SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 1998.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number:
0000906420
BANK UNITED CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3528556
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 SOUTHWEST FREEWAY, SUITE 1600
HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 543-6500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of the registrant's $0.01 par value common
stock as of May 13, 1998 were as follows:
TITLE OF EACH CLASS NUMBER OF SHARES
------------------- ----------------
Class A 28,354,276
Class B 3,241,320
<PAGE>
BANK UNITED CORP.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements...................................1
Consolidated Statements of Financial Condition -
March 31, 1998 and September 30, 1997............................1
Consolidated Statements of Operations -
For the Three and Six Months Ended March 31, 1998 and 1997.......2
Consolidated Statements of Stockholders' Equity -
For the Six Months Ended March 31, 1998 and 1997.................3
Consolidated Statements of Cash Flows -
For the Six Months Ended March 31, 1998 and 1997.................4
Notes to Consolidated Financial Statements.......................5
Independent Accountants' Report..................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................17
Item 2. Changes in Securities and Use of Proceeds.......................18
Item 3. Defaults Upon Senior Securities.................................18
Item 4. Submission of Matters to a Vote of Security Holders.............18
Item 5. Other Information...............................................18
Item 6. Exhibits and Reports on Form 8-K................................19
Signatures...............................................................20
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1997
--------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents ......................................... $ 197,207 $ 121,000
Securities purchased under agreements to resell and federal
funds sold ........................................................ 609,503 349,209
Securities ........................................................ 61,753 77,809
Mortgage-backed securities
Held to maturity, at amortized cost (fair value of $496.5
million in 1998 and $528.9 million in 1997) ................ 501,898 543,361
Available for sale, at fair value ............................ 817,806 1,026,344
Loans
Held for investment (net of allowances for credit losses of
$44.4 million in 1998 and $39.2 million in 1997) ........... 7,755,326 8,221,626
Held for sale ................................................ 2,211,739 773,603
Federal Home Loan Bank stock ...................................... 217,845 205,011
Premises and equipment ............................................ 50,788 46,921
Mortgage servicing rights ......................................... 275,672 272,214
Real estate owned (net of allowances for losses of $0.9
million in 1998 and $1.2 million in 1997) .................... 19,645 19,833
Deferred tax asset ................................................ 129,939 120,936
Other assets ...................................................... 260,376 189,205
----------- -----------
TOTAL ASSETS ...................................................... $13,109,497 $11,967,072
=========== ===========
LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits .......................................................... $ 6,506,367 $ 5,247,668
Federal Home Loan Bank advances ................................... 4,228,294 3,992,344
Securities sold under agreements to repurchase and federal
funds purchased ............................................... 668,430 1,308,600
Notes payable ..................................................... 220,209 220,199
Advances from borrowers for taxes and insurance .................. 175,747 173,294
Other liabilities ................................................. 471,929 240,988
----------- -----------
Total liabilities ....................................... 12,270,976 11,183,093
----------- -----------
MINORITY INTEREST
Preferred stock issued by consolidated subsidiary ................. 185,500 185,500
----------- -----------
STOCKHOLDERS' EQUITY
Common stock ...................................................... 316 316
Paid-in capital ................................................... 129,286 129,286
Retained earnings ................................................. 519,172 462,551
Accumulated other comprehensive income - unrealized gains
(losses) on securities available for sale, net of tax .......... 4,247 6,326
----------- -----------
Total stockholders' equity .............................. 653,021 598,479
----------- -----------
TOTAL LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY ........................................... $13,109,497 $11,967,072
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
1
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
---------------------------------- -----------------------------
1998 1997 1998 1997
--------------- --------------- --------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Short-term interest-earning assets ........................... $ 6,293 $ 8,194 $ 11,849 $ 17,537
Securities ................................................... 2,140 1,251 4,279 2,231
Mortgage-backed securities ................................... 22,595 26,520 46,980 53,336
Loans ........................................................ 189,007 159,136 373,135 318,400
Federal Home Loan Bank stock ................................. 3,181 2,827 6,338 5,527
--------- --------- --------- --------
Total interest income .............................. 223,216 197,928 442,581 397,031
--------- --------- --------- --------
INTEREST EXPENSE
Deposits ..................................................... 74,367 62,650 142,005 129,374
Federal Home Loan Bank advances .............................. 58,553 53,378 118,757 105,302
Securities sold under agreements to repurchase
and federal funds purchased ............................. 14,019 13,081 32,625 25,440
Notes payable ................................................ 4,896 2,315 9,792 4,626
--------- --------- --------- --------
Total interest expense ............................. 151,835 131,424 303,179 264,742
--------- --------- --------- --------
Net interest income ................................ 71,381 66,504 139,402 132,289
PROVISION FOR CREDIT LOSSES .................................. 11,524 4,305 14,963 11,219
--------- --------- --------- --------
Net interest income after provision
for credit losses ............................... 59,857 62,199 124,439 121,070
--------- --------- --------- --------
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing rights
and single family warehouse loans .................... 2,715 6,442 2,541 16,931
Securities and mortgage-backed securities................ 886 952 1,801 1,593
Other loans ............................................. 376 (4) 376 936
Sale of mortgage offices ................................ -- 3,998 -- 3,998
Loan servicing, net of related amortization .................. 4,121 7,651 13,459 15,826
Other ........................................................ 6,760 4,792 13,280 9,704
--------- --------- --------- --------
Total non-interest income .......................... 14,858 23,831 31,457 48,988
--------- --------- --------- --------
NON-INTEREST EXPENSE
Compensation and benefits .................................... 20,915 19,325 39,625 39,300
Occupancy .................................................... 4,071 3,616 7,749 7,871
Data processing .............................................. 3,927 3,418 7,750 7,219
Advertising and marketing .................................... 1,671 1,895 4,545 4,150
Amortization of intangibles .................................. 1,468 1,197 2,353 2,512
SAIF deposit insurance premiums .............................. 1,076 205 1,927 3,162
Furniture and equipment ...................................... 848 1,029 1,740 2,248
Other ........................................................ 13,081 11,899 22,558 24,691
--------- --------- --------- --------
Total non-interest expense .......................... 47,057 42,584 88,247 91,153
--------- --------- --------- --------
Income before income taxes and
minority interest ................................ 27,658 43,446 67,649 78,905
INCOME TAX (BENEFIT) EXPENSE ................................. (23,207) 16,780 (8,209) 30,413
--------- --------- --------- --------
Income before minority interest .................... 50,865 26,666 75,858 48,492
MINORITY INTEREST
Subsidiary preferred stock dividends ......................... 4,563 4,563 9,126 9,126
--------- --------- --------- --------
NET INCOME ................................. $ 46,302 $ 22,103 $ 66,732 $ 39,366
========= ========= ========= ========
EARNINGS PER COMMON SHARE
Basic ..................................................... $ 1.47 $ 0.70 $ 2.11 $ 1.25
Diluted ................................................... 1.43 0.69 2.06 1.23
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK COMPREHENSIVE
---------------------------------- INCOME -
CLASS A CLASS B UNREALIZED TOTAL
-------------- ----------------- PAID-IN RETAINED GAINS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS (LOSSES) EQUITY
------ ------ ------ ------ ------- -------- -------- ------
<S> <C> <C> <C> <C>
BALANCE AT
SEPTEMBER 30, 1996 .......................... 27,735,934 $277 3,859,662 $ 39 $129,286 $ 403,674 $(2,233) $ 531,043
Net income ................................ -- -- -- -- -- 39,366 -- 39,366
Change in unrealized gains (losses) ....... -- -- -- -- -- -- 7,335 7,335
