock and
3,241,320 shares of Class B Common Stock were outstanding. All of the shares of
Class A Common Stock outstanding are validly issued, fully paid and
nonassessable.

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

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<PAGE>
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 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 was not permitted to 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 August
Offering) or October 31, 1996, unless the Board of Directors of the Company
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 IRS 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 Board of Directors of the Company or made
in compliance with exceptions adopted by the Board of Directors of the Company.
This restriction was 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 Agreement, 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

122
<PAGE>
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 Board of Directors of the Company 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
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 Board of Directors of the
Company 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 Board of Directors of the Company 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 Board of Directors of the Company 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 Board of Directors of the Company will make
any determination to issue such shares based on its judgment as to the best
interests of the Company and its stockholders. The Board of Directors of the
Company, 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 Board of Directors of the Company, 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

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<PAGE>
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
Board of Directors of the Company 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 Board of Directors of the Company, 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 vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of directors constituting the Board of Directors of the Company 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 Board of Directors of the
Company 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 Board
of Directors of the Company. 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 Board of Directors of the
Company 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
Board of Directors of the Company 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 Board of Directors of the Company, 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

124
<PAGE>
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 Board of Directors of the Company 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 Board of Directors of the Company 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 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 Board of Directors of the Company 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 Board of Directors
of the Company 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

125
<PAGE>
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 Board of Directors of the Company 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

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.

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 is the transfer agent and registrar for the Class A
Common Stock.

126
<PAGE>
LEGAL MATTERS

Certain legal matters with respect to the validity of the Class A Common
Stock offered hereby will be passed upon for the Company by Wachtell, Lipton,
Rosen & Katz, New York, New York.

EXPERTS

The consolidated financial statements of the Company as of September 30,
1996 and 1995 and for each of the three years in the period ended September 30,
1996 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

This Prospectus, which constitutes a part of a Registration Statement filed
by the Company with the Commission under the Securities Act, omits certain of
the information set forth in the Registration Statement in accordance with the
rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and to the exhibits thereto for further information with
respect to the Company and the securities offered hereby. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described below. The Commission also maintains a Web site (http: //www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants such as the Company, which file electronically with the
Commission.

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facility maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.

The Company furnishes its stockholders with annual reports containing
audited financial statements.

127

<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----
Independent Auditors' Report......... F-2

Consolidated Statements of Financial
Condition as of March 31, 1997
(unaudited) and September 30, 1996
and 1995........................... F-3

Consolidated Statements of Operations
for the Six Months Ended March 31,
1997 (unaudited) and March 31, 1996
(unaudited) and for the Years Ended
September 30, 1996, 1995, and
1994............................... F-4
Consolidated Statements of
Stockholders' Equity for the Six
Months Ended March 31, 1997
(unaudited) and March 31, 1996
(unaudited) and for the Years Ended
September 30, 1996, 1995, and
1994............................... F-5

Consolidated Statements of Cash Flows
for the Years Ended September 30,
1996, 1995, and 1994............... F-6

Consolidated Statements of Cash Flows
for the Six Months Ended March 31,
1997 and 1996 (unaudited).......... F-8

Notes to Consolidated Financial
Statements......................... F-10

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

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of Bank United Corp.:

We have audited the accompanying consolidated statements of financial
condition of Bank United Corp. and its subsidiary (collectively known as the
"Company") as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1996. 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, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1996 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, 1994, 1993, and 1992 and for the years ended September 30, 1993
and 1992 included in notes 3, 4, 5, and 8 is presented for the purpose of
additional analysis and is 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
Houston, Texas
October 28, 1996

F-2
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------
NOTES 1997 1996 1995
----------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 111,252 $ 119,523 $ 112,931
Securities purchased under agreements
to resell and federal funds sold... 2 538,455 674,249 471,052
Trading account assets, at fair
value.............................. 1,190 1,149 1,081
Securities 3, 12
Held to maturity, at amortized
cost (fair value of $166
thousand in 1997, $169
thousand in 1996, and $2.7
million in 1995).............. 164 168 1,902
Available for sale, at fair
value......................... 27,846 64,376 114,111
Mortgage-backed securities 4, 9, 10
Held to maturity, at amortized
cost (fair value of $562.1
million in 1997, $609.2
million in 1996, and $2,031
million in 1995).............. 584,789 630,048 2,051,304
Available for sale, at fair
value......................... 940,297 1,027,860 346,959
Loans 5, 9
Held to maturity (net of the
allowance for credit losses of
$43.7 million in 1997, $39.7
million in 1996, and $36.8
million in 1995).............. 7,782,111 7,227,153 7,763,676
Held for sale................... 250,031 292,335 496,564
Federal Home Loan Bank stock......... 194,668 179,643 225,952
Premises and equipment............... 37,716 40,209 37,687
Mortgage servicing rights............ 6 208,003 123,392 75,097
Real estate owned (net of allowance
for losses of $1.0 million in 1997,
$986 thousand in 1996, and $1.1
million in 1995)................... 29,462 29,744 23,764
Deferred tax asset................... 14 139,567 168,323 77,571
Other assets......................... 157,074 134,205 183,883
------------- ------------- -------------
TOTAL ASSETS......................... $11,002,625 $ 10,712,377 $ 11,983,534
============= ============= =============
LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposits............................. 8 $ 5,065,804 $ 5,147,945 $ 5,182,220
Federal Home Loan Bank advances...... 4, 5, 9 3,786,596 3,490,386 4,383,895
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 4, 10 927,859 832,286 1,172,533
Senior Notes......................... 11, 21 115,000 115,000 115,000
Advances from borrowers for taxes and
insurance.......................... 117,842 146,634 183,968
Other liabilities.................... 235,127 263,583 264,315
------------- ------------- -------------
Total liabilities.......... 10,248,228 9,995,834 11,301,931
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES........ 12, 15, 17
MINORITY INTEREST
Preferred stock issued by
consolidated subsidiary............ 16 185,500 185,500 185,500
------------- ------------- -------------
STOCKHOLDERS' EQUITY................. 15, 16
Common stock......................... 316 316 289
Paid-in capital...................... 129,286 129,286 117,722
Retained earnings.................... 434,193 403,674 384,739
Unrealized gains (losses) on
securities and mortgage-backed
securities available for sale, net
of tax............................. 4 5,102 (2,233) (6,647)
------------- ------------- -------------
Total stockholders'
equity................... 568,897 531,043 496,103
------------- ------------- -------------
TOTAL LIABILITIES, MINORITY INTEREST,
AND
STOCKHOLDERS' EQUITY............... $11,002,625 $ 10,712,377 $ 11,983,534
============= ============= =============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-3
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER
MARCH 31, 30,
-------------------- -------------------------------
NOTES 1997 1996 1996 1995 1994
------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Short-term interest-earning assets... $ 17,537 $ 17,360 $ 39,302 $ 29,675 $ 19,019
Trading account assets............... 35 35 67 62 (144)
Securities........................... 3 2,196 2,112 3,917 5,893 5,007
Mortgage-backed securities........... 4 53,336 70,699 128,143 173,155 151,972
Loans................................ 5 318,400 323,930 627,940 526,528 308,804
Federal Home Loan Bank stock......... 5,527 7,085 12,943 11,446 5,558
Covered Assets and related assets.... 7 -- -- -- -- 4,490
--------- --------- --------- --------- ---------
Total interest income....... 397,031 421,221 812,312 746,759 494,706
--------- --------- --------- --------- ---------
INTEREST EXPENSE
Deposits............................. 8 129,374 138,510 272,220 264,366 209,034
Federal Home Loan Bank advances...... 9 105,302 136,501 247,093 224,767 91,060
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 10 25,440 29,073 55,112 53,220 10,574
Senior Notes......................... 11, 21 4,626 5,205 10,353 10,407 10,177
Other................................ -- -- -- -- 79
--------- --------- --------- --------- ---------
Total interest expense...... 264,742 309,289 584,778 552,760 320,924
--------- --------- --------- --------- ---------
Net interest income......... 132,289 111,932 227,534 193,999 173,782
PROVISION FOR CREDIT LOSSES.......... 5 11,219 5,850 16,469 24,293 6,997
--------- --------- --------- --------- ---------
Net interest income after
provision for credit
losses.................... 121,070 106,082 211,065 169,706 166,785
--------- --------- --------- --------- ---------
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing
rights and single family
warehouse loans................ 16,931 19,157 43,074 60,495 63,286
Securities and mortgage-backed
securities..................... 3, 4 1,593 2,863 4,002 26 10,404
Other loans...................... 936 3,485 3,189 (1,210) 163
Sale of mortgage offices......... 18 3,998
Loan servicing fees and charges...... 27,859 22,107 44,230 43,508 31,741
Other................................ 9,704 6,997 15,541 12,162 13,295
--------- --------- --------- --------- ---------
Total non-interest income... 61,021 54,609 110,036 114,981 118,889
--------- --------- --------- --------- ---------
NON-INTEREST EXPENSE
Compensation and benefits............ 13 39,300 39,898 87,640 83,520 86,504
Occupancy............................ 17 7,871 9,439 18,415 18,713 17,196
Data processing...................... 17 7,219 8,120 16,196 16,360 15,821
Advertising and marketing............ 4,150 4,053 8,025 9,262 10,796
Amortization of intangibles.......... 14,545 9,801 20,432 21,856 18,247
SAIF deposit insurance premiums...... 15 3,162 6,129 45,690 11,428 11,329
Furniture and equipment.............. 2,248 3,128 6,121 6,428 6,810
Restructuring charges................ 18 -- -- 10,681 -- --
Other................................ 24,691 18,736 40,065 27,009 32,890
--------- --------- --------- --------- ---------
Total non-interest
expense................... 103,186 99,304 253,265 194,576 199,593
--------- --------- --------- --------- ---------
Income before income taxes
and minority interest..... 78,905 61,387 67,836 90,111 86,081
INCOME TAX (BENEFIT) EXPENSE......... 14 30,413 25,278 (75,765) 37,415 (31,899)
--------- --------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST...... 48,492 36,109 143,601 52,696 117,980
Less minority interest:
Subsidiary preferred stock
dividends...................... 9,126 9,126 18,253 10,600 8,653
Payments in lieu of dividends.... 16 -- 224 6,413 377 357
--------- --------- --------- --------- ---------
NET INCOME........................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970
========= ========= ========= ========= =========
EARNINGS PER COMMON SHARE............ 16 $ 1.25 $ 0.87 $ 3.87 $ 1.35 $ 3.55
========= ========= ========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------- ----------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- ------ --------- ------ ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993.................. 23,828,400 $239 -- $ -- 5,034,600 $ 50 $ 121,480
Net income................................. -- -- -- -- -- -- --
Change in unrealized gains (losses)........ -- -- -- -- -- -- --
----------- ------ --------- ------ ----------- ------ ---------
BALANCE AT SEPTEMBER 30, 1994.................. 23,828,400 239 -- -- 5,034,600 50 121,480
Net income................................. -- -- -- -- -- -- --
Cost of subsidiary's preferred stock
issuance................................. -- -- -- -- -- -- (3,758)
Change in unrealized gains (losses)........ -- -- -- -- -- -- --
----------- ------ --------- ------ ----------- ------ ---------
BALANCE AT SEPTEMBER 30, 1995.................. 23,828,400 239 -- -- 5,034,600 50 117,722
Net income................................. -- -- -- -- -- -- --
Dividends declared: common stock ($3.46 per
share)................................... -- -- -- -- -- -- --
Restricted Stock issued (Note 13).......... -- -- 318,342 3 -- -- 3,706
Conversion of Warrant (Note 16)............ -- -- 1,503,560 15 -- -- (6,099)
Redistribution of common stock (Note 16)... 2,996,840 29 2,037,760 21 (5,034,600) (50) --
Common stock offering (Note 16)............ 910,694 9 -- -- -- -- 13,957
Change in unrealized gains (losses)........ -- -- -- -- -- -- --
----------- ------ --------- ------ ----------- ------ ---------
BALANCE AT SEPTEMBER 30, 1996.................. 27,735,934 $277 3,859,662 $ 39 -- $ -- $ 129,286
=========== ====== ========= ====== =========== ====== =========

(unaudited)
BALANCE AT SEPTEMBER 30, 1995.................. 23,828,400 $239 -- $ -- 5,034,600 $ 50 $ 117,722
Net income................................. -- -- -- -- -- -- --
Change in unrealized gains (losses)........ -- -- -- -- -- -- --
----------- ------ --------- ------ ----------- ------ ---------
BALANCE AT MARCH 31, 1996...................... 23,828,400 $239 -- $ -- 5,034,600 $ 50 $ 117,722
=========== ====== ========= ====== =========== ====== =========
<CAPTION>
(unaudited)
BALANCE AT SEPTEMBER 30, 1996.................. 27,735,934 $277 3,859,662 $ 39 -- $ -- $ 129,286
Net income................................. -- -- -- -- -- -- --
Dividends declared: common stock ($0.28 per
share)................................... -- -- -- -- -- -- --
Conversion of common stock (Note 16)....... 618,342 7 (618,342) (7) -- -- --
Change in unrealized gains (losses) (Note
4)....................................... -- -- -- -- -- -- --
----------- ------ --------- ------ ----------- ------ ---------
BALANCE AT MARCH 31, 1997...................... 28,354,276 $284 3,241,320 $ 32 -- $ -- $ 129,286
=========== ====== ========= ====== =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED TOTAL
RETAINED GAINS STOCKHOLDERS'
EARNINGS (LOSSES) EQUITY
--------- ----------- -------------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993.................. $ 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.................. 343,020 (13,427) 451,362
Net income................................. 41,719 -- 41,719
Cost of subsidiary's preferred stock
issuance................................. -- -- (3,758)
Change in unrealized gains (losses)........ -- 6,780 6,780
--------- ----------- -------------
BALANCE AT SEPTEMBER 30, 1995.................. 384,739 (6,647) 496,103
Net income................................. 118,935 -- 118,935
Dividends declared: common stock ($3.46 per
share)................................... (100,000) -- (100,000)
Restricted Stock issued (Note 13).......... -- -- 3,709
Conversion of Warrant (Note 16)............ -- -- (6,084)
Redistribution of common stock (Note 16)... -- -- --
Common stock offering (Note 16)............ -- -- 13,966
Change in unrealized gains (losses)........ -- 4,414 4,414
--------- ----------- -------------
BALANCE AT SEPTEMBER 30, 1996.................. $ 403,674 $ (2,233) $ 531,043
========= =========== =============

BALANCE AT SEPTEMBER 30, 1995.................. $ 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...................... $ 411,498 $ (3,068) $ 526,441
========= =========== =============