--------- ------- ---------
Total comprehensive income .............. -- -- -- -- -- 39,366 7,335 46,701
--------- ------- ---------
Dividends declared: common
stock ($0.28 per share) ................. -- -- -- -- -- (8,847) -- (8,847)
Conversion of common stock ................ 618,342 7 (618,342) (7) -- -- -- --
---------- ---- --------- ---- -------- --------- ------- ---------
BALANCE AT
MARCH 31, 1997 .............................. 28,354,276 $284 3,241,320 $ 32 $129,286 $ 434,193 $ 5,102 $ 568,897
========== ==== ========= ==== ======== ========= ======= =========
BALANCE AT
SEPTEMBER 30, 1997 .......................... 28,354,276 $284 3,241,320 $ 32 $129,286 $ 462,551 $ 6,326 $ 598,479
Net income ................................ -- -- -- -- -- 66,732 -- 66,732
Change in unrealized gains (losses) ....... -- -- -- -- -- -- (2,079) (2,079)
--------- ------- ---------
Total comprehensive income ............. -- -- -- -- -- 66,732 (2,079) 64,653
--------- ------- ---------
Dividends declared: common
stock ($0.32 per share) ................ -- -- -- -- -- (10,111) -- (10,111)
---------- ---- --------- ---- -------- --------- ------- ---------
BALANCE AT
MARCH 31, 1998 .............................. 28,354,276 $284 3,241,320 $ 32 $129,286 $ 519,172 $ 4,247 $ 653,021
========== ==== ========= ==== ======== ========= ======= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31,
----------------------------------
1998 1997
------------ ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used by operating activities ......................... $ (691,556) $ (118,481)
CASH FLOWS FROM INVESTING ACTIVITIES ---------- --------
Purchase price of acquisitions ................................ (51,662) --
Net change in securities purchased under agreements to
resell and federal funds sold ............................ (260,294) 135,794
Fundings of loans held for investment ......................... (1,736,554) (999,066)
Proceeds from principal repayments and maturities of
Loans held for investment ................................ 1,902,991 1,189,716
Securities available for sale ............................ 198,636 53,659
Mortgage-backed securities held to maturity .............. 40,947 39,843
Mortgage-backed securities available for sale ............ 219,389 110,562
Proceeds from the sale of
Securities available for sale ............................ 257,698 161,043
Mortgage servicing rights ................................ -- 7,461
Federal Home Loan Bank stock ............................. 43,395 7,500
Real estate owned acquired through foreclosure ........... 19,653 32,041
Purchases of
Loans held for investment ................................ (183,509) (715,082)
Securities available for sale ............................ (208,333) --
Mortgage-backed securities held to maturity .............. -- (2,134)
Mortgage-backed securities available for sale ............ (15,598) --
Mortgage servicing rights ................................ (23,332) (85,271)
Federal Home Loan Bank stock ............................. (49,891) (16,998)
Other changes in loans held for investment ...................... (213,897) (63,572)
Other changes in mortgage servicing rights ...................... (6,312) (11,373)
Net purchases of premises and equipment ......................... (12,385) (5,916)
---------- --------
Net cash used by investing activities .................... (79,058) (161,793)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits ........................................ (250,989) (82,141)
Proceeds from deposits purchased .............................. 1,509,688 --
Proceeds from Federal Home Loan Bank advances ................. 2,079,237 2,209,202
Repayment of Federal Home Loan Bank advances .................. (1,843,287) (1,912,992)
Net change in securities sold under agreements to
repurchase and federal funds purchased ..................... (640,170) 95,573
Change in advances from borrowers for taxes and insurance ..... 2,453 (28,792)
Payment of dividends .......................................... (10,111) (8,847)
---------- --------
Net cash provided by financing activities ................ 846,821 272,003
---------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............... 76,207 (8,271)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................... 121,000 119,523
---------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 197,207 $ 111,252
========== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest ........................................ $ 304,391 $ 261,166
Cash paid for income taxes .................................... 5,065 525
NONCASH INVESTING ACTIVITIES
Real estate owned acquired through foreclosure ................ 19,798 39,935
Sales of real estate owned financed by the Bank ............... 553 11,953
Securitization of loans ....................................... 232,190 172,194
Net transfer of loans from held for investment ................ 664,496 317
Transfer of mortgage-backed securities from held to
maturity to available for sale ........................... -- 6,843
Change in unrealized gains (losses) on securities
available for sale ....................................... (2,079) 7,335
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The accompanying unaudited Consolidated Financial Statements include the
accounts of Bank United Corp. (the "Parent Company"), Bank United, a federal
savings bank (the "Bank"), and subsidiaries of both the Parent Company and the
Bank (collectively known as the "Company"). All significant intercompany
accounts have been eliminated in consolidation. A majority of the Company's
assets and substantially all of the Company's operations are derived from the
Bank.
2. BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements were prepared
in accordance with the instructions for Form 10-Q and, therefore, do not include
all disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. All adjustments (consisting of only normal recurring
adjustments) that are necessary, in the opinion of management, for a fair
presentation of the interim financial statements have been included. The results
of operations for the six months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the entire fiscal year or any
interim period. The interim financial information should be read in conjunction
with the Consolidated Financial Statements and Notes included in the Company's
1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes have been reclassified for comparative purposes to conform
to the current presentation. Such reclassifications had no effect on previously
presented net income or retained earnings.
3. EARNINGS PER COMMON SHARE
Effective October 1, 1997, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings per Share", which establishes
standards for computing and presenting earnings per share ("EPS"). It 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. All prior period EPS
data were restated to comply with SFAS No. 128, but are not materially
different. The table below presents the computation of EPS pursuant to SFAS No.
128 (in thousands, except per share data).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
-------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME
Net income applicable to common shares .................. $46,302 $22,103 $66,732 $39,366
SHARES
Average common shares outstanding ....................... 31,596 31,596 31,596 31,596
Potential dilutive common shares from options ........... 721 364 720 315
------- ------- ------- -------
Average common shares and equivalents outstanding ....... 32,317 31,960 32,316 31,911
======= ======= ======= =======
BASIC ................................................... $ 1.47 $ 0.70 $ 2.11 $ 1.25
DILUTED ................................................. 1.43 0.69 2.06 1.23
</TABLE>
5
<PAGE>
BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. EMPLOYEE BENEFITS
SUMMARY OF STOCK-BASED COMPENSATION
The Company has granted stock options to certain employees and its Board of
Directors under incentive and compensation plans. See the Company's 1997 Annual
Report on Form 10-K for additional disclosures regarding these options.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31,
--------------------------------------------------------
1998 1997
-------------------------- ---------------------------
NUMBER OF WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding at end of period........ 1,658,220 $ 24.77 1,322,020 $ 21.02
Exercisable at end of period........ 26,500 30.87 - -
Vested at end of period............. 438,819 20.85 33,718 20.13
</TABLE>
PERFORMANCE UNITS
Effective October 1, 1997, the Company's Board of Directors granted
performance units to executive officers and other key officers and employees
under its 1996 Stock Incentive Plan. These units, which equate to shares of the
Company's common stock on a one-for-one basis, will be earned based on the
achievement of certain corporate performance goals over a performance period
beginning October 1, 1997 and ending September 30, 2000. Upon completion of the
performance period, the Company's Compensation Committee will determine the
number of performance units that have been earned based on the Company's
performance. Cash will be distributed to the participants equal to the number of
performance units earned multiplied by the fair market value of the Company's
common stock as of September 30, 2000. Additional units were awarded under this
plan on March 30, 1998, making the maximum award 201,000 performance units in
the aggregate. Compensation expense totalling $409,000 was recorded for the six
months ended March 31, 1998 relating to these units.