BALANCE AT SEPTEMBER 30, 1996.................. $ 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 (Note 16)....... -- -- --
Change in unrealized gains (losses) (Note
4)....................................... -- 7,335 7,335
--------- ----------- -------------
BALANCE AT MARCH 31, 1997...................... $ 434,193 $ 5,102 $ 568,897
========= =========== =============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $ 118,935 $ 41,719 $ 108,970
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Provision for credit losses................................................ 16,469 24,293 6,997
Deferred tax (benefit) expense............................................. (93,401) 16,615 (31,436)
Net gains on sales of assets............................................... (53,491) (72,918) (80,524)
Net depreciation, amortization, and accretion.............................. (12,095) (49,335) (7,921)
Amortization of intangibles................................................ 20,432 21,856 18,247
Federal Home Loan Bank stock dividend...................................... (12,943) (11,446) (5,558)
Purchases of trading account assets........................................ (12,955) (203) (46)
Proceeds from sales of trading account assets.............................. 12,819 143 103
Originations of loans held for sale........................................ (2,872,307) (2,275,058) (4,128,979)
Purchases of loans held for sale........................................... (143,309) (103,926) (60,900)
Proceeds from sales of loans held for sale................................. 3,321,599 2,164,407 4,838,051
Change in mortgage servicing rights........................................ (62,142) (29,251) (50,955)
Change in loans held for sale.............................................. 17,991 5,661 53,117
Change in interest receivable.............................................. 25,957 (37,778) (10,284)
Change in other assets..................................................... 19,397 (3,068) 86,496
Change in other liabilities................................................ (3,274) 89,056 (44,432)
Management Restricted Stock award.......................................... 3,709 -- --
------------- ------------- -------------
Net cash provided (used) by operating activities...................... 291,391 (219,233) 690,946
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under agreements to resell and federal
funds sold............................................................... (203,197) (117,342) 189,278
Purchases of securities held to maturity................................... (6,327) (2,920) (32,812)
Proceeds from maturities of securities held to maturity.................... 7,715 3,472 33,000
Purchases of mortgage-backed securities held to maturity................... (3,841) (38,515) (83,854)
Proceeds from sales of mortgage-backed securities held to maturity......... -- -- 38,294
Repayments of mortgage-backed securities held to maturity.................. 178,926 390,364 162,328
Purchases of securities available for sale................................. (16,029) -- (135,930)
Proceeds from sales of securities available for sale....................... 96,815 -- 61,482
Purchases of mortgage-backed securities available for sale................. -- (230) (735,757)
Proceeds from sales of mortgage-backed securities available for sale....... 295,702 77,626 187,189
Repayments of mortgage-backed securities available for sale................ 272,059 16,346 760,111
Change in mortgage-backed securities available for sale.................... -- -- (12,148)
Purchases of loans held to maturity........................................ (148,510) (2,658,093) (1,406,275)
Proceeds from sales of loans held to maturity.............................. 3,539 31,543 27,093
Change in loans held to maturity........................................... 509,704 (379,229) (734,276)
Change in Covered Assets................................................... -- -- 318,176
Purchases of Federal Home Loan Bank stock.................................. -- (100,190) (793)
Redemption of Federal Home Loan Bank stock................................. 59,252 18,500 --
Purchases of premises and equipment........................................ (9,394) (6,132) (10,379)
Proceeds from sales of real estate owned acquired through
foreclosure.............................................................. 42,741 34,137 31,212
Proceeds from sales of servicing rights.................................... 33,187 48,237 58,880
------------- ------------- -------------
Net cash provided (used) by investing activities...................... 1,112,342 (2,682,426) (1,285,181)
------------- ------------- -------------
</TABLE>
(CONTINUED ON FOLLOWING PAGE)

F-6
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)

FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits.............. $ (34,378) $ 419,738 $ (73,290)
Proceeds from Federal Home Loan
Bank advances................. 1,498,700 3,821,754 2,161,384
Repayment of Federal Home Loan
Bank advances................. (2,391,764) (2,058,200) (1,726,500)
Net change in securities sold
under agreements to repurchase
and federal funds purchased... (340,247) 619,533 243,000
Change in advances from
borrowers for taxes and
insurance..................... (37,334) 38,585 1,191
Proceeds from issuance of common
stock......................... 13,966 -- --
Cost of converting Bank common
stock Warrant................. (6,084) -- --
Proceeds from issuance of the
Bank's preferred stock........ -- 96,242 --
Payment of common stock
dividends..................... (100,000) -- --
----------- ----------- -----------
Net cash (used) provided by
financing activities..... (1,397,141) 2,937,652 605,785
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 6,592 35,993 11,550
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 112,931 76,938 65,388
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 119,523 $ 112,931 $ 76,938
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION AND NONCASH INVESTING
ACTIVITIES
Cash paid for interest.......... $ 606,911 $ 523,250 $ 313,092
Cash paid for income taxes...... 3,953 9,863 5,102
Cash paid in lieu of taxes...... 12,096 157 4,000
Real estate owned acquired
through foreclosure........... 70,843 49,403 44,753
Securitization of loans......... 33,167 -- 1,182,172
Transfer of loans from (to) held
to maturity................... 104,235 (805) (398,645)
Transfer of mortgage-backed
securities from (to) held to
maturity...................... 1,244,945 -- (1,250,136)
Change in unrealized gains
(losses) on securities and
mortgage-backed securities
available for sale............ 4,414 6,780 (46,811)

See accompanying Notes to Consolidated Financial Statements.

F-7

<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 income........................... $ 39,366 $ 26,759
Adjustments to reconcile net income
to net cash (used) provided by
operating activities:
Provision for credit losses..... 11,219 5,850
Deferred tax (benefit)
expense........................ 24,488 14,456
Net gains on sales of assets.... (22,307) (26,783)
Net depreciation, amortization,
and accretion.................. 729 (7,753)
Amortization of intangibles..... 14,545 9,801
Federal Home Loan Bank stock
dividend....................... (5,527) (7,086)
Purchases of trading account
assets......................... (10,642) (10,722)
Proceeds from sales of trading
account assets................. 10,616 10,620
Originations of loans held for
sale........................... (863,278) (1,492,463)
Purchases of loans held for
sale........................... (223,746) (52,957)
Proceeds from sales of loans
held for sale.................. 970,332 1,810,776
Change in mortgage servicing
rights......................... (96,644) (14,673)
Change in loans held for sale... 2,341 11,368
Change in interest receivable... (4,781) 19,443
Change in other assets.......... (27,403) 27,450
Change in other liabilities..... (34,433) 18,482
------------- ------------
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
------------- ------------

(CONTINUED ON FOLLOWING PAGE)

F-8
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS --(CONTINUED)
(IN THOUSANDS)

FOR THE SIX MONTHS
ENDED MARCH 31,
---------------------------
1997 1996
------------- ------------
(UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES
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 common stock
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 YEAR.................. 119,523 112,931
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 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.

F-9
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 21. 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 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.

Prior to June 1996, the Company was a subsidiary of Hyperion Holdings Inc.,
a Delaware corporation ("Hyperion Holdings"), which in turn was a subsidiary
of Hyperion Partners L.P., a Delaware limited partnership ("Hyperion
Partners"). In June 1996, in contemplation of a public offering of the
Company's common stock, the following actions were taken (collectively, the
"Restructuring"): (i) Hyperion Holdings exchanged shares of a newly created
class of its nonvoting common stock for certain shares of its voting common
stock held by Hyperion Partners; (ii) Hyperion Partners then distributed the
Hyperion Holdings common stock owned by it to its limited and general partners
in accordance with the terms of the limited partnership agreement of Hyperion
Partners (the "Distribution"); and (iii) following the Distribution, Hyperion
Holdings was merged with and into the Company (the "Merger"). As a result of
the Merger, the common stockholders of Hyperion Holdings (i.e. the limited and
general partners of Hyperion Partners) received shares of Class A voting and
Class B nonvoting common stock of the Company. As of the date of the Merger,
Hyperion Holdings had no significant assets, liabilities, or business other than
its investment in the Company. The Merger was accounted for in a manner similar
to a pooling of interests. Due to the immaterial nature of the assets,
liabilities, and operations of Hyperion Holdings prior to the Merger, prior
period results were not restated.

The accompanying Consolidated Financial Statements and information as of
March 31, 1997 and for the six months ended March 31, 1997 and 1996 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 preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires managment to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The accounting and reporting policies conform to generally accepted
accounting principles and general practices within the thrift and mortgage
banking industries.

F-10
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Board of Governors of the Federal Reserve System ("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 $34.1 million, $48.7 million, and
$63.7 million for the periods including March 31, 1997, September 30, 1996 and
1995, respectively. 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 ("MBS"),
are classified into one of three categories: held to maturity, available for
sale, or trading.

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 MBS that the Company has the positive intent and ability to
hold to maturity are classified as held to maturity and recorded at cost,
adjusted for the amortization of premiums and the accretion of discounts. Under
certain circumstances (including the deterioration of the issuer's
creditworthiness or a change in tax law, statutory requirements, or regulatory
requirements), securities and MBS held to maturity may be sold or transferred to
another portfolio.

Securities and MBS that the Company 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.

Prior to the implementation of Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities", when certain loans were securitized, a
portion of the original loan basis was allocated to an excess servicing
receivable for all loans having a servicing fee rate greater than the "normal"
servicing fee rate. This receivable represented the present value of the
estimated future servicing revenue in excess of a "normal" service fee. The
securitized portion of the receivable was classified and accounted for as MBS in
the Consolidated Statements of Financial Condition. That portion of the
receivable not securitized was classified as other assets in the Consolidated
Statements of Financial Condition and amortized to operations over the lives of
the underlying mortgages. Pursuant to the implementation of SFAS No. 125, these
assets are now classified as MBS and securities available for sale. See "Recent
Accounting Standards" and Note 4. The Company reviews these assets periodically
for valuation impairment in a manner similar to its mortgage servicing rights
("MSRs").

The overall return or yield earned on MBS 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 MBS 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 MBS.

If the fair value of a security or MBS 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.

F-11
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net gains or losses on sales of trading account assets, securities, and MBS
are computed on the specific identification method.

LOANS

Loans that the Company 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 or costs ("Book Value"). Loans
held for sale, excluding single family 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. Single
family warehouse loans held for sale are carried at the lower of allocated Book
Value or market value, on an aggregate basis, 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. The Book Value is allocated to loans and the MSRs in
accordance with SFAS No. 125. See "-- Loan Servicing".

Interest income on loans, including impaired loans, is recognized
principally using the level-yield method. Based upon management's periodic
evaluation or at the time a loan is ninety days past due ("nonperforming"),
the related accrued interest is generally reversed by a charge to operations and
the subject loan is simultaneously placed on nonaccrual. Once a loan becomes
current and the borrower demonstrates a continuation of its ability to repay the
loan, the loan is returned to accrual status.

Premiums, discounts, and loan fees (net of certain direct loan origination
costs) on warehouse loans held for sale are recognized in income when the
related loans are sold. Premiums, discounts, and loan fees (net of certain
direct loan origination costs) associated with other loans for which collection
is probable and estimable are recognized in income using the level-yield method,
over the loans' remaining lives (adjusted for anticipated prepayments) or when
such loans are sold. Net discounts associated with loans for which collection
may not be probable and estimable are not accreted to income ("non-accretable
discounts"). These non-accretable discounts relate to bulk purchases of loans,
a portion of which were nonperforming and acquired at discounts from their
principal balance. Management periodically evaluates current loss estimates on
loans with non-accretable discounts to determine if the remaining non-accretable
discounts should be accreted to income.

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 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 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 Company's single family
construction, multi-family, commercial, commercial real estate, healthcare,
small business, and mortgage banker finance line of credit loan categories in
the held to maturity portfolio. See Note 5. These statements apply to all loans
that are restructured in a troubled debt

F-12
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Company's
recorded investment in the loans (unpaid principal balance, adjusted for
unamortized premium or discount, net deferred loan origination fees or costs and
accrued interest receivable) over the measured value of the loans is provided
for in the allowance for credit losses.

LOAN SERVICING

In September 1995, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights, an amendment of Financial Accounting Standards Board
Statement No. 65," effective October 1, 1994. This statement required mortgage
loan servicing rights to be recognized as separate assets from the related
loans, regardless of how those servicing rights were acquired. Upon origination
of a mortgage loan, the Book Value of the mortgage loan was allocated to the MSR
and to the loan (without the MSR) based on its estimated relative fair value,
provided there was a plan to sell or securitize the related loan. On January 1,
1997, the Company adopted SFAS No. 125, which superseded SFAS No. 122, and
requires, among other things, that the book value of loans be allocated between
MSRs and the related loans at the time of the loan sale or securitization, if
servicing is retained. The allocation of the Book Value of the loan between the
MSR and the loan basis results in increased gains on the sales of the loan,
reflecting the value of the servicing rights. Prior to the implementation of
SFAS No. 122, the value of the originated mortgage servicing rights ("OMSRs")
was not recognized until the servicing rights were sold.

MSRs, both OMSRs and purchased mortgage servicing rights ("PMSRs"), are
periodically 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 Statements of
Operations.

An allowance for other losses associated with the mortgage servicing
portfolio and certain receivables, advances, and other assets associated with
that portfolio is established for expected costs that are incurred as a result
of the Company's responsibility as servicer of Federal Housing Administration
("FHA") insured and Department of Veteran Affairs ("VA") guaranteed loans
and is determined based on a number of variables. The allowance is netted
against the related assets in the Consolidated Statements of Financial Condition
and the related provision is included in non-interest expense in the
Consolidated Statements of Operations.

SALES OF SINGLE FAMILY LOANS

Loans are sold periodically to institutional and private investors. Gains
or losses on loan sales are recognized at the time of sale, determined using the
specific identification method, and reflect the extent that net sales proceeds
differ from the allocated Book Value of the loans. Single family warehouse loans
are generally

F-13
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

packaged into pools and sold as MBS. Accordingly, gains or losses on loan sales
include both gains from sales of MBS created from single family 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 ("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, 0.3% of total assets, or
5% of total FHLB advances. FHLB stock is redeemable at par value at the
discretion of the FHLB of Dallas and is used to collateralize FHLB advances.

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less accumulated depreciation,
and include certain branch facilities and the related furniture, fixtures, and
equipment. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets ranging from two to 40 years.

INTANGIBLE ASSETS

Intangible assets consist of the excess cost over fair value of net assets
acquired 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 were
amortized using the straight-line method over 5 years. The unidentifiable
intangible, or goodwill, resulting from thrift related acquisitions is amortized
at a constant rate applied to the carrying amount of the long-term
interest-earning assets acquired that are expected to be outstanding at the
beginning of each subsequent period based on their terms. The original estimated
lives of these long-term interest-earning assets ranged from one to 26 years.
The 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 or their write-off. Debt
issuance costs are being amortized over the life of the notes using the
straight-line method.

REAL ESTATE OWNED ("REO")

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
and included in non-interest expense on the Consolidated Statement of
Operations. 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. A majority of the Company's REO is

F-14
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

single family properties held by the banking segment. The historical average
holding period for REO is six months.

OTHER FINANCIAL INSTRUMENTS

The Company 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 Company
does not utilize instruments such as leveraged derivatives or structured notes.

INTEREST RATE EXCHANGE AGREEMENTS, CAPS, FLOORS, AND OPTIONS. Amounts
receivable and payable are accrued and offset against interest income or expense
on the hedged items.

FINANCIAL FUTURES CONTRACTS. Changes in the market value of futures
contracts are deferred and recognized as interest income or expense over the
remaining terms of the hedged items or recognized at the time the hedged items
are sold.

FORWARD DELIVERY CONTRACTS. Any gains or losses resulting from entering
into forward delivery contracts are recognized when the hedged items are sold as
net gains (losses) on sales of single family warehouse loans. Fees paid for
commitments to deliver loans are charged to other non-interest expense if the
likelihood that the commitment will be exercised is remote or the fees are
offset against the related net gains as the commitment is filled.

OTHER OFF-BALANCE-SHEET INSTRUMENTS. The Company 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.

STOCK-BASED COMPENSATION

On October 1, 1996, the Company adopted 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.

FEDERAL INCOME TAXES

The Parent Company, Holdings, 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, Holdings, 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 ("NOLs") and credit carryforwards that will be utilized
against future taxable income. A valuation allowance reduces the net deferred
tax asset to an amount management believes will more likely than not be
realized.

F-15
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 MSRs and the related loans at the time
of the loan sale or securitization, 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. See Note 3 for certain reclassifications made
pursuant to the implementation of SFAS No. 125. 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.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED SEPTEMBER
ENDED MARCH 31, 30,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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 Warrant
for periods prior to the Warrant redemption in August 1996) by the
weighted-average number of shares of common stock outstanding. Common stock
equivalents on the Bank's Warrant were computed using the treasury stock method.
Average shares and per common share results have been restated for all periods
presented to reflect an 1,800 to one stock conversion in June 1996.