5. COMPREHENSIVE INCOME
As of October 1, 1997, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which requires that all components of comprehensive
income and total comprehensive income be reported on one of the following: the
statement of operations, the statement of stockholders' equity, or a separate
statement of comprehensive income. The Company is disclosing this information on
its statement of stockholders' equity. Comprehensive income is comprised of net
income and all changes to stockholders' equity, except those due to investments
by owners (changes in paid-in capital) and distributions to owners (dividends).
This statement did not change the current accounting treatment for components of
comprehensive income (i.e. changes in unrealized gains or losses on securities
and mortgage-backed securities ("MBS") available for sale).
6. RECENT ACCOUNTING STANDARDS
SFAS No. 127, "Deferral of Certain Provisions of FASB Statement No. 125",
was implemented January 1, 1998. This statement deferred certain provisions of
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" related to secured borrowings and collateral for
all transactions and transfers of financial assets for securities purchased
under agreements to resell ("repurchase agreements"), dollar rolls, securities
lending, and similar transactions. Implementation of the deferred portion of
SFAS No. 125 had no material effect on the Company's Consolidated Financial
Statements.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" requires public companies to report certain information about their
operating segments in their annual financial statements and quarterly reports
issued to stockholders, for years beginning after implementation. It also
requires public companies to report certain information about their products and
services, the geographic areas in which they operate, and their major customers.
This statement is effective for fiscal years beginning after December 15, 1997.
The Company anticipates implementing SFAS No. 131 for its fiscal 1998 Annual
Report on Form 10-K. Implementation of SFAS No. 131 should have no material
effect on the Company's Consolidated Financial Statements.
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Bank United Corp.:
We have reviewed the accompanying condensed consolidated statement of financial
condition of Bank United Corp. and its subsidiaries (collectively known as the
"Company") as of March 31, 1998, and the related condensed consolidated
statements of operations for the three-month and six-month periods ended March
31, 1998 and 1997 and the related condensed consolidated statements of
stockholders' equity and cash flows for the six-month periods ended March 31,
1998 and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of Bank United
Corp. and its subsidiaries as of September 30, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated October 24,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated statement of financial condition as of September 30, 1997
is fairly stated, in all material respects, in relation to the consolidated
statement of financial condition from which it has been derived.
DELOITTE & TOUCHE LLP
Houston, Texas
April 28, 1998
7
<PAGE>
BANK UNITED CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
DISCUSSION OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND
1997
GENERAL
Net income was $66.7 million or $2.06 per diluted share for the six months
ended March 31, 1998, and $39.4 million or $1.23 per diluted share for the six
months ended March 31, 1997. Net income for the six months ended March 31, 1998
included two positive income tax adjustments, an increase in commercial loan
allowances, and allowances for prepayments in the Company's single family loan
and servicing portfolios. Excluding these adjustments and the prior year's gain
on the sale of certain mortgage origination offices, net income was $42.3
million, or $1.31 per diluted share for the six months ended March 31, 1998,
compared to $36.9 million, or $1.16 per diluted share for the six months ended
March 31, 1997, a 15% increase. The increase in net income, excluding the effect
of the adjustments, was primarily due to an increase in net interest income and
loan servicing income, offset by lower gains on sales of single family warehouse
loans.
NET INTEREST INCOME
Net interest income was $139.4 million for the six months ended March 31,
1998, compared to $132.3 million for the six months ended March 31, 1997, a $7.1
million, or 5%, increase. This increase was attributable to a $1.3 billion, or
12%, increase in average interest-earning assets, as well as a change in the
composition of the assets and deposits, partially offset by a 16 basis point
decrease in the net yield on interest-earning assets ("net yield").
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET, INTEREST INCOME/EXPENSE, AND AVERAGE YIELD/RATE
FOR THE SIX MONTHS ENDED MARCH 31,
------------------------------------------------------------------
1998 1997
---------------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE (1) BALANCE INTEREST RATE(1)
------- -------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Short-term interest-earning assets ........................ $ 298,337 $ 11,849 7.86% $ 597,513 $ 17,537 5.81%
Securities ................................................ 120,846 4,279 7.10 77,749 2,231 5.75
Mortgage-backed securities ................................ 1,395,908 46,980 6.73 1,576,883 53,336 6.76
Loans ..................................................... 9,545,570 373,135 7.82 7,847,869 318,400 8.11
FHLB stock ................................................ 211,949 6,338 6.00 190,769 5,527 5.81
----------- ----------- ---- ----------- -------- ----
Total interest-earning assets .......................... 11,572,610 442,581 7.64 10,290,783 397,031 7.71
Non-interest-earning assets ................................ 804,808 567,641
----------- ----------- ---- ----------- -------- ----
TOTAL ASSETS............................................ $12,377,418 $10,858,424
=========== ===========
INTEREST-BEARING LIABILITIES
Deposits ................................................. $ 5,674,144 142,005 5.02 $ 5,051,337 129,374 5.14
FHLB advances............................................. 4,084,028 118,757 5.75 3,721,496 105,302 5.60
Securities sold under agreements to repurchase
and federal funds purchased ............................. 1,124,151 32,625 5.74 905,887 25,440 5.55
Notes payable ............................................ 220,204 9,792 8.89 115,000 4,626 8.05
----------- ----------- ---- ----------- -------- ----
Total interest-bearing liabilities ................... 11,102,527 303,179 5.44 9,793,720 264,742 5.39
Non-interest-bearing liabilities, minority interest,
and stockholders' equity ................................ 1,274,891 1,064,704
----------- ----------- ---- ----------- -------- ----
TOTAL LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY ............................... $12,377,418 $10,858,424
=========== ===========
Net interest income/interest rate spread ................... $ 139,402 2.20% $132,289 2.32%
=========== ==== ======== ====
Net yield on interest-earning assets ....................... 2.42% 2.58%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities ..................... 1.04 1.05
==== ====
</TABLE>
(1) Annualized.
8
<PAGE>
BANK UNITED CORP.
The increase in average interest-earning assets resulted from growth in the
commercial loan portfolio through both originations and purchases. Average
commercial loans increased $1.3 billion, or 112%, to $2.5 billion for the six
months ended March 31, 1998, compared to $1.2 billion for the year ago period.
Average deposits increased $622.8 million, or 12%, during the current period,
resulting from increased transaction accounts and certificates of deposit
acquired in recent branch acquisitions. See "Discussion of Changes in Financial
Condition from September 30, 1997 to March 31, 1998".
During the six months ended March 31, 1998, a $2.0 million allowance was
recorded for prepayments in the single family loan portfolio due to a decline in
long-term market interest rates. Excluding the effect of this allowance and $4.1
million of discounts on single family loans recognized during the year ago
period, the net yield would have been 2.46% ("adjusted net yield") for the six
months ended March 31, 1998, compared to an adjusted net yield of 2.50% for the
six months ended March 31, 1997. The adjusted yield on interest-earning assets
increased 5 basis points, resulting from the increase in short-term market
interest rates and increased levels of higher yielding commercial loans
outstanding. These increases were partially offset by the decrease in long-term
market interest rates and increased levels of lower yielding single family loans
held for sale. The cost of funds increased 5 basis points due to the increase in
short-term market interest rates. The decline in deposit rates resulted from
maturities of higher rate brokered deposits and the effect of recent branch
acquisitions.