F-16
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS

Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes 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, ----------------------------------
1997 1996 1995 1994
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS
Balance outstanding at
period-end.................... $518,455 $ 649,249 $ 428,052 $ 248,710
Fair value of collateral at
period-end.................... 581,661 693,306 449,152 255,210
Maximum outstanding at any
month-end..................... 582,236 785,178 602,274 768,200
Daily average balance........... 535,956 608,102 420,355 422,745
Average interest rate........... 5.72% 5.83% 6.28% 4.04%

FEDERAL FUNDS SOLD
Balance outstanding at
period-end.................... $ 20,000 $ 25,000 $ 43,000 $ 110,000
Maximum outstanding at any
month-end..................... 85,000 110,000 75,000 110,000
Daily average balance........... 50,890 50,418 37,493 16,948
Average interest rate........... 5.14% 5.36% 5.68% 4.01%
</TABLE>
The repurchase agreements outstanding at March 31, 1997 and September 30,
1996 were collateralized by single family, multi-family and commercial real
estate loans, and MBS. The loans and MBS underlying the repurchase agreements
are held by the counterparty in safekeeping for the account of the Company or by
a third party custodian for the benefit of the Company. All of the investments
in repurchase agreements and federal funds sold outstanding at March 31, 1997
matured on or before April 25, 1997, and those outstanding at September 30, 1996
matured on or before October 21, 1996. The repurchase agreements provide for the
same loans and MBS to be resold at maturity. At March 31, 1997 and September 30,
1996, the following concentrations of repurchase agreements and federal funds
sold outstanding with individual counterparties exceeded ten percent of
stockholders' equity:

AT AT
MARCH 31, SEPTEMBER 30,
1997 1996
---------- -------------
CARRYING VALUE
---------------------------

(IN THOUSANDS)
Salomon Brothers Holding Company
Inc. .............................. $102,017 $ 107,000
Paine Webber Real Estate Securities
Inc................................ 100,000 107,000
Merrill Lynch Mortgage Capital
Inc................................ 100,000 25,000
Donaldson, Lufkin, and Jenrette
Mortgage Capital................... 68,671 95,524
Credit Suisse First Boston Mortgage
Capital Corp....................... 59,101 --
Lehman Commercial Paper Inc.......... 15,000 77,000
Bear Stearns and Company, Inc........ -- 106,547
---------- -------------
$444,789 $ 518,071
========== =============

F-17
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SECURITIES

<TABLE>
<CAPTION>
AT MARCH 31,
--------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
HELD TO MATURITY
Federal agency.................. $ 164 $ 2 $-- $ 166 $ 164
========== ========== ==========
AVAILABLE FOR SALE
Federal agency.................. 27,490 $ 387 $ 31 27,846 $ 27,846
========== ========== ==========
---------- ----------
Total securities........... $ 27,654 $ 28,012
========== ==========

<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
1996
HELD TO MATURITY
Federal agency.................. $ 168 $ 1 $-- $ 169 $ 168
========== ========== ==========
AVAILABLE FOR SALE
Federal agency.................. 12,082 $-- $ 40 12,042
U.S. Treasury notes............. 52,544 -- 210 52,334
---------- ---------- ---------- ----------
Available for sale......... 64,626 $-- $ 250 64,376 $ 64,376
========== ========== ==========
---------- ----------
Total securities........... $ 64,794 $ 64,545
========== ==========

1995
HELD TO MATURITY
Federal agency.................. $ 1,902 $ 799 $ 1 $ 2,700 $ 1,902
========== ========== ==========
AVAILABLE FOR SALE
U.S. Treasury notes............. 114,924 $-- $ 813 114,111 $ 114,111
========== ========== ==========
---------- ----------
Total securities........... $ 116,826 $ 116,811
========== ==========

1994
HELD TO MATURITY
Federal agency.................. $ 1,894 $ 541 $ 76 $ 2,359
U.S. Treasury notes............. 464 -- -- 464
---------- ---------- ---------- ----------
Held to maturity........... 2,358 $ 541 $ 76 2,823 $ 2,358
========== ========== ==========
---------- ----------
AVAILABLE FOR SALE
U.S. Treasury notes............. 114,833 $-- $3,076 111,757 $ 111,757
========== ========== ==========
---------- ----------
Total securities........... $ 117,191 $ 114,580
========== ==========
</TABLE>

During the six months ended March 31, 1997, securities available for sale
were sold for a net gain of $1.6 million. During fiscal 1996, there were $96.5
million of available for sale securities sold with proceeds of $96.8 million and
a net gain of $267,000. 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

F-18
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

during fiscal 1995. At September 30, 1996, securities with carrying values
totalling $1.0 million and fair values totalling $1.0 million were pledged
toward margin requirements for interest rate swap agreements. There were no
securities pledged toward margin requirements on interest rate swaps at March
31, 1997. See Note 4 for certain reclassifications made pursuant to the
implementation of SFAS No. 125.

Securities outstanding at March 31, 1997 mature as follows:
<TABLE>
<CAPTION>
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........................ $-- $ -- $ -- $ --
Due from one to five years..................... 164 166 -- --
Due from five to ten years..................... -- -- 4,464 4,432
Due in more than ten years..................... -- -- 23,026 23,414
---------- --------- ---------- ---------
$ 164 $ 166 $ 27,490 $ 27,846
========== ========= ========== =========

Securities outstanding at September 30, 1996 mature as follows:
<CAPTION>
HELD TO MATURITY AVAILABLE FOR SALE
---------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- --------- ---------- ---------
(IN THOUSANDS)
Due in one year or less......................... $ -- $ -- $ 52,544 $ 52,334
Due from one to five years...................... 168 169 -- --
Due from five to ten years...................... -- -- 12,082 12,042
---------- --------- ---------- ---------
$168 $ 169 $ 64,626 $ 64,376
========== ========= ========== =========
</TABLE>
F-19
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. MORTGAGE-BACKED SECURITIES

<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
------------ ---------- ---------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
HELD TO MATURITY
Agency
Fixed-rate.................... $ 2,133 $ -- $ -- $ 2,133
CMOs -- fixed-rate............ 529 -- 1 528
Non-agency
Adjustable-rate............... 485,621 635 17,757 468,499
CMOs -- fixed-rate............ 96,798 -- 5,572 91,226
Other........................... (292) 55 -- (237)
------------ ---------- ---------- ------------
Held to maturity........... 584,789 $ 690 $ 23,330 562,149 $ 584,789
========== ========== ==========
------------ ------------
AVAILABLE FOR SALE
Agency
Fixed-rate.................... 31 $ 248 $ -- 279
Adjustable-rate............... 280,855 3,724 9 284,570
CMOs -- adjustable-rate....... 213,888 1,386 311 214,963
Non-agency
Fixed-rate.................... 55,640 1,328 -- 56,968
Adjustable-rate............... 328,584 1,533 569 329,548
CMOs--fixed-rate.............. 11,687 7,471 192 18,966
CMOs -- adjustable-rate....... 35,150 263 572 34,841
Other........................... 162 -- -- 162
------------ ---------- ---------- ------------
Available for sale......... 925,997 $ 15,953 $ 1,653 940,297 $ 940,297
------------ ========== ========== ------------ ==========
Total mortgage-backed
securities............... $ 1,510,786 $ 1,502,446
============ ============
</TABLE>

F-20
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
------------ ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
HELD TO MATURITY
Agency
CMOs -- fixed-rate............ $ 1,548 $ 5 $ -- $ 1,553
Non-agency
Fixed-rate.................... 7,042 1,753 126 8,669
Adjustable-rate............... 521,280 401 17,634 504,047
CMOs -- fixed-rate............ 99,966 -- 5,277 94,689
Other........................... 212 55 -- 267
------------ ---------- ---------- ------------
Held to maturity........... 630,048 $2,214 $ 23,037 609,225 $ 630,048
------------ ========== ========== ------------ ============
AVAILABLE FOR SALE
Agency
Adjustable-rate............... 326,338 $1,860 $ 13 328,185
CMOs -- fixed-rate............ 1,818 -- 1 1,817
CMOs -- adjustable-rate....... 224,081 1,414 192 225,303
Non-agency
Fixed-rate.................... 61,893 2,253 -- 64,146
Adjustable-rate............... 373,876 1,119 1,702 373,293
CMOs -- adjustable-rate....... 34,017 -- 862 33,155
Other........................... 1,961 -- -- 1,961
------------ ---------- ---------- ------------
Available for sale......... 1,023,984 $6,646 $ 2,770 1,027,860 $ 1,027,860
------------ ========== ========== ------------ ============
Total mortgage-backed
securities............... $ 1,654,032 $ 1,637,085
============ ============

1995
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........................... 3,547 56 -- 3,603
------------ ---------- ---------- ------------
Held to maturity........... 2,051,304 $ 14,536 $ 34,628 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>
F-21
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1994
HELD TO MATURITY
Agency
Fixed-rate.................... $ 5,313 $ 20 $ 15 $ 5,318
Adjustable-rate............... 563,629 830 15,290 549,169
CMOs -- fixed-rate............ 81,395 -- 3,967 77,428
Non-agency
Fixed-rate.................... 184,929 603 2,057 183,475
Adjustable-rate............... 1,288,271 226 23,048 1,265,449
CMOs -- fixed-rate............ 267,658 -- 11,601 256,057
Other........................... 3,783 113 -- 3,896
------------ ---------- ---------- ------------
Held to maturity........... 2,394,978 $ 1,792 $ 55,978 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>

As a result of the implementation of SFAS No. 125, on January 1, 1997, the
Company reclassified $6.8 million from MBS held to maturity and $15.5 million
from other assets to MBS and securities available for sale. An unrealized gain
of $8.2 million, before tax, or $5.1 million after tax, was recorded in
stockholders' equity.

In November 1995, "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities" was issued.
This implementation guide provided the Company the opportunity to reassess the
appropriateness of the classifications of its securities and provided 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.

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) was included as a component of
stockholders' equity. This transfer was made in response to the classification
of securities as high-risk under the Financial Accounting Standards Board's
("FASB") Emerging Issues Task Force guidelines in effect at that time.
Subsequent to the transfer, these securities were sold.

During fiscal 1994, $38.3 million of non-agency MBS 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.

MBS 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

F-22
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1997 and September 30, 1996, MBS with carrying values
totalling $981.9 million and $1,030.9 million, respectively, and fair values
totalling $963.1 million and $1,020.4 million, respectively, were used to
collateralize securities sold under agreements to repurchase ("reverse
repurchase agreements").

CHANGES IN UNREALIZED GAINS (LOSSES)

<TABLE>
<CAPTION>
MORTGAGE-BACKED
SECURITIES
----------------------- SECURITIES
AVAILABLE HELD TO AVAILABLE TAX
FOR SALE MATURITY FOR SALE EFFECT TOTAL
--------- --------- ----------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 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......... 3,332 -- 830 (1,561) 2,601
(Gains) losses realized due to
sales......................... (2,712) -- (267) 1,117 (1,862)
Transfer from held to
maturity...................... 3,040 1,114 -- (1,558) 2,596
Amortization of held to
maturity...................... -- 1,727 -- (648) 1,079
--------- --------- ----------- ------- --------
Balance at September 30, 1996........ 3,876 (7,199) (250) 1,340 (2,233)
--------- --------- ----------- ------- --------
Market value changes and the
effect of prepayments......... 2,397 -- 2,030 (1,660) 2,767
(Gains) losses realized due to
sales......................... -- -- (1,591) 597 (994)
Amortization of held to
maturity...................... -- 759 -- (319) 440
Implementation of SFAS No.
125........................... 8,028 -- 167 (3,073) 5,122
--------- --------- ----------- ------- --------
Balance at March 31, 1997............ $ 14,301 $ (6,440) $ 356 $(3,115) $ 5,102
========= ========= =========== ======= ========
</TABLE>
In fiscal 1994, the banking segment securitized $1.2 billion of single
family loans into MBS. There were no securitizations of single family loans
during the six months ended March 31, 1997, fiscal 1996 and 1995. During the six
months ended March 31, 1997 and fiscal 1996, the banking segment securitized
small business loans into securities totalling $167.3 million and $30.5 million,
respectively. There were no small business securitizations in fiscal 1995 and
1994. The activity in the excess servicing receivable generated as a result of
these securitizations was as follows:

EXCESS SERVICING RECEIVABLE

FOR THE YEAR ENDED SEPTEMBER
30,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Balance at beginning of period....... $ 11,116 $ 12,182 $ 15,023
Additions....................... 2,645 -- 2,044
Sales........................... -- -- --
Amortization.................... (1,028) (1,066) (4,885)
Allowance for losses............ (5) -- --
--------- --------- ---------
Balance at end of period............. $ 12,728 $ 11,116 $ 12,182
========= ========= =========

F-23
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Approximately $3.4 million, $4.0 million, and $4.3 million of the excess
servicing receivable balance at September 30, 1996, 1995, and 1994,
respectively, represented the securitized portion of the receivable, which was
included in the MBS portfolio. The remaining balance was included in other
assets. These assets are currently classified as securities and MBS available
for sale pursuant to SFAS No. 125.

The following table provides information related to the sales of MBS
available for sale.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ---------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Proceeds from sales............................. $ -- $ 201,523 $ 295,702 $ 77,626 $ 186,190
Gross gains on sales............................ -- 3,472 3,529 217 16,300
Gross losses on sales........................... -- 702 817 201 4,812
</TABLE>

F-24
<PAGE>
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, --------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
HELD TO MATURITY
<S> <C> <C> <C> <C> <C> <C>
Single family................... $6,224,026 $ 6,152,504 $ 7,061,088 $ 4,203,614 $ 2,847,602 $ 2,302,073
Single family construction...... 306,117 242,525 115,436 57,786 35,904 31,920
Consumer........................ 247,463 173,518 123,096 108,179 57,902 21,732
Multi-family.................... 558,752 479,833 356,587 256,362 94,120 50,741
Multi-family construction....... 71,642 31,355 35,430 20,437 17,935 --
Commercial real estate.......... 74,320 10,538 27,393 61,919 49,510 58,521
Commercial real estate
construction.................. 42,438 21,551 3,613 -- -- --
Commercial...................... 20,137 -- -- -- -- --
Healthcare and healthcare
construction.................. 39,904 8,750 -- -- -- --
Small business.................. 33,903 22,798 6,495 -- -- --
Mortgage banker finance line of
credit........................ 218,963 139,872 109,339 147,754 385,548 --
------------- ------------ ------------ ------------ ------------ ------------
7,837,665 7,283,244 7,838,477 4,856,051 3,488,521 2,464,987
Allowance for credit losses..... (43,699) (39,633) (36,763) (23,378) (27,970) (25,529)
Accretable unearned discounts... (8,498) (12,846) (34,784) (50,384) (25,486) (53,174)
Net deferred loan origination
fees.......................... (3,357) (3,612) (3,254) (1,961) (625) (402)
------------- ------------ ------------ ------------ ------------ ------------
Held to maturity........... 7,782,111 7,227,153 7,763,676 4,780,328 3,434,440 2,385,882
------------- ------------ ------------ ------------ ------------ ------------
HELD FOR SALE
Single family warehouse......... 145,471 260,745 411,287 252,153 899,602 1,016,854
Single family................... 59,804 -- -- -- 528,579 783,002
Multi-family.................... -- -- 87,781 12,535 -- --
Small business.................. 38,574 32,790 825 -- -- --
------------- ------------ ------------ ------------ ------------ ------------
243,849 293,535 499,893 264,688 1,428,181 1,799,856
Allowance for credit losses..... (49) (27) (38) (76) (1,894) (2,685)
Unrealized losses............... -- -- (1,142) -- -- --
Accretable unearned premiums
(discounts)................... 5,362 (2,461) (3,676) (266) (2,437) (85,115)
Net deferred loan origination
costs......................... 869 1,288 1,527 1,500 4,089 3,778
------------- ------------ ------------ ------------ ------------ ------------
Held for sale.............. 250,031 292,335 496,564 265,846 1,427,939 1,715,834
------------- ------------ ------------ ------------ ------------ ------------
Total loans................ $8,032,142 $ 7,519,488 $ 8,260,240 $ 5,046,174 $ 4,862,379 $ 4,101,716
============= ============ ============ ============ ============ ============
SUPPLEMENTAL INFORMATION
Non-accretable unearned
discounts..................... $ (2,028) $ (7,075) $ (15,423) $ (31,917) $ (42,975) $ (41,060)
Undisbursed portion of loans in
process....................... (285,867) (262,081) (179,737) (136,797) (39,162) (41,534)
</TABLE>

F-25
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the geographic distribution of loans by
states with concentrations of 4% of loans or greater at March 31, 1997 and
September 30, 1996. The geographic data was based on gross loan principal and
excludes non-accretable unearned discounts.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
---------------------------------------------------------------------------------------
SINGLE COMMERCIAL
FAMILY SINGLE REAL ESTATE SINGLE TOTAL NON-REAL
AND FAMILY MULTI- AND FAMILY REAL ESTATE ESTATE
STATE CONSUMER CONSTRUCTION FAMILY HEALTHCARE WAREHOUSE LOANS LOANS
- ------------------------------------- --------- ------------ --------- ------------ --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
California........................... $3,262,788 $ -- $ 48,741 $ 16,269 $ -- $3,327,798 $ 46
Texas................................ 842,516 151,934 243,259 69,717 -- 1,307,426 139,068
Florida.............................. 388,019 43,458 19,993 14,746 -- 466,216 83
Other................................ 1,936,055 110,725 318,481 77,608 145,471 2,588,340 254,565
--------- ------------ --------- ------------ --------- ----------- --------
Total.............................. $6,429,378 $306,117 $ 630,474 $178,340 $145,471 $7,689,780 $393,762
========= ============ ========= ============ ========= =========== ========
% of Total........................... 79.54% 3.79% 7.80% 2.20% 1.80 % 95.13% 4.87%
========= ============ ========= ============ ========= =========== ========
</TABLE>
% OF
STATE TOTAL TOTAL
- ------------------------------------- --------- ---------

California........................... $3,327,844 41.17%
Texas................................ 1,446,494 17.89%
Florida.............................. 466,299 5.77%
Other................................ 2,842,905 35.17%
--------- ---------
Total.............................. $8,083,542 100.00%
========= =========
% of Total........................... 100.0%
=========
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
---------------------------------------------------------------------------------------
SINGLE COMMERCIAL
FAMILY SINGLE REAL ESTATE SINGLE TOTAL NON-REAL
AND FAMILY MULTI- AND FAMILY REAL ESTATE ESTATE
STATE CONSUMER CONSTRUCTION FAMILY HEALTHCARE WAREHOUSE LOANS LOANS
- ------------------------------------- --------- ------------ --------- ------------ --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
California........................... $3,383,554 $ -- $ 21,177 $ -- $ -- $3,404,731 $ 66
Texas................................ 851,832 124,941 242,554 26,132 -- 1,245,459 119,999
Florida.............................. 393,402 28,440 12,522 1,974 -- 436,338 89
Other................................ 1,608,008 89,144 236,341 14,276 260,745 2,208,514 168,658
--------- ------------ --------- ------------ --------- ----------- --------
Total.............................. $6,236,796 $242,525 $ 512,594 $ 42,382 $260,745 $7,295,042 $288,812
========= ============ ========= ============ ========= =========== ========
% of Total........................... 82.24% 3.20% 6.76% 0.55% 3.44 % 96.19% 3.81%
========= ============ ========= ============ ========= =========== ========
</TABLE>
% OF
STATE TOTAL TOTAL
- ------------------------------------- --------- ---------

California........................... $3,404,797 44.90%
Texas................................ 1,365,458 18.00
Florida.............................. 436,427 5.75
Other................................ 2,377,172 31.35
--------- ---------
Total.............................. $7,583,854 100.00%
========= =========
% of Total........................... 100.00%
=========

Contractual maturities of the loans held to maturity portfolio as of March
31, 1997, were as follows:
<TABLE>
<CAPTION>
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED MARCH 31,
---------------------------------------------------------------------------
2001- 2003- 2008- 2013 AND
1998 1999 2000 2002 2007 2012 THEREAFTER TOTAL
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN
Single family........................ $ 87,844 $ 94,906 $ 102,536 $ 230,464 $ 759,192 $ 1,117,543 $ 3,831,541 $6,224,026
Single family construction........... 306,117 -- -- -- -- -- -- 306,117
Consumer............................. 89,591 15,102 16,619 38,413 87,738 -- -- 247,463
Multi-family......................... 62,873 68,112 73,792 154,489 199,486 -- -- 558,752
Multi-family construction............ 44,121 27,521 -- -- -- -- -- 71,642
Commercial real estate............... 9,099 9,913 10,799 24,581 18,900 1,028 -- 74,320
Commercial real estate
construction....................... 17,640 24,798 -- -- -- -- -- 42,438
Commercial........................... 20,137 -- -- -- -- -- -- 20,137
Healthcare and healthcare
construction....................... 8,449 9,144 3,071 391 18,849 -- -- 39,904
Small business....................... 3,371 3,722 4,110 9,547 13,153 -- -- 33,903
Mortgage banker finance line of
credit............................. 217,175 -- -- 1,788 -- -- -- 218,963
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Total............................ $ 866,417 $ 253,218 $ 210,927 $ 459,673 $1,097,318 $1,118,571 $3,831,541 $7,837,665
========= ========= ========= ========= ========== ========== ========== ==========
TYPE OF INTEREST
Fixed-rate loans..................... $ 55,621 $ 67,844 $ 65,892 $ 149,912 $ 485,860 $ 262,370 $ 491,249 $1,578,748
Adjustable-rate loans................ 810,796 185,374 145,035 309,761 611,458 856,201 3 ,340,292 6,258,917
--------- --------- --------- --------- ---------- ---------- ---------- ---------
Total............................ $ 866,417 $ 253,218 $ 210,927 $ 459,673 $1,097,318 $1,118,571 $3,831,541 $7,837,665
========= ========= ========= ========= ========== ========== ========== ==========
</TABLE>

F-26
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Contractual maturities of the loans held to maturity portfolio as of
September 30, 1996, were as follows:
<TABLE>
<CAPTION>
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
2000- 2002- 2007- 2012 AND
1997 1998 1999 2001 2006 2011 THEREAFTER TOTAL
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN
Single family........................ $ 94,810 $ 102,314 $ 110,413 $ 247,738 $ 812,708 $1,189,495 $3,595,026 $6,152,504
Single family construction........... 242,525 -- -- -- -- -- -- 242,525
Consumer............................. 86,119 11,175 12,353 28,747 35,124 -- -- 173,518
Multi-family......................... 92,631 100,890 84,795 28,811 172,706 -- -- 479,833
Multi-family construction............ 13,134 13,173 1,763 3,285 -- -- -- 31,355
Commercial real estate............... 1,576 1,708 1,853 3,156 20,096 7,367 5,083 40,839
Small business....................... 4,786 5,284 5,833 6,736 159 -- -- 22,798
Mortgage banker finance line of
credit............................. 137,186 -- -- 2,686 -- -- -- 139,872
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 672,767 $ 234,544 $ 217,010 $ 321,159 $1,040,793 $1,196,862 $3,600,109 $7,283,244
========= ========= ========= ========= ========= ========= ========= =========
TYPE OF INTEREST
Fixed-rate loans..................... $ 47,176 $ 51,297 $ 55,790 $ 124,938 $ 411,665 $ 297,328 $ 18,025 $1,006,219
Adjustable-rate loans................ 625,591 183,247 161,220 196,221 629,128 899,534 3,582,084 6,277,025
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 672,767 $ 234,544 $ 217,010 $ 321,159 $1,040,793 $1,196,862 $3,600,109 $7,283,244
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

The performing single family loans are pledged, under a blanket lien, as
collateral securing advances from the FHLB at March 31, 1997 and September 30,
1996.

PRINCIPAL BALANCE OF NONACCRUAL LOANS
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------
1997 1996 1995 1994
------------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NONACCRUAL LOANS
Single family................... $ 85,764 $ 92,187 $ 83,954 $ 85,722
Single family construction...... -- -- 505 --
Consumer........................ 950 1,039 563 506
Multi-family.................... 2,281 144 213 3,802
Commercial real estate and small
business...................... 121 350 -- 2,342
------------- ---------- ---------- ----------
89,116 93,720 85,235 92,372
Discounts....................... (620) (4,077) (9,727) (16,053)
------------- ---------- ---------- ----------
Net nonaccrual loans............ $ 88,496 $ 89,643 $ 75,508 $ 76,319
============= ========== ========== ==========
ALLOWANCE FOR CREDIT LOSSES TO NET
NONACCRUAL LOANS
Single family................... 36.71% 32.46% 39.74% 22.70%
Total........................... 49.44 44.24 48.74 30.73
</TABLE>
At September 30, 1994, nonaccrual loans above included $5.7 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, 1997, and September 30, 1996 and 1995.

If the nonaccrual loans as of March 31, 1997 and September 30, 1996 had
been performing in accordance with their original terms throughout the six
months ended March 31, 1997, and fiscal 1996, interest income recognized would
have been $4.1 million and $8.3 million, respectively. The actual interest
income recognized on these loans for the six months ended March 31, 1997 was
$516,000 and for fiscal 1996 was $3.4 million. No

F-27
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

commitments exist to lend additional funds to borrowers whose loans were on
nonaccrual status at March 31, 1997 and September 30, 1996.

At March 31, 1997, the recorded investment in impaired loans pursuant to
SFAS No. 114 totalled $3.6 million and the average outstanding balance for the
six months ended March 31, 1997 was $3.6 million. At September 30, 1996, the
recorded investment in impaired loans pursuant to SFAS No. 114 totalled $3.9
million and the average outstanding balance for fiscal 1996 was $4.4 million. No
allowance for credit losses determined in accordance with SFAS No. 114 was
required on these impaired loans because the measured values of the loans
exceeded the recorded investments in the loans.

Interest income of $162,000 was recognized on impaired loans during the six
months ended March 31, 1997 of which $161,000 was collected in cash. Interest
income of $393,000 was recognized on impaired loans during fiscal 1996, of which
$355,000 was collected in cash.

F-28

<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
LOANS HELD TO MATURITY
----------------------------------------------------------------------------------
COMMERCIAL
REAL
ESTATE, MORTGAGE
SMALL BANKER
SINGLE MULTI- BUSINESS FINANCE
SINGLE FAMILY MULTI- FAMILY AND LINE OF
FAMILY CONSTRUCTION CONSUMER FAMILY CONSTRUCTION HEALTHCARE CREDIT
------- ------------ -------- ------ ------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1991................. $ 8,956 $186 $ 81 $ 144 $-- $ 552 $--
Provision........................ 14,156 135 39 75 -- 6,261 --
Charge-offs...................... (2,835) -- (76 ) -- -- -- --
Recoveries....................... 8 -- -- -- -- -- --
Other............................ (6,817) -- 100 -- -- 4,564 --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
September 30, 1992................. 13,468 321 144 219 -- 11,377 --
Provision........................ 1,824 56 264 1,178 107 (25) 944
Charge-offs...................... (2,167) (71) (72 ) -- -- -- --
Recoveries....................... 6 -- 19 -- -- -- --
Other............................ 378 -- -- (31 ) 1 30 --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
September 30, 1993................. 13,509 306 355 1,366 108 11,382 944
Provision........................ 2,369 93 2,794 1,187 28 875 (260)
Charge-offs...................... (1,722) -- (1,365 ) (233 ) -- (10,145) --
Recoveries....................... 20 -- 38 -- -- -- --
Other............................ 1,729 -- -- 9 (9) -- --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
September 30, 1994................. 15,905 399 1,822 2,329 127 2,112 684
Provision........................ 18,493 (38) 4,178 524 72 1,374 (274)
Charge-offs...................... (4,840) -- (2,847 ) -- -- (3,389) --
Recoveries....................... 36 -- 94 2 -- -- --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
September 30, 1995................. 29,594 361 3,247 2,855 199 97 410
Provision........................ 6,771 332 7,823 1,263 33 256 2
Charge-offs...................... (7,751) -- (5,995 ) -- -- (39) --
Recoveries....................... 31 -- 144 -- -- -- --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
September 30, 1996................. $28,645 $693 $ 5,219 $4,118 $ 232 $ 314 $ 412
======= ============ ======== ====== ============ ========== =========
Balance at
September 30, 1995................. $29,594 $361 $ 3,247 $2,855 $ 199 $ 97 $ 410
Provision........................ 2,429 122 3,030 143 32 86 2
Charge-offs...................... (3,242) -- (3,008 ) -- -- -- --
Recoveries....................... 18 -- 70 -- -- -- --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
March 31, 1996..................... $28,799 $483 $ 3,339 $2,998 $ 231 $ 183 $ 412
======= ============ ======== ====== ============ ========== =========
Balance at
September 30, 1996................. $28,645 $693 $ 5,219 $4,118 $ 232 $ 314 $ 412
Provision........................ 6,747 376 2,629 646 15 557 227
Charge-offs...................... (4,096) (73) (2,970 ) (148 ) -- -- --
Recoveries....................... 17 -- 136 -- -- 3 --
------- ------------ -------- ------ ------------ ---------- ---------
Balance at
March 31, 1997..................... $31,313 $996 $ 5,014 $4,616 $ 247 $ 874 $ 639
======= ============ ======== ====== ============ ========== =========
</TABLE>
LOANS
HELD FOR SALE
-------------------
SINGLE
FAMILY SINGLE
WAREHOUSE FAMILY TOTAL
--------- ------- --------
Balance at
September 30, 1991................. $ 229 $ -- $ 10,148
Provision........................ 467 -- 21,133
Charge-offs...................... (118) -- (3,029)
Recoveries....................... -- -- 8
Other............................ -- 2,107 (46)
--------- ------- --------
Balance at
September 30, 1992................. 578 2,107 28,214
Provision........................ (265) -- 4,083
Charge-offs...................... (148) -- (2,458)
Recoveries....................... -- -- 25
Other............................ -- (378) --
--------- ------- --------
Balance at
September 30, 1993................. 165 1,729 29,864
Provision........................ (89) -- 6,997
Charge-offs...................... -- -- (13,465)
Recoveries....................... -- -- 58
Other............................ -- (1,729) --
--------- ------- --------
Balance at
September 30, 1994................. 76 -- 23,454
Provision........................ (36) -- 24,293
Charge-offs...................... (2) -- (11,078)
Recoveries....................... -- -- 132
--------- ------- --------
Balance at
September 30, 1995................. 38 -- 36,801
Provision........................ (11) -- 16,469
Charge-offs...................... -- -- (13,785)
Recoveries....................... -- -- 175
--------- ------- --------
Balance at
September 30, 1996................. $ 27 $ -- $ 39,660
========= ======= ========
Balance at
September 30, 1995................. $ 38 $ -- $ 36,801
Provision........................ 6 -- 5,850
Charge-offs...................... -- -- (6,250)
Recoveries....................... -- -- 88
--------- ------- --------
Balance at
March 31, 1996..................... $ 44 $ -- $ 36,489
========= ======= ========
Balance at
September 30, 1996................. $ 27 $ -- $ 39,660
Provision........................ 22 -- 11,219
Charge-offs...................... -- -- (7,287)
Recoveries....................... -- -- 156
--------- ------- --------
Balance at
March 31, 1997..................... $ 49 $ -- $ 43,748
========= ======= ========

F-29
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LOAN SERVICING

SINGLE FAMILY SERVICING PORTFOLIO
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------
1997 1996 1995
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
OWNED LOANS.......................... $ 6,780,299 $ 6,694,634 $ 7,602,869
Less: Loans serviced by
others........................ 2,863,622 2,700,049 3,476,733
------------- ------------- -------------
Total owned loans serviced
by Company............... 3,916,677 3,994,585 4,126,136
------------- ------------- -------------
LOANS SERVICED FOR OTHERS
Purchased servicing rights...... 9,365,321 4,841,534 4,652,081
Loans originated and sold with
servicing retained............ 3,723,101 3,008,615 1,186,951
Servicing purchases -- not yet
transferred to Company........ (3,497,699) -- --
Servicing sales -- not yet
transferred by Company........ 90,559 464,053 1,045,839
Other........................... 223,453 349,389 276,457
------------- ------------- -------------
Total loans serviced for
others................... 9,904,735 8,663,591 7,161,328
MORTGAGE-BACKED SECURITIES
SECURITIZED BY BANKING SEGMENT..... 769,828 831,197 1,360,443
------------- ------------- -------------
Total servicing
portfolio................ $14,591,240 $ 13,489,373 $ 12,647,907
============= ============= =============
</TABLE>
The table above includes single family, single family construction, and
single family warehouse loans. In addition to the single family servicing
portfolio, there were $250.6 million, $283 million, and $177 million of
multi-family loans serviced for others at March 31, 1997, September 30, 1996,
and 1995, respectively.