PROVISION FOR CREDIT LOSSES
The provision for credit losses increased $3.7 million to $15.0 million for
the six months ended March 31, 1998. This increase principally resulted from the
additional allowances established for the commercial loan portfolio. The
commercial loan portfolio increased $1.5 billion, or 107% from March 31, 1997 to
March 31, 1998. Due to this growth, the Company increased this portfolio's
allowances by $16.9 million during the current period, bringing the commercial
loan allowance ratio to approximately one percent. Also during the current
period, the Company determined that its single family allowances could be
reduced, based principally on the portfolio's historical losses. Accordingly,
$9.1 million of single family allowances were reversed through a negative
provision, bringing the single family held for investment loan allowance ratio
to approximately 30 basis points. The net effect of these two items reduced
earnings by $7.8 million, before tax, or $0.15 per diluted share. The consumer
loan provision increased from the year ago period due to additional provisions
recorded on the consumer line of credit portfolio during the current period. The
consumer line of credit portfolio, totalling $37.6 million, was sold in January
1998. Charge-offs of $4.9 million related to this sale were recorded during the
first quarter of fiscal 1998.
ALLOWANCE FOR CREDIT LOSSES
SINGLE
FAMILY COMMERCIAL CONSUMER TOTAL
------ ---------- -------- -----
Balance at September 30, 1996.....$28,672 $ 5,769 $ 5,219 $39,660
Provision...................... 6,769 1,821 2,629 11,219
Net charge-offs................ (4,079) (218) (2,834) (7,131)
------- ------- ------- --------
Balance at March 31, 1997.........$31,362 $ 7,372 $ 5,014 $43,748
======= ======= ======= =======
Balance at September 30, 1997.....$24,538 $ 8,766 $ 5,870 $39,174
Provision...................... (8,121) 19,842 3,242 14,963
Net charge-offs................ (2,306) (181) (7,235) (9,722)
------- ------- ------- --------
Balance at March 31, 1998.........$14,111 $28,427 $ 1,877 $44,415
======= ======= ======= =======
9
<PAGE>
BANK UNITED CORP.
NONPERFORMING ASSETS
MARCH 31, SEPTEMBER 30, MARCH 31,
1998 1997 1997
-------- --------- ---------
(IN THOUSANDS)
Nonaccrual loans
Single family......................... $ 59,534 $ 51,742 $ 85,764
Commercial............................ 1,916 1,995 2,402
Consumer.............................. 730 974 950
-------- -------- ---------
62,180 54,711 89,116
Discounts................................ (13) (759) (620)
--------- -------- ---------
Net nonaccrual loans ................ 62,167 53,952 88,496
REO, primarily single family properties.. 20,504 21,038 30,497
-------- -------- ---------
Total nonperforming assets......... $ 82,671 $ 74,990 $ 118,993
======== ======== =========
The Company's nonperforming assets decreased from March 1997 due to the sale
in April 1997 of $31.3 million of nonperforming assets.
SELECTED ASSET QUALITY RATIOS
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR AT OR FOR THE
SIX MONTHS ENDED THE YEAR ENDED SIX MONTHS ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997 MARCH 31, 1997
------------- ------------------ -----------------
<S> <C> <C> <C>
Allowance for credit losses to net nonaccrual loans
Single family ................................... 23.70% 47.37% 36.71%
Total ........................................... 71.44 72.61 49.44
Allowance for credit losses to total loans ......... 0.44 0.43 0.54
Nonperforming assets to total assets ............... 0.63 0.63 1.08
Net nonaccrual loans to total loans ................ 0.62 0.60 1.10
Nonperforming assets to total loans and REO ........ 0.82 0.83 1.47
Net loan charge-offs to average loans - annualized
Single family ................................... 0.07 0.18(1) 0.13
Total ........................................... 0.20(2) 0.23(1) 0.18
</TABLE>
(1) Excluding charge-offs totalling $5.0 million related to the nonperforming
loan sale in April 1997, the single family charge-off ratio would have been
0.11% and the total charge-off ratio would have been 0.17%.
(2) Excluding charge-offs in December 1997 totalling $4.9 million related to the
January 1998 sale of the consumer line of credit portfolio, the total charge-off
ratio would have been 0.10%.
NON-INTEREST INCOME
Non-interest income decreased $17.5 million, or 36%, during the six months
ended March 31, 1998, compared to the six months ended March 31, 1997. This
decrease was largely the result of lower gains on sales of single family
warehouse loans. The prior period's results also include a $4.0 million gain
related to the sale of certain mortgage origination offices.
Loan servicing income, which primarily consists of loan servicing fee
revenue, net of amortization of mortgage servicing rights ("MSRs"), declined
$2.4 million during the six months ended March 31, 1998, compared to the same
period a year ago. Loan servicing income for the current period was reduced by a
valuation allowance of $4.8 million before tax, or $0.09 per diluted share, for
prepayments on the servicing portfolio's underlying loans resulting from the
current low interest rate environment. Excluding this valuation allowance, loan
servicing income increased $2.4 million, or 15%, during the current period.
Gross servicing fee revenue increased $12.7 million and was partially offset by
a $10.3 million increase in the amortization of MSRs, excluding the effect of
the valuation allowance. These increases resulted from a larger portfolio of
single family loans serviced for others, on average, which increased to $19.7
10
<PAGE>
BANK UNITED CORP.
billion for the six months ended March 31, 1998, compared to $11.5 billion for
the six months ended March 31, 1997. Other non-interest income increased $3.6
million, or 37%, during the six months ended March 31, 1998 as a result of the
growth in the number of checking accounts and an increase in annuity sales
volume.
NON-INTEREST EXPENSE
Non-interest expense was $88.2 million for the six months ended March 31,
1998, down from $91.2 million for the six months ended March 31, 1997, or 1.43%
and 1.68% of average total assets for those same periods. This decrease was
principally the result of the sale in the second quarter of fiscal 1997 of
certain mortgage origination offices and lower Savings Association Insurance
Fund ("SAIF") premiums during the current period. These decreases were partially
offset by additional costs to service a larger servicing portfolio, costs
associated with recent branch acquisitions, and start-up costs incurred in
conjunction with the Company's program of offering home equity loans in Texas.
See "Discussion of Changes in Financial Condition from September 30, 1997 to
March 31, 1998".
INCOME TAX EXPENSE
During the quarter ended March 31, 1998, the Company successfully resolved
an outstanding tax benefit lawsuit with the Federal Deposit Insurance
Corporation as manager of the Federal Savings and Loan Insurance Corporation
Resolution Fund, which resulted in a positive income tax adjustment of
approximately $6.0 million, or $0.18 per diluted share. Additionally, the
Company recognized a positive income tax adjustment of $27.5 million, or $0.85
per diluted share, resulting from the anticipated use of additional net
operating losses against future taxable income.
DISCUSSION OF CHANGES IN FINANCIAL CONDITION FROM SEPTEMBER 30, 1997 TO MARCH
31, 1998
GENERAL
Total assets increased during the six months ended March 31, 1998 by $1.1
billion, or 10%, to $13.1 billion. This increase primarily occurred in the loan
portfolio. During the six months ended March 31, 1998, the Company acquired 21
branches with deposits totalling $1.5 billion. The cash acquired in these
transactions, along with principal repayments on loans and MBS, were used to
fund the growth in the Company's loan portfolio.
11
<PAGE>
BANK UNITED CORP.
ORIGINATION, PURCHASE, AND SALE OF LOANS
FOR THE SIX MONTHS ENDED MARCH 31,
----------------------------------
1998 1997
--------------- --------------
(IN THOUSANDS)
Beginning balance, September 30............ $ 8,995,229 $ 7,519,488
Fundings
Single family ...................... 1,959,019 1,153,489
Commercial.......................... 1,219,141 645,493
Consumer............................ 180,030 63,362
Purchases
Single family....................... 79,523 601,799
Commercial.......................... 391,866 274,762
Consumer............................ 172 62,267
Net change in mortgage banker finance
line of credit...................... 203,623 78,804
Repayments.............................. (2,052,943) (1,197,605)
Securitized loans sold or transferred... (520,162) (967,132)
Sales................................... (463,452) (169,908)
Other................................... (24,981) (32,677)
----------- -----------
Ending balance, March 31................... $ 9,967,065 $ 8,032,142
=========== ===========
LOAN PORTFOLIO
MARCH 31, SEPTEMBER 30, MARCH 31,
1998 1997 1997
----------- ---------- ----------
(IN THOUSANDS)
Single family
Held for investment...............$4,556,130 $5,795,179 $6,187,096
Held for sale..................... 2,146,018 697,410 207,734
Commercial........................... 2,880,053 2,201,880 1,394,338
Consumer............................. 384,864 300,760 242,974
----------- ---------- ----------
$9,967,065 $8,995,229 $8,032,142
========== ========== ==========
Securities purchased under agreements to resell and federal funds sold
increased $260.3 million during the six months ended March 31, 1998 to $609.5
million. This increase primarily resulted from the Company's ability to borrow
funds and invest those funds at a positive spread on a short-term basis.
Total loans increased $971.8 million, or 11%, during the six months ended
March 31, 1998, due to a $1.2 billion decrease in single family loans held for
investment, a $1.4 billion increase in single family loans held for sale, a
$678.2 million increase in commercial loans, and an $84.1 million increase in
consumer loans.
Single family loans held for sale increased $1.4 billion, or 208%, to $2.1
billion at March 31, 1998. Despite the sale of certain mortgage origination
offices during fiscal 1997, single family loan originations increased to $2.0
billion during the six months ended March 31, 1998, compared to $1.2 billion
during the six months ended March 31, 1997. The increase in originations
resulted from increased refinance activity resulting from lower long-term market
interest rates. Refinancings approximated $1.5 billion and $374.9 million, or
72% and 31%, of total single family loan originations during these periods.
Sales of single family loans approximated $415.9 million for the six months
ended March 31, 1998, compared to $150.8 million for the prior year period.
Single family loans held for investment decreased $1.2 billion during the
six months ended March 31, 1998 primarily due to principal repayments. The
Company has reduced its reliance on these loans as it continues to build its
commercial loan portfolio and designate a greater portion of its single family
loan portfolio as held for sale.
12
<PAGE>
BANK UNITED CORP.
The commercial loan portfolio increased to $2.9 billion at March 31, 1998,
due to originations and purchases. During the six months ended March 31, 1998,
the Company purchased commercial real estate loans with principal balances
totalling $163.5 million. These loans are secured by apartment buildings, office
buildings, and retail centers. Single family construction loan originations
totalled $658.1 million for the six months ended March 31, 1998, compared to
$355.7 million for the six months ended March 31, 1997, an 85% increase. The
mortgage banker finance line of credit portfolio increased $203.6 million
primarily due to the decline in long-term market interest rates during the six
months ended March 31, 1998. During the six months ended March 31, 1998, the
Company purchased $234.1 million of Small Business Administration ("SBA") loans.
Securities created from SBA loans totalled $232.2 million and $230.9 million
were sold during the current period.
The increase in consumer loans was due to the implementation of the
Company's program of offering home equity loans in Texas in January 1998. Since
the program began, the Company approved $227 million and funded $104.2 million
of such loans.
During the second quarter of fiscal 1998, the Company signed an agreement to
purchase servicing rights associated with $3.3 billion in single family loans
for a premium of $79.2 million. This transaction closed during April 1998 and
the servicing rights are expected to be transferred to the Company during the
fourth quarter of fiscal 1998.
Deposits increased $1.3 billion during the six months ended March 31, 1998.
During this period, the Company purchased 21 branches with deposits totalling
$1.5 billion and associated goodwill of $51.7 million. The Company has
consolidated or plans to consolidate 12 of the 21 branches purchased with
existing branches.
Increases in other assets and other liabilities were primarily due to growth
in the Company's servicing portfolio and due to branch acquisitions.
LIQUIDITY
The Bank is required by the Office of Thrift Supervision ("OTS") to
maintain a certain level of liquidity. The Bank's average daily liquidity ratio
for the quarter ended March 31, 1998 was 5.71%, compared to the requirement of
4.0%.
The primary sources of funds are deposits, Federal Home Loan Bank ("FHLB")
advances, reverse repurchase agreements, and principal repayments on loans and
MBS. These funds are principally used to meet ongoing commitments related to
deposit withdrawals, repayment of borrowings, funding of existing and continuing
loan commitments, and to maintain liquidity. Management believes that the Bank
has adequate resources to fund all of its commitments.
The 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 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, and applicable regulatory requirements. At March 31,
1998, the Bank had $202.7 million of available capacity for the payment of
dividends under OTS regulations.
REGULATORY MATTERS
The Bank's capital levels at March 31, 1998 and September 30, 1997 qualified
it as "well-capitalized", the highest of five tiers under applicable regulatory
definitions. The Bank's capital ratios at March 31, 1998 and September 30, 1997,
and the regulatory capital requirements were as follows:
13
<PAGE>
BANK UNITED CORP.
MARCH 31, 1998 SEPTEMBER 30, 1997 REQUIREMENT
-------------- ------------------ -----------
Tangible capital............... 7.02% 7.72% 1.50%
Core capital................... 7.06 7.77 3.00
Tier 1 capital................. 11.05 12.65 6.00
Total risk-based capital....... 11.59 13.18 8.00
DISCUSSION OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND 1997
GENERAL
Net income was $46.3 million or $1.43 per diluted share for the three months
ended March 31, 1998, and $22.1 million or $0.69 per diluted share for the three
months ended March 31, 1997. Net income for the three months ended March 31,
1998 included two positive income tax adjustments, an increase in commercial
loan allowances, and allowances for prepayments in the Company's single family
loan and servicing portfolios. Excluding these adjustments and the year ago
quarter's gain on the sale of certain mortgage origination offices, net income
was $21.9 million, or $0.68 per diluted share for the three months ended March
31, 1998, compared to $19.6 million, or $0.61 per diluted share for the three
months ended March 31, 1997, an 11% increase. The increase in net income,
excluding the effect of the adjustments, was due to an increase in net interest
income and loan servicing income, offset by lower gains on sales of single
family warehouse loans and higher non-interest expenses.
NET INTEREST INCOME
Net interest income was $71.4 million for the three months ended March 31,
1998, compared to $66.5 million for the three months ended March 31, 1997, a
$4.9 million, or 7%, increase. This increase was attributable to a $1.5 billion,
or 14%, increase in average interest-earning assets, as well as a change in the
composition of the assets and deposits, partially offset by a 16 basis point
decrease in the net yield.