FAIR VALUE OF SINGLE FAMILY SERVICING PORTFOLIO
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------
1997 1996 1995
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
PRINCIPAL
Total loans serviced for
others........................ $ 9,904,735 $ 8,663,591 $ 7,161,328
Mortgage-backed securities
securitized by banking
segment....................... 769,828 831,197 1,360,443
Servicing purchases -- not yet
transferred to Company........ 3,497,699 -- --
Servicing sales -- not yet
transferred by Company........ (90,559) (464,053) (1,045,839)
Single family warehouse loans
subject to SFAS No. 122....... -- 260,745 411,287
------------- ------------- -------------
Total single family
servicing portfolio, as
adjusted................. $14,081,703 $ 9,291,480 $ 7,887,219
============= ============= =============
FAIR VALUE........................... $ 259,875 $ 168,971 $ 122,250
------------- ------------- -------------
BOOK VALUE
OMSR............................ 70,834 62,571 23,062
PMSR............................ 137,169 60,821 52,035
------------- ------------- -------------
Total book value........... 208,003 123,392 75,097
------------- ------------- -------------
Fair value in excess of
book value (see Note
12)...................... $ 51,872 $ 45,579 $ 47,153
============= ============= =============
</TABLE>
F-30
<PAGE>
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,
------------------------------------------ ------------------------------------------
1997 1996 1996 1995
-------------------- -------------------- -------------------- --------------------
OMSRS PMSRS OMSRS PMSRS OMSRS PMSRS OMSRS PMSRS

(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period....... $ 62,571 $ 60,821 $ 23,062 $ 52,035 $ 23,062 $ 52,035 $ -- $ 56,677
Additions........................ 12,108 85,337 14,944 1,142 48,412 23,535 28,694 12,546
Amortization..................... (3,845) (8,188) (1,125) (4,823) (4,107) (9,740) (1,010) (9,821)
Deferred hedging gains........... -- (801) -- (1,730) -- (2,140) -- (7,173)
Sales............................ -- -- 1,386 (1,508) (4,796) (2,869) (4,622) (194)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at end of period............. $ 70,834 $ 137,169 $ 38,267 $ 45,116 $ 62,571 $ 60,821 $ 23,062 $ 52,035
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
1994
---------
PMSRS

Balance at beginning of period....... $ 10,650
Additions........................ 50,955
Amortization..................... (4,928)
Deferred hedging gains........... --
Sales............................ --
---------
Balance at end of period............. $ 56,677
=========

7. COVERED ASSETS AND FEDERAL FINANCIAL ASSISTANCE

Concurrent with the Bank's incorporation on December 30, 1988, the Parent
Company, the Bank, and certain of their direct and indirect parent entities
entered into an Assistance Agreement ("Assistance Agreement") with the Federal
Savings and Loan Insurance Corporation ("FSLIC") whereby the Bank acquired
substantially all of the assets and assumed all of the deposits and certain
liabilities of United Savings Association of Texas ("Old USAT"), an insolvent
thrift institution (the "Acquisition"). The majority of assets acquired were
designated as Covered Assets ("Covered Assets") and were subject to certain
provisions contained in the Assistance Agreement. The Assistance Agreement
provided for, among other things, financial assistance to the Bank.

On December 23, 1993, the Parent Company, the Bank, and certain of their
direct and indirect parent entities, and the Federal Deposit Insurance
Corporation, ("FDIC") 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. The
following table shows the composition of FRF payments received in fiscal 1994.

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

F-31
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. DEPOSITS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------
AT MARCH 31,
1997 1996 1995 1994
-------------------- -------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NON-INTEREST BEARING DEPOSITS........ $ 313,689 -- % $ 284,304 -- % $ 181,196 -- % $ 76,498 -- %
INTEREST-BEARING DEPOSITS
Transaction accounts............. 211,584 1.00 211,976 1.00 219,307 1.50 233,666 1.49
Insured money fund accounts
Consumer....................... 700,540 4.24 588,585 4.36 397,473 3.73 407,029 3.12
Commercial..................... 809,289 5.30 810,743 5.29 857,669 5.82 416,571 4.84
--------- -------- --------- -------- --------- --- --------- ---
Subtotal..................... 1,509,829 4.81 1,399,328 4.90 1,255,142 5.16 823,600 3.99
--------- -------- --------- -------- --------- --- --------- ---
Savings accounts................. 128,436 2.33 130,137 2.48 144,301 2.73 222,769 2.60
Certificates of deposit
Consumer....................... 2,803,012 5.69 2,911,682 5.71 3,063,631 5.84 2,949,715 4.88
Commercial..................... 4,922 4.88 2,667 4.88 2,273 5.36 -- --
Wholesale...................... 94,332 9.73 207,851 10.28 316,370 9.06 457,956 7.92
--------- -------- --------- -------- --------- --- ---------
Subtotal..................... 2,902,266 5.82 3,122,200 6.01 3,382,274 6.14 3,407,671 5.29
--------- -------- --------- -------- --------- --- --------- ---
Total interest-bearing
deposits................... 4,752,115 5.19 4,863,641 5.38 5,001,024 5.59 4,687,706 4.74
--------- -------- --------- -------- --------- --- --------- ---
Total deposits............... $5,065,804 4.87% $5,147,945 5.08% $5,182,220 5.40% $4,764,204 4.67%
========= ======== ========= ======== ========= === ========= ===
Consumer............................. $3,981,406 $3,939,631 $3,868,498 $3,834,239
Commercial........................... 990,066 1,000,463 997,352 472,009
Wholesale............................ 94,332 207,851 316,370 457,956
--------- --------- --------- ---------
Total deposits............... $5,065,804 $5,147,945 $5,182,220 $4,764,204
========= ========= ========= =========
</TABLE>
At March 31, 1997 and September 30, 1996, 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 1998 1999 2000 2001 2002 THEREAFTER TOTAL
- ------------------------------------- ------------ ---------- ---------- --------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
2.99% and below...................... $ 4,413 $ -- $ -- $ -- $ -- $ -- $ 4,413
3.00% to 3.99%....................... 10,156 114 -- -- -- 3 10,273
4.00% to 4.99%....................... 296,029 38,968 4,930 2,478 25 -- 342,430
5.00% to 5.99%....................... 1,053,005 551,500 68,143 22,927 44,606 343 1,740,524
6.00% to 6.99%....................... 223,466 261,531 86,127 12,468 82,539 442 666,573
7.00% to 7.99%....................... 8,826 3,591 25,057 818 12,197 131 50,620
8.00% to 8.99%....................... 929 2,263 4,177 715 121 25 8,230
9.00% to 9.99%....................... 2,596 7,380 158 155 -- 308 10,597
10.00% to 10.99%..................... 11,927 22,509 77 688 -- 228 35,429
Over 10.99%.......................... 32,881 -- 296 -- -- -- 33,177
------------ ---------- ---------- --------- ---------- ---------- ------------
$ 1,644,228 $ 887,856 $ 188,965 $ 40,249 $ 139,488 $ 1,480 $ 2,902,266
============ ========== ========== ========= ========== ========== ============
</TABLE>

F-32
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
CERTIFICATES MATURING IN THE YEAR ENDING SEPTEMBER 30,
-------------------------------------------------------------------------
STATED RATE 1997 1998 1999 2000 2001 THEREAFTER TOTAL
- ------------------------------------- ------------ ------------ ---------- --------- --------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
2.99% and below...................... $ 1,584 $ -- $ -- $ -- $ -- $ -- $ 1,584
3.00% to 3.99%....................... 21,867 740 8 -- -- 3 22,618
4.00% to 4.99%....................... 437,650 23,983 33,839 1,063 2,645 61 499,241
5.00% to 5.99%....................... 861,376 409,903 92,854 6,826 34,185 449 1,405,593
6.00% to 6.99%....................... 440,730 246,208 74,373 61,165 49,022 1,788 873,286
7.00% to 7.99%....................... 79,767 7,747 5,778 21,536 11,276 1,529 127,633
8.00% to 8.99%....................... 1,399 678 4,485 2,326 354 27 9,269
9.00% to 9.99%....................... 579 6,480 3,062 12 138 308 10,579
10.00% to 10.99%..................... 40,224 14,699 11,166 664 97 228 67,078
Over 10.99%.......................... 88,281 16,757 281 -- -- -- 105,319
------------ ------------ ---------- --------- --------- ---------- ------------
$ 1,973,457 $ 727,195 $ 225,846 $ 93,592 $ 97,717 $ 4,393 $ 3,122,200
============ ============ ========== ========= ========= ========== ============
</TABLE>

Scheduled maturities of CDs of $100,000 or more outstanding at March 31,
1997 and September 30, 1996 were as follows:
<TABLE>
<CAPTION>
AT MARCH 31, 1997 AT SEPTEMBER 30, 1996
--------------------- ---------------------
NUMBER OF DEPOSIT NUMBER OF DEPOSIT
ACCOUNTS AMOUNT ACCOUNTS AMOUNT
--------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Three months or less................. 543 $ 59,044 1,234 $130,243
Over three through six months........ 652 68,500 551 57,661
Over six through twelve months....... 1,184 124,393 957 101,299
Over twelve months................... 2,088 220,103 1,813 190,973
--------- -------- --------- --------
Total...................... 4,467 $472,040 4,555 $480,176
========= ======== ========= ========
</TABLE>
INTEREST EXPENSE ON DEPOSITS

F-33
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. FEDERAL HOME LOAN BANK ADVANCES

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------------
1997 1996 1995 1994
----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Maximum outstanding at any
<S> <C> <C> <C> <C>
month-end.......................... $3,936,551 $ 4,384,798 $ 4,386,605 $ 2,697,829
Daily average balance................ 3,721,496 4,073,297 3,560,844 2,285,630
Average interest rate................ 5.60% 6.07% 6.31% 3.98%
</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,
1997 1996 1995
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------ -------- ------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1996................................. $ -- -- % $ -- -- % $ 2,391,885 6.22%
1997................................. -- -- 2,564,095 5.82 1,855,765 6.33
1998................................. 1,072,449 5.61 905,046 5.47 115,000 6.60
1999................................. 1,139,400 5.52 8,700 7.65 8,700 7.65
2000................................. 725,702 5.40 2,700 7.80 2,700 7.80
2001................................. 281,200 5.52 7,145 8.16 4,800 7.92
2002 and Thereafter.................. 567,845 5.47 2,700 8.04 5,045 8.33
------------ -------- ------------ -------- ------------ --------
Total...................... $ 3,786,596 5.51% $ 3,490,386 5.74% $ 4,383,895 6.28%
============ ======== ============ ======== ============ ========
</TABLE>
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, --------------------------------------
1997 1996 1995 1994
------------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REVERSE REPURCHASE AGREEMENTS
Balance outstanding at
period-end.................... $ 927,859 $ 832,286 $ 1,172,533 $ 553,000
Fair value of collateral at
period-end.................... 963,081 1,020,405 1,239,527 673,000
Maximum outstanding at any
month-end..................... 1,038,086 1,096,508 1,355,540 553,000
Daily average balance........... 905,475 955,681 887,932 273,899
Average interest rate........... 5.55% 5.77% 5.99% 3.85%
FEDERAL FUNDS PURCHASED
Balance outstanding at
period-end.................... $ -- $ -- $ -- $ --
Maximum outstanding at any
month-end..................... -- -- -- 15,000
Daily average balance........... 412 27 521 767
Average interest rate........... 5.28% 6.02% 5.95% 3.73%

</TABLE>
F-34
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled maturities of reverse repurchase agreements outstanding at March
31, 1997 and September 30, 1996 were as follows:

AT MARCH 31, 1997 AT SEPTEMBER 30, 1996
------------------ ---------------------
(IN THOUSANDS)
October 1996................... $-- $ 472,286
March 1997..................... -- 360,000
April 1997..................... 465,842 --
May 1997....................... 102,017 --
September 1997................. 360,000 --
------------------ ---------------------
$927,859 $ 832,286
================== =====================

The counterparties to all reverse repurchase agreements at March 31, 1997
and September 30, 1996 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,
1997 and September 30, 1996, the reverse repurchase agreements were outstanding
with the following counterparties:

AT MARCH 31, 1997 AT SEPTEMBER 30, 1996
------------------ ---------------------
CARRYING VALUE
-------------------------------------------

(IN THOUSANDS)
Morgan Stanley and Co.
Incorporated.................... $360,000 $ 360,000
Credit Suisse First Boston Inc.... 191,118 44,215
Donaldson, Lufkin, and Jenrette
Securities Corporation.......... 161,085 301,524
Goldman, Sachs and Co............. 115,656 57,000
Federal Home Loan Bank............ 50,000 45,000
PaineWebber, Inc.................. 50,000 24,547
------------------ ---------------------
$927,859 $ 832,286
================== =====================

11. SENIOR NOTES

In May 1993, the Parent Company issued $115 million of 8.05% Senior Notes
due May 15, 1998 and repaid long-term debt and a note payable to a related
party. 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. The interest rate on the Senior Notes was subject to increase in
certain circumstances if an exchange offer ("Exchange Offer") was not
consummated by certain dates. 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. The Exchange Offer was consummated in August 1996 and the
interest rate reverted to the initial rate of 8.05% in September 1996.

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, including the costs of the Exchange
Offering, totalled $5.4 million, and amortization for the six months ended March
31, 1997 and 1996 and for fiscal 1996, 1995, and 1994 was $632,000, $488,000,
$1.0 million, $976,000, and $977,000, respectively.

F-35
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. In
December 1996, the Parent Company contributed all of the outstanding stock of
its subsidiary, the Bank, to Holdings, and Holdings assumed the obligations of
the Senior Notes. The Parent Company has no significant assets other than its
equity in Holdings and the Parent Company's ability to pay dividends on its
common stock and to meet its other cash obligations is dependent upon the
receipt of dividends from Holdings. Holdings' ability to pay dividends to the
Parent Company is dependent on the extent to which it receives common stock
dividends from the Bank. 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 ("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 Parent Company on its common stock and by the Bank on its
preferred stock, 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 April 1, 1997 and September 30, 1996, $78.8
million and $76.8 million were available for payment of future dividends by the
Parent Company under this restriction. See Note 21 for a discussion of
subsequent events.

12. FINANCIAL INSTRUMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires the disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Quoted market
prices, when available, are used as the measure of fair value. In cases where
quoted market prices are not available, fair values are based on present value
estimates or other valuation techniques. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair
values cannot always be substantiated by comparison to independent market quotes
and, in many cases, the estimated fair values could not necessarily be realized
in an immediate sale or settlement of the instrument.

The fair value estimates presented herein are based on relevant information
available to management as of March 31, 1997, September 30, 1996, and 1995.
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 Company. 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 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 MBS approximate their fair values as they mature within
90 days and do not present significant credit concerns. The fair values of
securities and MBS 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

F-36
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximates their fair value. For fixed-rate loans and single family loans,
excluding the single family 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 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 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 Company
for deposits of similar remaining maturities.

FHLB ADVANCES, REVERSE REPURCHASE AGREEMENTS, AND FEDERAL FUNDS
PURCHASED. Fair values are estimated based on the discounted value of
contractual cash flows using rates currently available to the Company 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. The carrying amount of financial instruments
in these classifications are considered a reasonable estimate of their fair
value due to the short-term nature of the instruments.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. The fair values of
financial instruments with off-balance-sheet risk are based on current market
prices.

SERVICING PORTFOLIO. See Note 1 for a description of the method used to
value the single family servicing portfolio.

F-37
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS NO. 107 FAIR VALUES

<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
---------------------- -----------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
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......................... $ 649,707 $ 649,707 $ 793,772 $ 793,772 $ 583,983 $ 583,983
Trading account assets........... 1,190 1,190 1,149 1,149 1,081 1,081
Securities....................... 28,010 28,012 64,544 64,545 116,013 116,811
Mortgage-backed securities....... 1,525,086 1,502,446 1,657,908 1,637,085 2,398,263 2,378,171
Loans............................ 8,032,142 8,136,157 7,519,488 7,657,483 8,260,240 8,418,464
FHLB stock....................... 194,668 194,668 179,643 179,643 225,952 225,952
Other assets..................... 139,413 139,413 110,441 115,658 150,542 155,631
NON-FINANCIAL ASSETS................. 432,409 N/A 385,432 N/A 247,460 N/A
---------- ========= ---------- ========= ---------- =========
Total assets................. $11,002,625 $10,712,377 $11,983,534
========== ========== ==========
FINANCIAL LIABILITIES
Deposits......................... $5,065,804 $5,076,131 $5,147,945 $5,164,988 $5,182,220 $5,215,438
FHLB advances.................... 3,786,596 3,786,679 3,490,386 3,493,086 4,383,895 4,395,965
Reverse repurchase agreements and
federal funds purchased........ 927,859 927,655 832,286 832,328 1,172,533 1,171,884
Senior Notes..................... 115,000 116,025 115,000 118,396 115,000 115,383
Other liabilities................ 127,010 127,010 170,870 170,870 162,073 162,073
NON-FINANCIAL LIABILITIES, MINORITY
INTEREST, AND STOCKHOLDERS'
EQUITY............................. 980,356 N/A 955,890 N/A 967,813 N/A
---------- ========= ---------- ========= ---------- =========
Total liabilities, minority
interest, and stockholders'
equity..................... $11,002,625 $10,712,377 $11,983,534
========== ========== ==========
OTHER FINANCIAL ASSETS
(LIABILITIES) -- FAIR VALUE
Interest rate swaps............ $ 2,608 $ (66) $ (1,517)
Interest rate caps............. 829 1,057 1,113
Interest rate floors........... 3,060 2,515 4,895
Financial options.............. -- -- 103
Financial futures contracts.... -- -- (1,869)
Forward delivery contracts..... 1,168 (176) (2,877)
Commitments to extend credit... 46 2,238 897
OTHER NON-FINANCIAL
ASSETS -- UNREALIZED GAINS
Single family servicing
portfolio, as adjusted (See
Note 6)...................... 51,872 45,579 47,153
</TABLE>

The carrying values of other financial assets (liabilities) and other
non-financial assets, if any, were included with the carrying values of the
related assets and liabilities.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company 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 Company 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, and 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 offset 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 Company 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

F-38
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Company's involvement in particular classes of financial
instruments and generally exceed the expected future cash requirements relating
to the instruments.

AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1997 1996 1995
------------ ---------- ----------
(IN THOUSANDS)
Interest rate swaps.................. $ 241,000 $ 50,000 $ 615,000
Interest rate caps................... 913,000 659,000 565,000
Interest rate floors................. 1,740,500 688,500 310,000
Financial options.................... -- -- 23,000
Financial futures contracts.......... -- -- 529,000
Forward delivery contracts........... 107,481 321,923 509,463
Commitments to extend credit......... 1,125,823 988,120 999,792

Financial instruments with off-balance-sheet risk at March 31, 1997 and
September 30, 1996 were scheduled to mature as follows:
<TABLE>
<CAPTION>
MATURING IN THE YEAR ENDING MARCH 31,
-------------------------------------------------
1998 1999 2000 THEREAFTER TOTAL
------------ ---------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest rate swaps.................. $ -- $ 146,000 $ 59,500 $ 35,500 $ 241,000
Interest rate caps................... 579,000 64,000 51,000 219,000 913,000
Interest rate floors................. 310,000 482,000 330,000 618,500 1,740,500
Forward delivery contracts........... 107,481 -- -- -- 107,481
Commitments to extend credit......... 951,026 89,814 52,532 32,451 1,125,823
------------ ---------- ---------- ---------- ------------
Total...................... $ 1,947,507 $ 781,814 $ 493,032 $ 905,451 $ 4,127,804
============ ========== ========== ========== ============
</TABLE>

<TABLE>
<CAPTION>
MATURING IN THE YEAR ENDING SEPTEMBER 30,
------------------------------------------------
1997 1998 1999 THEREAFTER TOTAL
------------ ---------- --------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest rate swaps.................. $ 50,000 $ -- $ -- $ -- $ 50,000
Interest rate caps................... 237,000 121,000 58,000 243,000 659,000
Interest rate floors................. 60,000 250,000 -- 378,500 688,500
Forward delivery contracts........... 321,923 -- -- -- 321,923
Commitments to extend credit......... 844,112 100,459 9,728 33,821 988,120
------------ ---------- --------- ---------- ------------
Total...................... $ 1,513,035 $ 471,459 $ 67,728 $ 655,321 $ 2,707,543
============ ========== ========= ========== ============
</TABLE>
F-39
<PAGE>
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 Company's liabilities with the related assets. During the six
months ended March 31, 1997 and fiscal 1996, $50.0 million and $565.0 million,
respectively, of interest rate swap contracts expired.
<TABLE>
<CAPTION>
NOTIONAL FIXED FLOATING HEDGED
AMOUNT RATE RATE ITEM
-------- ------- -------- ------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AT MARCH 31, 1997
Received Floating/Pay Fixed.......... $ 75,000 6.06% 5.77%(1) FHLB advances
45,000 6.20 5.77(1) FHLB advances
37,500 6.38 5.77(1) FHLB advances
26,000 5.87 5.77(1) FHLB advances
22,500 6.75 5.77(1) FHLB advances
22,000 6.00 5.77(1) FHLB advances
13,000 6.34 5.77(1) FHLB advances
--------
Total........................... $241,000
========
AT SEPTEMBER 30, 1996
Receive Fixed/Pay Floating........... $ 25,000 6.00 5.50(2) Consumer deposits
25,000 4.60 5.69(1) Consumer deposits
--------
Total........................... $ 50,000
========

AT SEPTEMBER 30, 1995
Receive Floating/Pay Fixed........... $ 75,000 6.10 5.81(2) FHLB advances
340,000 6.50 5.86(2) Reverse repurchase agreements
100,000 6.58 6.00(1) Commercial deposits
Receive Fixed/Pay Floating........... 75,000 4.32 5.88(1) Consumer deposits
25,000 6.00 5.81(2) Consumer deposits
--------
Total........................... $615,000
========
</TABLE>

(1) Based on the three month London InterBank Offered Rate ("LIBOR") as of the
last reset prior to the date reported.

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

F-40
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTEREST RATE CAPS. During fiscal 1995, interest rate caps with original
notional principal amounts totalling $565.0 million were entered into in an
effort to hedge certain adjustable-rate loans. After considering expected
prepayments and the amortization of the loans that were being hedged, the
amortized notional principal amounts of these caps totalled $459.0 million at
September 30, 1996 and $413.0 million at March 31, 1997. Interest rate caps with
notional principal amounts totalling $950.0 million were entered into during
fiscal 1996 in an effort to hedge certain adjustable-rate MBS and FHLB advances.
During fiscal 1996, $750.0 million of the caps entered into during fiscal 1996
were sold as the MBS being hedged were sold. The resulting gain on the sale of
the caps of $1.9 million partially offset the loss on the sale of the MBS.
During the six months ended March 31, 1997, $300.0 million in interest rate caps
were entered into in an effort to hedge FHLB advances.

AVERAGE
NOTIONAL INDEX CONTRACTED
AMOUNT RATE RATE
-------- ----- ----------
(DOLLARS IN THOUSANDS)
AT MARCH 31, 1997............. buy $413,000 5.66 %(1) 7.86%
500,000 5.56 (2) 6.22
sell 413,000 5.66 (1) 8.57
AT SEPTEMBER 30, 1996......... buy 459,000 5.93 (1) 7.86
200,000 5.66 (2) 6.19
sell 459,000 5.93 (1) 8.57
AT SEPTEMBER 30, 1995......... buy 565,000 5.91 (1) 7.86
sell 565,000 5.91 (1) 8.57

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

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

INTEREST RATE FLOORS. Floor contracts were entered into during the six
months ended March 31, 1997 and during fiscal 1996 and 1995 in an effort to
hedge the MSRs against declines in value as a result of prepayments.

AVERAGE
NOTIONAL INDEX FLOOR HEDGED
AMOUNT RATE RATE ITEM
--------- ----- ------- ------
(DOLLARS IN THOUSANDS)
AT MARCH 31, 1997.............. $1,207,000 6.64 %(1) 5.95% MSRs
533,500 6.49 (2) 5.95 MSRs
---------
Total..................... $1,740,500
=========
AT SEPTEMBER 30, 1996.......... $ 498,500 6.67 (2) 5.99 MSRs
190,000 6.88 (1) 6.25 MSRs
---------
Total..................... $ 688,500
=========
AT SEPTEMBER 30, 1995.......... $ 260,000 6.01 (2) 6.70 MSRs
50,000 6.17 (1) 7.20 MSRs
---------
Total..................... $ 310,000
=========

(1) Based on the ten year Constant Maturity Treasury ("CMT") as of the last
reset prior to the date reported.

(2) Based on the five year CMT as of the last reset prior to the date reported.

F-41
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. Interest received on interest rate floor agreements
totalled $801,000, $2.1 million, and $817,000 during the six months ended March
31, 1997 and during fiscal 1996 and 1995, respectively. The interest received
was deferred and is being amortized over the life of the MSRs.

FINANCIAL OPTIONS. At September 30, 1995 there was a Treasury call option
outstanding with a notional principal amount of $23.0 million. A Treasury call
option with a notional principal amount of $22.5 million was purchased and
expired during fiscal 1996. 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 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 fiscal 1996, a Eurodollar put option with notional principal amount
of $2.0 billion was purchased in an effort to hedge certain MBS. The Eurodollar
put option was sold during fiscal 1996 for a loss of $49,000 as the MBS 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 $26.6 million were entered into in an effort to hedge loans the
Company 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").
These options were sold during fiscal 1996.

A Treasury call option with a notional principal amount of $50.0 million
was purchased and expired during fiscal 1996. The option was entered into as
trading activity.

At March 31, 1997 and September 30, 1996 there were no options outstanding.

FINANCIAL FUTURES CONTRACTS. Treasury futures were entered into during
fiscal 1996 and 1995 in an effort to hedge loans in the portfolio pipeline. As
of September 30, 1996, all such Treasury futures contracts were closed or had
expired as the loans being hedged had been sold or were included in the held to
maturity loan portfolio. A net gain of $210,000 and $222,000 on the sale of
Treasury futures contracts as of March 31, 1997 and September 30, 1996,
respectively, was deferred and is being amortized over the life of the loans. A
loss of $6.0 million on the sale of Treasury futures contracts was deferred as
of September 30, 1995 and recognized into income during fiscal 1996 as the loans
being hedged were sold.

The Eurodollar futures contracts outstanding at September 30, 1995 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 September 30,
1996, all of the Eurodollar futures contracts outstanding at September 30, 1995
were closed or had expired. At September 30, 1996, losses of $135,000 on closed
Eurodollar futures contracts were deferred and were fully amortized at March 31,
1997.

At March 31, 1997, there were no future contracts outstanding.

FORWARD DELIVERY CONTRACTS. Forward delivery contracts are entered into to
sell single family warehouse loans and to manage the risk that a change in
interest rates will decrease the value of single family warehouse loans or
commitments to originate mortgage loans ("mortgage pipeline").

F-42
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FORWARD DELIVERY CONTRACTS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ---------------------------
1997 1996 1995
------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
COUNTERPARTY
GNMA............................ $ 47,775 $197,389 $ 205,250
FNMA............................ 33,500 89,203 264,797
Other........................... 26,206 35,331 39,416
------------- -------------- ----------
Total...................... $ 107,481 $321,923 $ 509,463
============= ============== ==========
TYPE
Fixed........................... $ 92,131 $252,587 $ 428,013
Variable........................ 15,350 69,336 81,450
------------- -------------- ----------
Total...................... $ 107,481 $321,923 $ 509,463
============= ============== ==========
LOANS AVAILABLE TO FILL COMMITMENTS
Single family warehouse......... $ 145,471 $260,745 $ 411,287
Mortgage pipeline (estimated)... 105,606 174,883 185,204
------------- -------------- ----------
Total...................... $ 251,077 $435,628 $ 596,491
============= ============== ==========
</TABLE>

COMMITMENTS TO EXTEND CREDIT. The Company's exposure to credit loss for
commitments to extend credit is represented by the contractual amount of those
agreements. The Company 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 may
require the payment of a fee to the Company. Because commitments may expire
without being drawn upon, the total contract amounts do not necessarily
represent future cash requirements.

COMMITMENTS TO EXTEND CREDIT

AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1997 1996 1995
------------- ---------- ----------
(IN THOUSANDS)
Single family........................ $ 162,470 $ 253,453 $ 329,364
Other................................ 963,353 734,667 670,428
------------- ---------- ----------
Total...................... $1,125,823 $ 988,120 $ 999,792
============= ========== ==========
Fixed................................ $ 150,960 $ 201,649 $ 282,101
Variable............................. 974,863 786,471 717,691
------------- ---------- ----------
Total...................... $1,125,823 $ 988,120 $ 999,792
============= ========== ==========

Included in the commitments to extend credit amounts above were letters of
credit of $10.3 million, $8.8 million, and $5.4 million at March 31, 1997 and
September 30, 1996 and 1995, respectively.

RECOURSE OBLIGATIONS. The Company had servicing of approximately $17.2
million, $20.8 million, and $26.6 million at March 31, 1997 and September 30,
1996 and 1995, respectively, for which certain recourse obligations apply.
Management believes that it has adequately provided reserves for its recourse
obligations related to this servicing.

F-43
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. EMPLOYEE BENEFITS

SAVINGS PLAN

The Company has an employee tax deferred savings plan (plan 401(k) under
the Code) available to all eligible employees. Through June 30, 1995, the
Company 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 Company's 401(k) plan was amended effective July 1,
1995. The Company currently contributes fifty cents for every dollar contributed
up to two percent of the participant's earnings, and dollar for dollar for
contributions between two and four percent of the participant's earnings. The
maximum contribution percentage is now fifteen percent of an employee's earnings
on a tax deferred basis, subject to Internal Revenue Service maximum
contributions limitations. This is a participant directed plan. Plan assets are
held in trust and managed by Fidelity Institutional Retirement Services Company.
Contributions to the plan are in such amounts and within certain limitations as
the Company may authorize. The Company's contributions to the plan were
approximately $608,770, $740,757, $1.5 million, $1.5 million, and $1.7 million,
for the six months ended March 31, 1997 and 1996, and for fiscal 1996, 1995, and
1994, respectively.

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.

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

F-44
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 September 30, 1996 and changes during the six months ended March 31,
1997 and fiscal 1996 is presented below. The Company granted no options prior to
fiscal 1996. No options were exercised, forfeited or expired during the six
months ended March 31, 1997 or fiscal 1996, however, in connection with the
February 1997 sale of mortgage offices, 33,718 options became fully vested. See
Note 18. 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 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. The weighted-average
grant date fair value for the options granted during fiscal 1996 was $6.46 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 fiscal 1996: estimated volatility of 27.00%; risk-free interest rate
of 6.55%; dividend yield of 3.00%; and an expected life of ten years.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE RANGE OF
SHARES EXERCISE PRICE EXERCISE PRICES
---------- ----------------- -------------------
<S> <C> <C> <C> <C>
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
==========
</TABLE>
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 reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
--------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income As reported........................... $39,366 $118,935
Pro forma............................. 37,906 118,316
Earnings per share As reported........................... 1.25 3.87
Pro forma............................. 1.20 3.85
</TABLE>

The weighted-average grant date fair value for the 318,342 shares of
Restricted Stock issued during fiscal 1996 was $11.65 per share. See
" -- Management Compensation Program."