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET, INTEREST INCOME/EXPENSE, AND AVERAGE YIELD/RATE
FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------
1998 1997
-------------------------------- -------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1)
--------- ------------ -------- ----------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Short-term interest-earning assets.............. $ 298,741 $ 6,293 8.43% $ 560,082 $ 8,194 5.85%
Securities ..................................... 122,614 2,140 7.08 78,801 1,251 6.44
Mortgage-backed securities...................... 1,336,361 22,595 6.76 1,540,910 26,520 6.88
Loans .......................................... 9,831,691 189,007 7.70 7,974,249 159,136 7.98
FHLB stock ..................................... 214,899 3,181 6.00 198,343 2,827 5.78
----------- ---------- ---- ----------- ------- ----
Total interest-earning assets................ 11,804,306 223,216 7.57 10,352,385 197,928 7.66
Non-interest-earning assets ..................... 904,027 592,417
----------- ---------- ---- ----------- ------- ----
TOTAL ASSETS................................. $12,708,333 $10,944,802
=========== ===========
INTEREST-BEARING LIABILITIES
Deposits ...................................... $ 6,110,899 74,367 4.94 $ 4,991,255 62,650 5.09
FHLB advances ................................. 4,068,040 58,553 5.76 3,846,585 53,378 5.55
Securities sold under agreements
to repurchase and federal funds
purchased .................................... 989,259 14,019 5.67 940,199 13,081 5.57
Notes payable ................................. 220,207 4,896 8.89 115,000 2,315 8.05
----------- ---------- ---- ----------- ------- ----
Total interest-bearing liabilities ........ 11,388,405 151,835 5.37 9,893,039 131,424 5.35
Non-interest-bearing liabilities,
minority interest, and stockholders'
equity ....................................... 1,319,928 1,051,763
----------- ---------- ---- ----------- ------- ----
TOTAL LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY .................... $12,708,333 $10,944,802
=========== ===========
Net interest income/interest rate spread ........ $ 71,381 2.20% $ 66,504 2.31%
========= ==== ======== ====
Net yield on interest-earning assets ............ 2.39% 2.55%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities .......... 1.04 1.05
==== ====
</TABLE>
(1) Annualized.
14
<PAGE>
BANK UNITED CORP.
The increase in average interest-earning assets resulted from growth in the
commercial loan portfolio through both originations and purchases. Average
commercial loans increased $1.4 billion, or 108%, to $2.7 billion for the three
months ended March 31, 1998, compared to $1.3 billion for the year ago quarter.
Average deposits increased $1.1 billion, or 22%, during the current quarter,
resulting from increased transaction accounts and certificates of deposit
acquired in recent branch acquisitions. See "Discussion of Changes in Financial
Condition from September 30, 1997 to March 31, 1998".
During the three months ended March 31, 1998, a $2.0 million allowance was
recorded for prepayments in the single family loan portfolio due to a decline in
long-term market interest rates. Excluding the effect of this allowance, the
adjusted net yield would have been 2.46% for the three months ended March 31,
1998, compared to 2.55% for the three months ended March 31, 1997. The adjusted
yield on interest-earning assets declined 2 basis points, resulting from the
decrease in long-term market interest rates and increased levels of lower
yielding single family loans held for sale. These decreases were partially
offset by the increase in short-term market interest rates and increased levels
of higher yielding commercial loans outstanding. The cost of funds increased 2
basis points due to the increase in short-term market interest rates. The
decline in deposit rates resulted from maturities of higher rate brokered
deposits and the effect of recent branch acquisitions.
PROVISION FOR CREDIT LOSSES
The provision for credit losses increased $7.2 million from the year ago
quarter. This increase principally resulted from additional allowances
established for the commercial loan portfolio. The commercial loan portfolio
increased $1.5 billion, or 107% from March 31, 1997 to March 31, 1998. Due to
this growth, the Company increased this portfolio's allowances by $16.9 million
during the current quarter, bringing the commercial loan allowance ratio to
approximately one percent. Also during the current quarter, the Company
determined that its single family allowances could be reduced, based principally
on the portfolio's historical losses. Accordingly, $9.1 million of single family
allowances were reversed through a negative provision, bringing the single
family held for investment loan allowance ratio to approximately 30 basis
points. The net effect of these two items reduced earnings by $7.8 million,
before tax, or $0.15 per diluted share.
ALLOWANCE FOR CREDIT LOSSES
SINGLE
FAMILY COMMERCIAL CONSUMER TOTAL
------ ---------- -------- -----
(in thousands)
Balance at December 31, 1996........ $31,522 $ 6,969 $ 5,041 $43,532
Provision........................ 2,051 621 1,633 4,305
Net charge-offs.................. (2,211) (218) (1,660) (4,089)
------- ------- ------- -------
Balance at March 31, 1997........... $31,362 $ 7,372 $ 5,014 $43,748
======= ======= ======= =======
Balance at December 31, 1997........ $23,321 $10,123 $ 1,765 $35,209
Provision........................ (8,005) 18,485 1,044 11,524
Net charge-offs.................. (1,205) (181) (932) (2,318)
------- ------- ------- -------
Balance at March 31, 1998........... $14,111 $28,427 $ 1,877 $44,415
======= ======= ======= =======
NON-INTEREST INCOME
Non-interest income decreased $9.0 million, or 38%, during the three months
ended March 31, 1998, compared to the three months ended March 31, 1997. This
decrease was partially the result of a decrease in gains on sales of single
family warehouse loans. The year ago quarter's results included a $4.0 million
gain related to the sale of certain mortgage origination offices.
15
<PAGE>
BANK UNITED CORP.
Loan servicing income declined $3.5 million during the three months ended
March 31, 1998, compared to the three months ended March 31, 1997, due to a $4.8
million valuation allowance recorded during the current quarter. Excluding this
valuation allowance, loan servicing income increased $1.2 million, or 16%. Gross
servicing fee revenue increased $4.8 million and was partially offset by a $3.6
million increase in the amortization of MSRs, excluding the effect of the
valuation allowance. These increases resulted from a larger portfolio of single
family loans serviced for others, on average, which increased to $19.7 billion
for the three months ended March 31, 1998, compared to $13.1 billion for the
three months ended March 31, 1997. Other non-interest income increased $2.0
million, or 41%, during the current quarter as a result of the growth in the
number of checking accounts and an increase in annuity sales volume.
NON-INTEREST EXPENSE
Non-interest expenses increased $4.5 million, or 11%, during the three
months ended March 31, 1998, compared to the three months ended March 31, 1997.
This increase was primarily due to additional costs to service a larger
servicing portfolio, costs associated with the Company's branch acquisitions,
and start-up costs incurred in conjunction with the Company's program of
offering home equity loans in Texas. Partially offsetting these increases was
the effect of the sale of certain mortgage origination offices in the quarter
ended March 31, 1997.
INCOME TAX EXPENSE
See "Discussion of Results of Operations for the Six Months Ended March 31,
1998 and 1997 - Income Tax Expense".
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 interest rates and economic conditions; the shift in the Company's
emphasis from residential mortgage lending to community and commercial banking
activities; increased competition for deposits and loans; changes in the
availability of funds; changes in local economic and business conditions;
changes in availability of residential mortgage loans originated by other
financial institutions or the Company's ability to purchase such loans on
favorable terms; the Company's ability to make acquisitions of other depository
institutions, their assets or their liabilities and the Company's successful
integration of any such acquisitions; 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 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. See "Risk Factors" in the Company's registration statement filed with
respect to an offering of its common stock (Registration No. 333-19237).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's principal market risk exposure is to changes in market
interest rates. See discussion in "Business - Asset and Liability Management" in
the Company's 1997 Annual Report on Form 10-K.
16
<PAGE>
BANK UNITED CORP.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 25, 1995, the Bank, the Parent Company (including its
predecessors), and Hyperion Partners L.P. (collectively, "Plaintiffs") filed
suit against the United States of America in the United States Court of Federal
Claims for breach of contract and taking of property without compensation in
contravention of the Fifth Amendment of the United States Constitution. The
action arose because the passage of Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") and the regulations adopted by the OTS
pursuant to FIRREA deprived Plaintiffs of their contractual rights.
In December 1988, the United States, through its agencies, entered into
certain agreements with the Plaintiffs that resulted in contractual obligations
owed to Plaintiffs. Plaintiffs contend that the obligations were undertaken to
induce, and did induce, the Company's acquisition of substantially all of the
assets and the secured deposit, and certain tax liabilities of United Savings
Association of Texas ("Old USAT"), an insolvent savings and loan association,
thereby relieving the Federal Savings and Loan Insurance Corporation ("FSLIC"),
an agency of the United States government, of the immense costs and burdens of
taking over and managing or liquidating the institution.
The lawsuit alleges breaches of the United States' contractual obligations
(1) 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, (2) to abide
by its commitment to allow the Bank to count $110 million of subordinated debt
as regulatory capital for all purposes, and (3) to abide by an accounting
forbearance, which would have allowed the Bank to count as capital for
regulatory purposes, and to amortize over a period of twenty-five years, the
$30.7 million difference between certain FSLIC payment obligations to the Bank
and the discounted present value of those future FSLIC payments. The lawsuit
seeks monetary relief for the breaches by the United States of its contractual
obligations to Plaintiffs and, in the alternative, seeks just compensation for a
taking of property and for a denial of due process under the Fifth Amendment to
the United States Constitution.
The lawsuit was stayed from the outset by a judge of the Court of Federal
Claims pending the Supreme Court's decision in UNITED STATES V. WINSTAR CORP.,
an action by three other thrifts raising similar issues (the "WINSTAR cases").
Since the Supreme Court ruling, the Chief Judge of the Court of Federal Claims
convened a number of status conferences to establish a case management protocol
for the more than 100 lawsuits on the Court of Federal Claims docket, that, like
Plaintiffs' case, involve issues similar to those raised in the WINSTAR cases.
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 trial of one of these two cases is in progress and
the trial of the other case has not yet begun. 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, and that they could range as high as $1 billion or more, the
Company is unable to predict the outcome of Plaintiffs'
17
<PAGE>
BANK UNITED CORP.
suit against the United States and the amount of judgment for damages, if any,
that may be awarded. Plaintiffs expect that the government may argue that no
breach by the government has occurred and that damages to the Plaintiffs, in any
event, would approach zero. The Company, on November 27, 1996, moved for partial
summary judgment on liability, and the Government has opposed the motion. The
Company is pursuing an early trial on damages. Uncertainties remain concerning
the administration of the Omnibus Case Management Order and the future course of
the Company's lawsuit pursuant to the Omnibus Case Management Order.
Accordingly, the Company cannot predict the timing of any resolution of its
claims. The damage trial in the first case has lasted longer than was originally
estimated, and the Company now expects the trial of its case to commence during
the second quarter of fiscal 1999. The Company is unable to predict the outcome
of its suit against the United States and the amount of judgment for damages, if
any, that may be awarded. Consequently, no assurances can be given as to the
results of this suit.
The Company and the Bank have entered into an agreement with Hyperion
Partners L.P. acknowledging the relative value, as among the parties, of their
claims in the pending litigation. The agreement confirms that the Company and
the Bank are entitled to receive 85% of the amount, if any, recovered as a
result of the settlement of or a judgment on such claims, and that Hyperion
Partners L.P. is entitled to receive 15% of such amount. The agreement was
approved by the disinterested directors of the Company. Plaintiffs will continue
to cooperate in good faith and will use their best efforts to maximize the total
amount, if any, that they may recover.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Parent Company was held on
March 19, 1998, for the purpose of voting on the election of directors.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934, and there was no solicitation in
opposition.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
NOMINEE SHARES FOR SHARES WITHHELD
David M. Golush 21,773,167 529,035
Anthony J. Nocella 21,773,367 528,835
Salvatore A. Ranieri 21,773,174 529,028
Kendrick R. Wilson III 21,772,217 529,985
The names of the directors whose terms of office continued after the
meeting are as follows:
Lewis S. Ranieri, Chairman
Barry C. Burkholder
Lawrence Chimerine
Paul M. Horvitz
Alan E. Master
Scott A. Shay
Patricia A. Sloan
Michael S. Stevens
ITEM 5. OTHER INFORMATION
Not applicable.
18
<PAGE>
ITEM 6A. EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
*15.1 - Letter in Lieu of Consent of Deloitte & Touche LLP, independent
accountants
*27.1 - Financial Data Schedule, Quarter Ended March 31, 1998
*27.2 - Financial Data Schedule, Fiscal Years 1995, 1996, and 1997
[Restated]
*27.3 - Financial Data Schedule, Fiscal Year 1997 Quarters [Restated]
*27.4 - Financial Data Schedule, Fiscal Year 1996 Quarters [Restated]
* Filed herewith.
ITEM 6B. REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the six months ended
March 31, 1998.
19
<PAGE>
BANK UNITED CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANK UNITED CORP.
(Registrant)
Date MAY 13, 1998 /s/ BARRY C. BURKHOLDER
---------------------------------- -------------------------
Barry C. Burkholder
President
Chief Executive Officer
(Duly Authorized Officer)
Date MAY 13, 1998 /s/ ANTHONY J. NOCELLA
--------------------------------- ------------------------
Anthony J. Nocella
Vice Chairman
Chief Financial Officer
20
EXHIBIT 15.1
May 13, 1998
Bank United Corp.
3200 Southwest Freeway
Houston, Texas 77027
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Bank United Corp. and its subsidiaries (collectively known as the
"Company") for the periods ended March 31, 1998 and 1997, as indicated in our
report dated April 28, 1998; because we did not perform an audit, we expressed
no opinion on that information.
We are aware that our report referred to above, which is included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, is
incorporated by reference in Post-effective Amendment No. 6 to Form S-1
(Registration Statement No. 333-19237) on Form S-3, Post-effective Amendment No.
2 to Form S-1 (Registration Statement No. 333-37645) on Form S-3, and Form S-8
(Registration Statement No. 333-42765).