F-45
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. INCOME TAXES

In June 1996, the Parent Company's Certificate of Incorporation and By-Laws
were restated with the intent to preserve certain beneficial tax attributes
limiting the disposition of certain common stock and other interests in the
Parent Company by certain of its stockholders. The preservation of certain tax
attributes allowed the recognition of tax benefits of $85.2 million by the Bank
in June 1996 for the expected utilization of $365 million of NOLs against future
taxable income. These tax benefits were not recognized in prior periods due to
limitations on the utilization of NOLs if an Ownership Change ("Ownership
Change," as defined in Section 382 of the Code) had occurred. In June 1996, the
Parent Company and the Bank entered into a tax sharing agreement. This agreement
resulted in the recognition of a tax benefit of $16.5 million by the Parent
Company for the expected utilization of $47 million of the Parent Company's NOLs
by the Bank. The 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,
in accordance with SFAS No. 109, "Accounting for Income Taxes".

In fiscal 1995, no tax benefits were recorded by the Parent Company or the
Bank. The Parent Company recognized no benefit for its stand alone NOLs as it
did not generate taxable income to offset such losses and it was not party to a
federal tax sharing agreement with the Bank at that time. The Bank recognized no
tax benefits due to limitations on the utilization of its NOLs if an Ownership
Change had occurred.

Tax NOLs at March 31, 1997 were as follows:

ALTERNATIVE EXPIRATION
YEAR GENERATED REGULAR TAX MINIMUM TAX DATE
- ------------------------------------- ----------- ----------- ----------
(IN MILLIONS)
December 30, 1988.................... $-- $ 9 2003
September 30, 1989................... 313 154 2004
September 30, 1990................... 296 141 2005
September 30, 1991................... 119 56 2006
September 30, 1992................... 33 7 2007
September 30, 1994................... 7 -- 2009

F-46
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Tax NOLs at September 30, 1996 were as follows:

ALTERNATIVE EXPIRATION
YEAR GENERATED REGULAR TAX MINIMUM TAX DATE
- ------------------------------------- ----------- ----------- ----------
(IN MILLIONS)
December 30, 1988.................... $ 33 $ 53 2003
September 30, 1989................... 329 154 2004
September 30, 1990................... 296 141 2005
September 30, 1991................... 119 56 2006
September 30, 1992................... 33 7 2007
September 30, 1994................... 7 -- 2009

Utilization of the NOLs generated for the year ended December 30, 1988 is
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, Holdings, and the Bank are
members.

The Parent Company, Holdings, and the Bank are subject to regular income
tax and alternative minimum tax ("AMT"). For the six months ended March 31,
1997 and 1996, and fiscal 1996 and 1995, the current federal tax expense is the
result of AMT. Even though the Parent Company and the Bank have AMT net
operating loss carryforwards ("AMT NOLs"), the Code limits the amount of
utilization of AMT NOLs by 90% of alternative minimum taxable income ("AMTI").
For fiscal 1994, the federal tax expense was the result of residential interests
in real estate mortgage investment conduits ("REMIC"), which could not be
offset by NOLs.

Income tax and related payments differ from the amount computed by applying
the federal income tax statutory rate on income as follows:

F-47
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED TAX ASSETS AND LIABILITIES

AT AT SEPTEMBER 30,
MARCH 31, ------------------------
1997 1996 1995
--------- ----------- -----------
(IN THOUSANDS)
DEFERRED TAX ASSETS
Net operating losses............ $ 184,484 $ 196,326 $ 211,637
Purchase accounting............. 5,901 6,252 10,064
Capital loss carryforwards...... 1,449 1,449 --
Tax mark to market.............. 4,064 3,654 --
Unrealized losses on securities
available for sale............ -- 1,340 3,990
REMIC........................... 6,705 6,830 7,083
Goodwill amortization........... -- 1,897 413
State........................... 307 1,455 2,817
AMT credit...................... 5,450 4,065 2,985
Depreciation -- premises and
equipment..................... 2,911 2,975 3,084
SAIF assessment(1).............. -- 11,780 --
Other........................... 7,903 9,832 2,926
--------- ----------- -----------
Total deferred tax
assets................... 219,174 247,855 244,999
--------- ----------- -----------
DEFERRED TAX LIABILITIES
Bad debt reserve................ 12,163 18,199 11,577
FHLB stock...................... 12,197 12,196 8,673
OMSR............................ 23,078 19,958 --
REO............................. -- -- 7,096
Tax mark to market.............. -- -- 2,816
Goodwill amortization........... 83 -- --
State........................... -- -- 16
Unrealized gain on securities
available for sale............ 3,115 -- --
Other........................... 1,471 1,679 6,050
--------- ----------- -----------
Total deferred tax
liabilities.............. 52,107 52,032 36,228
--------- ----------- -----------
Net deferred tax asset before
valuation allowance........... 167,067 195,823 208,771
Valuation allowance............. (27,500) (27,500) (131,200)
--------- ----------- -----------
Net deferred tax assets.... $ 139,567 $ 168,323 $ 77,571
========= =========== ===========

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

(1) Assessed in fiscal 1996, tax-deductible in fiscal 1997 when paid. See Note
15.

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. Due to recently enacted legislation, the Bank's
post-1987 tax bad debt reserve will be required to be recaptured into income
beginning with fiscal 1997. The reserve will be recaptured over a six taxable
year period with the opportunity to defer recapture by up to two years if
certain residential loan requirements are met. The Bank will not have the
opportunity to defer recapture of the bad debt reserve as the residential loan
requirements will not be met. At September 30, 1996, the Bank has approximately
$89 million of post-1987 tax bad debt reserves. There will be no financial
statement impact from this recapture as 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 will be reduced by NOLs
available to offset this income.

No deferred taxes have been provided on approximately $52 million of
pre-1988 tax bad debt reserves. This tax reserve for bad debts is included in
taxable income in later years if certain circumstances occur, such as, a

F-48
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

distribution in redemption of stock of the Bank (with certain exceptions for
preferred stock); partial or complete liquidation of the Bank following a merger
or liquidation; or a dividend distribution in excess of certain earnings and
profits. However, if a thrift with a pre-1988 reserve is merged, liquidated on a
tax free basis, or acquired by another depository institution, the remaining
institution will inherit the thrift's pre-1988 reserve and post-1951 earnings
and profits. Because management believes the circumstances requiring recapture
of the reserve are not likely to occur, deferred income taxes of approximately
$18 million have not been provided.

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 ("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 tax expense. The final guaranteed payment was made in
July 1994 for fiscal 1993. The Assistance Agreement was terminated in December
1993. As part of the Settlement Agreement, the Parent Company, the Bank, and
certain of their direct and indirect parent entities entered into a tax benefit
agreement (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.

15. REGULATORY MATTERS

The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations (as set forth in the table below). Any savings
association that fails to meet its regulatory capital requirements is subject to
enforcement actions by the OTS which could have a material effect on its
financial statements. Under the capital adequacy requirements and prompt
corrective action provisions, the Bank must meet specific capital requirements
based on its capital, assets, and certain off-balance-sheet items as calculated
under regulatory accounting practices.

To meet the capital adequacy requirements, the Bank must maintain minimum
amounts and ratios of tangible capital, core capital, and total risk-based
capital (as set forth in the table below). As of March 31, 1997 and September
30, 1996 and 1995, the Bank met all capital adequacy requirements.

As of March 31, 1997 and September 30, 1996 and 1995, the most recent
notification from the OTS categorized the Bank as well-capitalized, the highest
of five tiers, under the prompt corrective action provisions. To be categorized
as well-capitalized, the Bank must maintain minimum amounts and ratios of core
capital, tier 1 capital, and total risk-based capital (as set forth in the table
below). As of March 31, 1997 and September 30, 1996, there are no conditions or
events since the OTS notification that management believes would change the
institution's category.

F-49
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables show the Bank's compliance with the regulatory capital
requirements:

<TABLE>
<CAPTION>
AT MARCH 31,
----------------------------------------------------------------
CAPITAL ADEQUACY WELL-CAPITALIZED
ACTUAL REQUIREMENTS REQUIREMENTS
-------------------- -------------------- --------------------
RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1997
Stockholders' equity of the Bank..................... $ 849,147
Less: Net unrealized gains......................... (5,102)
Intangible assets of the Bank.................. (11,094)
Non-qualifying deferred tax assets............. (85,036)
Non-qualifying MSRs............................ (46)
---------
TANGIBLE CAPITAL..................................... 6.87% 747,869 1.50% $ 163,206
Add: Core deposit intangibles...................... 7,065
---------
CORE CAPITAL......................................... 6.93% $ 754,934 3.00% 326,623 5.00% $ 544,372
=========

TIER 1 CAPITAL....................................... 11.99% $ 754,934 6.00% 377,821
Add: Allowance for loan and MBS credit losses...... 43,803
---------
TOTAL RISK-BASED CAPITAL............................. 12.68% $ 798,737 8.00% 503,762 10.00% 629,702
=========
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------------------------
CAPITAL ADEQUACY WELL-CAPITALIZED
ACTUAL REQUIREMENTS REQUIREMENTS
-------------------- -------------------- --------------------
RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996
Stockholders' equity of the Bank..................... $ 793,527
Add: Net unrealized losses......................... 2,233
Less: Intangible assets of the Bank................ (14,867)
Non-qualifying deferred tax assets............. (85,036)
Non-qualifying MSRs............................ (36)
---------
TANGIBLE CAPITAL..................................... 6.57% 695,821 1.50% $ 158,943
Add: Core deposit intangibles...................... 8,087
---------
CORE CAPITAL......................................... 6.64% $ 703,908 3.00% 318,129 5.00% $ 530,216
=========

TIER 1 CAPITAL....................................... 12.40% $ 703,908 6.00% 340,734
Add: Allowance for loan and MBS credit losses...... 39,715
---------
TOTAL RISK-BASED CAPITAL............................. 13.09% $ 743,623 8.00% 454,312 10.00% 567,890
=========
</TABLE>
F-50
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------------------------
CAPITAL ADEQUACY WELL-CAPITALIZED
ACTUAL REQUIREMENTS REQUIREMENTS
-------------------- -------------------- --------------------
RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1995
Stockholders' equity of the Bank..................... $ 794,678
Add: Net unrealized losses......................... 6,647
Less: Intangible assets of the Bank................ (23,956)
Non-qualifying deferred tax assets............. (37,617)
Non-qualifying MSRs............................ (25)
---------
TANGIBLE CAPITAL..................................... 6.20% 739,727 1.50% $ 178,844
Add: Core deposit intangibles...................... 10,838
---------
CORE CAPITAL......................................... 6.29% $ 750,565 3.00% 358,013 5.00% $ 596,688
=========

TIER 1 CAPITAL....................................... 12.82% $ 750,565 6.00% 351,184
Add: Allowance for loan and MBS credit losses...... 36,855
---------
TOTAL RISK-BASED CAPITAL............................. 13.45% $ 787,420 8.00% 468,245 10.00% 585,307
=========
</TABLE>

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,
1997 and September 30, 1996, there was an aggregate of approximately $164.3
million and $152.7 million, respectively, available for the payment of dividends
under these requirements.

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, 1997 and the
Bank's Annual Report on Form 10-K agree with the information included in the
Bank's Thrift Financial Report filed with the OTS as of March 31, 1997 and as of
September 30, 1996.

FORBEARANCE

Notwithstanding the above capital requirements, the Bank's capital
requirements were established pursuant to the forbearance letter (a
"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 Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Despite
the OTS position, management believes that all significant waivers, approvals,
and forbearances related to the Bank's acquisition, including the capital
forbearances, remain in full force and effect following the enactment of FIRREA.
Pursuant to the Settlement Agreement, the Bank has retained all claims relating
to the forbearances against the United States of America, and on July 25, 1995,
the Bank, the Parent Company, and Hyperion Partners (collectively,
"Plaintiffs") filed suit against the United States of America in the United
States 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 was
stayed from the outset by a judge of the Court of Federal Claims pending the
United States 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

F-51
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 case.

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 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 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 any
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.

SAIF ASSESSMENT

The United States Congress passed legislation that was signed into law on
September 30, 1996, which resulted in an assessment on all Savings Association
Insurance Fund ("SAIF")-insured deposits in such amounts that fully
capitalized the SAIF at a reserve ratio of 1.25% of SAIF-insured deposits. This
one-time assessment was set at 65.7 basis points of SAIF-assessable deposits at
March 31, 1995. The Company's assessment of $33.7 million, $20.7 million net of
tax, was recorded in the fourth quarter of fiscal 1996 and paid in the first
quarter of fiscal 1997.

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

F-52
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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, respectively,
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 A SERIES B DOLLAR EQUIVALENT
BEGINNING DECEMBER 31, BEGINNING SEPTEMBER 30, REDEMPTION PRICE PER SHARE
- ----------------------- ------------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
1997 2000 105% $ 26.25
1998 2001 104 26.00
1999 2002 103 25.75
2000 2003 102 25.50
2001 2004 101 25.25
2002 and thereafter 2005 and thereafter 100 25.00
</TABLE>
WARRANT

In connection with the Acquisition, the Bank issued a warrant, which
entitled the FDIC to purchase 158,823 shares of the Bank's common stock for an
exercise price of $0.01 per share (the "Warrant"). In August 1996, the FDIC
surrendered a portion of the Warrant for a cash payment of $6.1 million, and
exercised the remainder of the Warrant. The FDIC immediately exchanged the
shares of common stock of the Bank it received for 1,503,560 shares of common
stock of the Company. The FDIC sold all of the 1,503,560 shares of common stock
of the Company in the offering discussed below.

As part of the Settlement Agreement discussed in Note 7, the Bank made
payments to the FDIC in lieu of dividends on the common stock of the Bank from
December 1993 through August 1996 when the Warrant was no longer outstanding.

CAPITAL STOCK

Prior to June 1996, the Company had 13,238 shares of Class A and 2,797
shares of Class C common stock outstanding. The June 1996 Merger and
Restructuring discussed in Note 1 included a 1,800 to one stock conversion and
the conversion of Class C and certain Class A shares to Class B shares. After
conversion, the Class C shares were cancelled. Also in June 1996, 318,342 shares
of Restricted Stock were awarded as part of the management compensation program
discussed in Note 13.

In August 1996, the Company filed a registration statement with the
Securities and Exchange Commission ("SEC") and 12,075,000 shares of the
Company Class A common stock were sold to the public (the "August Offering").
The Company sold 910,694 shares and certain shareholders ("selling
shareholders") sold 11,164,306 shares. The net proceeds to the Company,
proceeds to the selling shareholders and the underwriting discount were $14.0
million, $210.4 million, and $13.9 million, respectively. The net proceeds to
the Company from the August Offering was contributed to the capital of the Bank
in the first quarter of fiscal 1997 for general corporate purposes.

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 Offering. On February 10,
1997, restrictions

F-53
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

At September 30, 1996, after the 1,800 to one stock conversion, the Warrant
conversion, the issuance of Restricted Stock, and the August Offering, the
Company had a total of 31,595,596 shares of common stock (par value $0.01)
outstanding as follows: Class A (voting) -- 27,735,934 shares and Class B
(nonvoting) -- 3,859,662 shares. During fiscal 1997, 618,342 shares of Class B
common stock were converted to Class A common stock. At March 31, 1997, the
Company had 28,354,276 shares of Class A and 3,241,320 shares of Class B common
stock outstanding. The authorized stock of the Company consists of the
following: Class A common stock -- 40,000,000 shares, Class B common
stock -- 40,000,000 shares, and preferred stock -- 10,000,000 shares. Class B
common stock may be converted to Class A common stock subject to certain
restrictions.

EARNINGS PER COMMON SHARE

The table below presents the computation of earnings per common share (in
thousands, except per share data). The dilutive effect of the Bank Warrant has
been considered in computing earnings per common share for periods prior to its
redemption in August 1996. Average shares and per share results have been
restated to reflect an 1,800 to one stock conversion in June 1996.
<TABLE>
<CAPTION>

FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net income........................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970
Less: Bank's net income attributable
to common stock equivalents on the
Warrant............................ -- (1,791) (5,608) (2,895) (6,451)
--------- --------- ---------- --------- ----------
Net income applicable to common
shares............................. $ 39,366 $ 24,968 $ 113,327 $ 38,824 $ 102,519
========= ========= ========== ========= ==========
Average number of common shares
outstanding........................ 31,596 28,863 29,260 28,863 28,863
========= ========= ========== ========= ==========
EARNINGS PER COMMON SHARE............ $ 1.25 $ 0.87 $ 3.87 $ 1.35 $ 3.55
========= ========= ========== ========= ==========
</TABLE>

17. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

A petition for review has been filed in the United States District Court of
Appeals for the Fifth Circuit seeking to modify, terminate, and set aside the
order approving the Acquisition, which involved substantially all of the Bank's
initial assets and liabilities. On December 10, 1996 the Fifth Circuit Court
affirmed the order approving the Acquisition in all respects and an appeal to
the Supreme Court of the United States was not filed within the applicable time
limit.

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 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 this proceeding but may file a
Motion to Intervene at a later date.

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

F-54
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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 Company.

FACILITIES OPERATIONS

Future minimum commitments on data processing agreements and significant
operating leases in effect at September 30, 1996 were as follows (in thousands):

YEARS ENDING
SEPTEMBER 30, AMOUNT
- ------------------------------------- ---------
1997.............................. $ 19,707
1998.............................. 15,900
1999.............................. 9,279
2000.............................. 2,331
2001.............................. 1,906
Thereafter........................ 10,853
---------
$ 59,976
=========

Total data processing and rental expense for the six months ended March 31,
1997 and 1996, and for fiscal 1996, 1995, and 1994 under the same or similar
agreements as in the preceding table, after consideration of certain credits and
rental income, were $10.9 million, $11.5 million, $22.4 million, $22.9 million,
and $22.4 million, respectively.

F-55
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. FINANCIAL HIGHLIGHTS BY PRINCIPAL BUSINESS OPERATION

The Company operates as a broad-based financial services provider to
consumers and businesses in Texas and other selected regional markets throughout
the United States. This business is conducted through the Community Banking,
Financial Markets, and Commercial Banking Groups, which comprise the Banking
Segment, and the Mortgage Banking Segment. 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,
-------------------------------------------------------------------------
MORTGAGE PARENT
BANKING BANKING COMPANY
OPERATIONS SEGMENT AND HOLDINGS ELIMINATIONS COMBINED
------------- ------------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
Revenues................................ $ 149,138 $ 51,556 $ 4,520 $ (11,904) $ 193,310
Earnings before income taxes and
minority interest..................... 75,375 9,960 2,716 (9,146) 78,905
Depreciation and amortization of
intangibles........................... 4,516 15,943 632 (2,758) 18,333
Capital expenditures.................... 5,814 102 -- -- 5,916
Average identifiable assets............. 10,514,696 579,740 20,417 (256,429) 10,858,424
Loan transfers to (from)................ 293,346 (293,346) -- -- --
Interest income (expense) on single
family warehouse outstanding loan
balance............................... 7,146 (7,146) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (6,526) 6,526 -- -- --

1996
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 warehouse outstanding loan
balance............................... 11,895 (11,895) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (6,917) 6,917 -- -- --
</TABLE>

F-56
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------
MORTGAGE PARENT
BANKING BANKING COMPANY
SEGMENT SEGMENT AND HOLDINGS ELIMINATIONS COMBINED
------------- ------------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Revenues................................ $ 248,968 $ 103,161 $ 98,714 $ (113,273) $ 337,570
Earnings before income taxes and
minority interest..................... 82,449 (3,120) 97,518 (109,011) 67,836
Depreciation and amortization of
intangibles........................... 9,214 23,155 1,000 (4,262) 29,107
Capital expenditures.................... 8,951 443 -- -- 9,394
Average identifiable assets............. 10,947,844 640,780 9,972 (369,165) 11,229,431
Loan transfers to (from)................ 818,563 (818,563) -- -- --
Interest income (expense) on single
family warehouse outstanding loan
balance............................... 21,878 (21,878) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (13,723) 13,723 -- -- --

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 warehouse outstanding loan
balance............................... 19,903 (19,903) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (12,672) 12,672 -- -- --

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 warehouse outstanding loan
balance............................... 33,173 (33,173) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (10,223) 10,223 -- -- --

</TABLE>
Revenues for the Banking and Mortgage Banking segments are comprised of net
interest income (before the provision for credit losses) and non-interest
income. Revenues for the Parent Company and Holdings also include dividends
received from the Bank. On May 6, 1996, the Bank paid a $100 million dividend to
the Parent

F-57
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company on the common stock of the Bank. Interest costs incurred by the Parent
Company and Holdings are included in its revenues above since they relate to
long-term debt and are not directly attributable to a specific segment. Earnings
before income taxes and minority interest 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
that segment. General corporate overhead expenses not specifically identified to
an individual segment, but necessary for the maintenance of the Bank as a going
concern, are also allocated to the two segments. Parent Company and Holdings
expenses are not allocated to the Bank's business segments. The elimination
amounts reflect the following: (i) dividends received by the Parent Company and
Holdings 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) single family warehouse loans funded by the Banking Segment.

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 $890,000 and $1.2 million
for the six months ended March 31, 1997 and 1996, respectively, $2.3 million for
fiscal 1996, $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 actual Book Value of the loans 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 $1.9 million and
$736,000 for the six months ended March 31, 1997 and 1996, respectively, $1.9
million for fiscal 1996, $1.0 million for fiscal 1995, and $283,000 for fiscal
1994.

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
origination offices and several regional operations centers and recorded $1.8
million of other expenses related to the mortgage origination business. The
restructuring charge included estimated costs for severance and other benefits
of $800,000, 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
reflected $3.5 million of goodwill and $1.8 million of fixed assets and
leasehold improvements written off in connection with the closed production
offices.

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 and September 30, 1996, the unpaid liability relating to
the sale, the two restructurings and the branch closures was $6.6 million and
$4.6 million, respectively, 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.

The Mortgage Banking Segment activity subsequent to February 1, 1997 is
comprised of the Company's mortgage servicing business only. The wholesale
mortgage origination offices that were retained have been integrated into the
existing Financial Markets Group, and therefore the Banking Segment, as of the
same date. Prior period segment information has not been restated.

F-58
<PAGE>
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
of fiscal 1997 and each of the quarters in fiscal 1996 and 1995 (in thousands,
except earnings per share).
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ------------------------------------------ --------------------
SECOND FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income...................... $ 197,928 $ 199,103 $ 191,893 $ 199,198 $ 203,436 $ 217,785 $ 224,308 $ 194,865
Interest expense..................... 131,424 133,318 136,752 138,737 148,548 160,741 166,580 146,220
--------- --------- --------- --------- --------- --------- --------- ---------
Net interest income.............. 66,504 65,785 55,141 60,461 54,888 57,044 57,728 48,645
Provision for credit losses.......... 4,305 6,914 6,314 4,305 3,181 2,669 9,663 10,473
--------- --------- --------- --------- --------- --------- --------- ---------
Net interest income after provision
for credit losses.................. 62,199 58,871 48,827 56,156 51,707 54,375 48,065 38,172
Non-interest income.................. 31,355 29,666 31,954 23,473 27,687 26,922 25,201 23,127
Non-interest expense................. 50,108 53,078 85,272 68,689 50,012 49,292 52,466 40,465
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
minority interest.................. 43,446 35,459 (4,491) 10,940 29,382 32,005 20,800 20,834
Income tax expense (benefit)......... 16,780 13,633 (2,121) (98,922) 12,144 13,134 8,169 9,060
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) before minority
interest........................... 26,666 21,826 (2,370) 109,862 17,238 18,871 12,631 11,774
Less minority interest:
Subsidiary preferred stock
dividends...................... 4,563 4,563 4,564 4,563 4,563 4,563 4,111 2,163
Payments in lieu of dividends.... -- -- -- 6,189 -- 224 -- 71
--------- --------- --------- --------- --------- --------- --------- ---------
NET INCOME (loss)................ $ 22,103 $ 17,263 $ (6,934) $ 99,110 $ 12,675 $ 14,084 $ 8,520 $ 9,540
========= ========= ========= ========= ========= ========= ========= =========
Net income (loss) applicable to
common shares...................... $ 22,103 $ 17,263 $ (6,934) $ 94,143 $ 11,824 $ 13,144 $ 7,936 $ 8,851
Earnings per common share............ 0.70 0.55 (0.23) 3.26 0.41 0.46 0.28 0.31
Average common shares outstanding.... 31,596 31,596 30,441 28,863 28,863 28,863 28,863 28,863
</TABLE>

SECOND FIRST
QUARTER QUARTER
--------- ---------
Interest income...................... $ 172,992 $ 154,594
Interest expense..................... 129,915 110,045
--------- ---------
Net interest income.............. 43,077 44,549
Provision for credit losses.......... 3,223 934
--------- ---------
Net interest income after provision
for credit losses.................. 39,854 43,615
Non-interest income.................. 30,641 36,012
Non-interest expense................. 51,553 50,092
--------- ---------
Income (loss) before income taxes and
minority interest.................. 18,942 29,535
Income tax expense (benefit)......... 8,062 12,124
--------- ---------
Net income (loss) before minority
interest........................... 10,880 17,411
Less minority interest:
Subsidiary preferred stock
dividends...................... 2,163 2,163
Payments in lieu of dividends.... -- 306
--------- ---------
NET INCOME (loss)................ $ 8,717 $ 14,942
========= =========
Net income (loss) applicable to
common shares...................... $ 8,086 $ 13,951
Earnings per common share............ 0.28 0.48
Average common shares outstanding.... 28,863 28,863

The 1995 figures have been restated to reflect the implementation of SFAS
No. 122 effective October 1, 1994. See Note 1. Average shares and per share
results have been restated to reflect an 1,800 to one stock conversion in June
1996. See Note 16.

F-59
<PAGE>
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.

PARENT COMPANY
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)

SEPTEMBER 30,
MARCH 31, ----------------------
1997 1996 1995
--------- ---------- ----------
ASSETS
Cash and cash equivalents............ $ 1,660 $ 18,790 $ 1
Securities purchased under agreements
to resell.......................... -- -- 2,121
Investment in subsidiary............. 547,651 608,027 609,178
Intangible assets.................... -- 2,055 2,563
Deferred tax asset................... 20,375 19,527 --
Other assets......................... 544 5,281 1,287
--------- ---------- ----------
TOTAL ASSETS......................... $570,230 $ 653,680 $ 615,150
========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Senior Notes (Notes 11 and 21)....... $ -- $ 115,000 $ 115,000
Other liabilities.................... 1,333 7,637 4,047
--------- ---------- ----------
Total liabilities.......... 1,333 122,637 119,047
--------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock......................... 316 316 289
Paid-in capital...................... 129,286 129,286 117,722
Retained earnings.................... 434,193 403,674 384,739
Unrealized gains (losses) on
subsidiary's securities and
mortgage-backed securities
available for sale, net of tax..... 5,102 (2,233) (6,647)
--------- ---------- ----------
Total stockholders'
equity................... 568,897 531,043 496,103
--------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $570,230 $ 653,680 $ 615,150
========= ========== ==========

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

F-60
<PAGE>
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,
-------------------- ---------------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
INCOME
Dividends from subsidiary............ $ 9,146 $ 3,810 $ 109,011 $ 6,409 $ 11,435
Short-term interest-earning assets... -- 29 56 88 21
--------- --------- ---------- --------- ----------
Total income............... 9,146 3,839 109,067 6,497 11,456
--------- --------- ---------- --------- ----------
EXPENSE
Interest expense -- Senior Notes..... 1,913 5,205 10,353 10,407 10,177
Amortization of intangibles.......... 262 488 1,000 976 977
Other................................ 1,168 76 196 114 947
--------- --------- ---------- --------- ----------
Total expense.............. 3,343 5,769 11,549 11,497 12,101
--------- --------- ---------- --------- ----------
INCOME (LOSS) BEFORE UNDISTRIBUTED
INCOME OF SUBSIDIARY AND INCOME
TAXES.............................. 5,803 (1,930) 97,518 (5,000) (645)
Equity in undistributed income of
subsidiary......................... 32,277 28,198 519 45,322 104,316
--------- --------- ---------- --------- ----------
INCOME BEFORE INCOME TAXES........... 38,080 26,268 98,037 40,322 103,671
Income tax benefit................... (1,286) (491) (20,898) (1,397) (5,299)
--------- --------- ---------- --------- ----------
NET INCOME........................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970
========= ========= ========== ========= ==========
</TABLE>

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

F-61
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- -----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................... $ 39,366 $ 26,759 $ 118,935 $ 41,719 $ 108,970
Adjustments to reconcile net income
to net cash
(used) provided by operating
activities:
Equity in undistributed income
of subsidiary................. (32,277) (28,198) (519) (45,322) (104,316)
Deferred tax benefit............ (848) -- (19,527) -- --
Amortization of intangibles..... 262 488 1,000 976 977
Change in other assets.......... 4,733 (488) (4,486) 4,111 (5,393)
Change in other liabilities..... (5,519) -- 3,590 (73) 159
Management Restricted Stock
award......................... -- -- 3,709 -- --
---------- ---------- ---------- ---------- -----------
Net cash provided by
operating activities..... 5,717 (1,439) 102,702 1,411 397
---------- ---------- ---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities
purchased under agreements to
resell........................ -- 1,439 2,121 (1,411) (397)
Capital contributions to
subsidiary.................... (14,000) -- -- -- --
---------- ---------- ---------- ---------- -----------
Net cash provided (used) by
investing activities..... (14,000) 1,439 2,121 (1,411) (397)
---------- ---------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common
stock......................... -- -- 13,966 -- --
Payment of common stock
dividends..................... (8,847) -- (100,000) -- --
---------- ---------- ---------- ---------- -----------
Net cash used by financing
activities............... (8,847) -- (86,034) -- --
---------- ---------- ---------- ---------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ (17,130) -- 18,789 -- --
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 18,790 1 1 1 1
---------- ---------- ---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 1,660 $ 1 $ 18,790 $ 1 $ 1
========== ========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING ACTIVITIES
Net transfer of investment in Bank
and Senior Notes to Holdings
(Note 1)........................ 525,751 -- -- -- --
</TABLE>

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

F-62
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. SUBSEQUENT EVENTS (UNAUDITED)

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 sale
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.

F-63
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE AGENT. THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH THEY RELATE OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

PAGE
-----
PROSPECTUS SUPPLEMENT
Prospectus Supplement................... S-3
Participating Selling Stockholders...... S-8
Derivative Transactions................. S-9
Plan of Distribution.................... S-9
PROSPECTUS
Prospectus Summary...................... 2
Risk Factors............................ 10
The Company............................. 16
Use of Proceeds......................... 18
Dividend Policy......................... 19
Capitalization.......................... 20
Selected Consolidated Financial and
Other Data............................ 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 25
Business................................ 52
Regulation.............................. 74
Properties.............................. 95
Legal Proceedings....................... 95
Management.............................. 99
Selling Stockholders.................... 118
Description of Capital Stock............ 121
Legal Matters........................... 127
Experts................................. 127
Available Information................... 127
Index to Consolidated Financial
Statements ........................... F-1

1,218,511 SHARES

[LOGO]
BANK
UNITED CORP.

CLASS A COMMON STOCK

------------------------
PROSPECTUS SUPPLEMENT
AUGUST 12, 1997
------------------------

LEHMAN BROTHERS
================================================================================