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Houston, Texas
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 191,314
<INT-BEARING-DEPOSITS> 5,893
<FED-FUNDS-SOLD> 609,503
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 879,403
<INVESTMENTS-CARRYING> 502,054
<INVESTMENTS-MARKET> 496,640
<LOANS> 9,967,065
<ALLOWANCE> 44,415
<TOTAL-ASSETS> 13,109,497
<DEPOSITS> 6,506,367
<SHORT-TERM> 4,896,724
<LIABILITIES-OTHER> 647,676
<LONG-TERM> 220,209
0
0
<COMMON> 316
<OTHER-SE> 652,705
<TOTAL-LIABILITIES-AND-EQUITY> 13,109,497
<INTEREST-LOAN> 373,135
<INTEREST-INVEST> 63,108
<INTEREST-OTHER> 6,338
<INTEREST-TOTAL> 442,581
<INTEREST-DEPOSIT> 142,005
<INTEREST-EXPENSE> 303,179
<INTEREST-INCOME-NET> 139,402
<LOAN-LOSSES> 14,963
<SECURITIES-GAINS> 1,801
<EXPENSE-OTHER> 88,247
<INCOME-PRETAX> 67,649
<INCOME-PRE-EXTRAORDINARY> 66,732
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,732
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.06
<YIELD-ACTUAL> 2.42
<LOANS-NON> 62,180
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 39,174
<CHARGE-OFFS> 10,091
<RECOVERIES> 369
<ALLOWANCE-CLOSE> 44,415
<ALLOWANCE-DOMESTIC> 44,415
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996 SEP-30-1995
<PERIOD-END> SEP-30-1997 SEP-30-1996 SEP-30-1995
<CASH> 113,805 109,853 108,092
<INT-BEARING-DEPOSITS> 7,195 9,670 4,839
<FED-FUNDS-SOLD> 349,209 674,249 471,052
<TRADING-ASSETS> 0 1,149 1,081
<INVESTMENTS-HELD-FOR-SALE> 1,103,993 1,092,236 461,070
<INVESTMENTS-CARRYING> 543,521 630,216 2,053,206
<INVESTMENTS-MARKET> 529,030 609,394 2,033,912
<LOANS> 8,995,229 7,519,488 8,260,240
<ALLOWANCE> 39,174 39,660 36,801
<TOTAL-ASSETS> 11,967,072 10,712,377 11,983,534
<DEPOSITS> 5,247,668 5,147,945 5,182,220
<SHORT-TERM> 5,300,944 4,322,672 5,556,428
<LIABILITIES-OTHER> 414,282 410,217 448,289
<LONG-TERM> 220,199 115,000 115,000
0 0 0
0 0 0
<COMMON> 316 316 289
<OTHER-SE> 598,163 530,727 495,814
<TOTAL-LIABILITIES-AND-EQUITY> 11,967,072 10,712,377 11,983,534
<INTEREST-LOAN> 652,886 627,940 526,528
<INTEREST-INVEST> 146,502 171,429 208,785
<INTEREST-OTHER> 11,320 12,943 11,446
<INTEREST-TOTAL> 810,708 812,312 746,759
<INTEREST-DEPOSIT> 262,761 272,220 264,366
<INTEREST-EXPENSE> 546,064 584,778 552,760
<INTEREST-INCOME-NET> 264,644 227,534 193,999
<LOAN-LOSSES> 18,107 16,469 24,293
<SECURITIES-GAINS> 2,841 4,002 26
<EXPENSE-OTHER> 172,136 253,265 194,576
<INCOME-PRETAX> 157,833 67,836 90,111
<INCOME-PRE-EXTRAORDINARY> 78,894 118,935 41,719
<EXTRAORDINARY> 2,323 0 0
<CHANGES> 0 0 0
<NET-INCOME> 76,571 118,935 41,719
<EPS-PRIMARY> 2.42 4.06 1.45
<EPS-DILUTED> 2.40 3.87 1.35
<YIELD-ACTUAL> 2.52 2.10 1.92
<LOANS-NON> 54,711 93,720 85,235
<LOANS-PAST> 0 0 0
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 39,660 36,801 23,454
<CHARGE-OFFS> 19,036 13,785 11,078
<RECOVERIES> 443 175 132
<ALLOWANCE-CLOSE> 39,174 39,660 36,801
<ALLOWANCE-DOMESTIC> 39,174 39,660 36,801
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997 SEP-30-1997
<PERIOD-END> JUN-30-1997 MAR-31-1997 DEC-31-1996
<CASH> 97,561 101,346 125,987
<INT-BEARING-DEPOSITS> 5,250 9,906 6,829
<FED-FUNDS-SOLD> 577,059 538,455 582,236
<TRADING-ASSETS> 1,211 1,190 1,174
<INVESTMENTS-HELD-FOR-SALE> 1,094,468 968,143 1,045,927
<INVESTMENTS-CARRYING> 563,531 584,953 610,534
<INVESTMENTS-MARKET> 543,875 562,315 593,463
<LOANS> 8,271,904 8,032,142 7,957,010
<ALLOWANCE> 38,558 43,748 43,532
<TOTAL-ASSETS> 11,439,050 11,002,625 11,059,646
<DEPOSITS> 5,249,888 5,065,804 4,999,286
<SHORT-TERM> 4,811,442 4,714,455 4,898,547
<LIABILITIES-OTHER> 389,350 352,969 316,165
<LONG-TERM> 220,194 115,000 115,000
0 0 0
0 0 0
<COMMON> 316 316 316
<OTHER-SE> 582,360 568,581 544,832
<TOTAL-LIABILITIES-AND-EQUITY> 11,439,050 11,002,625 11,059,646
<INTEREST-LOAN> 482,077 318,400 159,264
<INTEREST-INVEST> 109,430 73,104 37,139
<INTEREST-OTHER> 8,427 5,527 2,700
<INTEREST-TOTAL> 599,934 397,031 199,103
<INTEREST-DEPOSIT> 195,107 129,374 66,724
<INTEREST-EXPENSE> 401,025 264,742 133,318
<INTEREST-INCOME-NET> 198,909 132,289 65,785
<LOAN-LOSSES> 14,644 11,219 6,914
<SECURITIES-GAINS> 2,277 1,593 641
<EXPENSE-OTHER> 153,000 103,186 53,078
<INCOME-PRETAX> 118,157 78,905 35,459
<INCOME-PRE-EXTRAORDINARY> 58,969 39,366 17,263
<EXTRAORDINARY> 2,323 0 0
<CHANGES> 0 0 0
<NET-INCOME> 56,646 39,366 17,263
<EPS-PRIMARY> 1.79 1.25 0.55
<EPS-DILUTED> 1.77 1.23 0.54
<YIELD-ACTUAL> 2.58 2.58 2.63
<LOANS-NON> 54,679 89,116 90,384
<LOANS-PAST> 0 0 0
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 39,660 39,660 39,660
<CHARGE-OFFS> 16,033 7,287 3,096
<RECOVERIES> 287 156 54
<ALLOWANCE-CLOSE> 38,558 43,748 43,532
<ALLOWANCE-DOMESTIC> 38,558 43,748 43,532
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE FINANCIAL DATA SHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND FORM 10-Q FOR THE
NINE MONTHS ENDED 6/30/96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-END> JUN-30-1996 MAR-31-1996
<CASH> 91,617 126,118
<INT-BEARING-DEPOSITS> 5,030 9,573
<FED-FUNDS-SOLD> 856,178 659,279
<TRADING-ASSETS> 1,129 1,267
<INVESTMENTS-HELD-FOR-SALE> 1,144,783 1,336,030
<INVESTMENTS-CARRYING> 654,797 676,391
<INVESTMENTS-MARKET> 632,803 660,582
<LOANS> 7,597,406 7,878,080
<ALLOWANCE> 37,056 36,489
<TOTAL-ASSETS> 11,023,270 11,266,636
<DEPOSITS> 5,053,605 4,963,321
<SHORT-TERM> 4,769,264 5,088,959
<LIABILITIES-OTHER> 370,469 387,415
<LONG-TERM> 115,000 115,000
0 0
0 0
<COMMON> 292 289
<OTHER-SE> 529,140 526,152
<TOTAL-LIABILITIES-AND-EQUITY> 11,023,270 11,266,636
<INTEREST-LOAN> 478,846 323,930
<INTEREST-INVEST> 131,483 90,206
<INTEREST-OTHER> 10,090 7,085
<INTEREST-TOTAL> 620,419 421,221
<INTEREST-DEPOSIT> 204,138 138,510
<INTEREST-EXPENSE> 448,026 309,289
<INTEREST-INCOME-NET> 172,393 111,932
<LOAN-LOSSES> 10,155 5,850
<SECURITIES-GAINS> 3,821 2,863
<EXPENSE-OTHER> 167,993 99,304
<INCOME-PRETAX> 72,327 61,387
<INCOME-PRE-EXTRAORDINARY> 125,869 26,759
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 125,869 26,759
<EPS-PRIMARY> 4.36 0.93
<EPS-DILUTED> 4.13 0.87
<YIELD-ACTUAL> 2.09 2.00
<LOANS-NON> 87,259 103,714
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 36,801 36,801
<CHARGE-OFFS> 10,024 6,250
<RECOVERIES> 124 88
<ALLOWANCE-CLOSE> 37,056 36,489
<ALLOWANCE-DOMESTIC> 37,056 36,489
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
