<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996
 
                                                      REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------
 
                               BANK UNITED CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                 <C>                                 <C>
              DELAWARE                              6711                             13-3528556
      (STATE OF INCORPORATION)          (PRIMARY STANDARD INDUSTRIAL              (I.R.S. EMPLOYER
                                        CLASSIFICATION CODE NUMBER)             IDENTIFICATION NO.)
</TABLE>
 
                                   SUITE 500
                           50 CHARLES LINDBERGH BLVD.
                              UNIONDALE, NY 11553
                                 (516) 745-6644
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                           SALVATORE A. RANIERI, ESQ.
                       VICE PRESIDENT AND GENERAL COUNSEL
                                   SUITE 500
                           50 CHARLES LINDBERGH BLVD.
                              UNIONDALE, NY 11553
                                 (516) 745-6644
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------
 
                                   Copies to:
 
<TABLE>
<S>                                 <C>                                 <C>
     WILLIAM F. BAVINGER, ESQ.            CRAIG M. WASSERMAN, ESQ.             JAMES F. MUNSELL, ESQ.
           BRYAN CAVE LLP              WACHTELL, LIPTON, ROSEN & KATZ    CLEARY, GOTTLIEB, STEEN & HAMILTON
       700 THIRTEENTH STREET                51 WEST 52ND STREET                  ONE LIBERTY PLAZA
       WASHINGTON, D.C. 20005                NEW YORK, NY 10019                  NEW YORK, NY 10006
           (202) 508-6037                      (212) 403-1000                      (212) 225-2000
</TABLE>
 
                            ------------------------
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after the effective date of this Registration Statement.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  / /
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:  / / ________
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(e)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  / / ________
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:  / /
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<S>                                          <C>              <C>              <C>              <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
                                                                               PROPOSED MAXIMUM
                                                              PROPOSED MAXIMUM    AGGREGATE
     TITLE OF EACH CLASS OF SECURITIES         AMOUNT TO BE    OFFERING PRICE      OFFERING        AMOUNT OF
              TO BE REGISTERED                REGISTERED(1)     PER SHARE(2)       PRICE(2)     REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Class A Common Stock, $0.01 par value per
  share.....................................      shares             $           $100,000,000       $34,483
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) Includes           shares of Class A Common Stock that the Underwriters have
    options to purchase to cover over-allotments, if any.
 
(2) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457 under the Securities Act of 1933, as amended.
                            ------------------------
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2
 
                               BANK UNITED CORP.
 
         CROSS-REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B)
 
<TABLE>
<CAPTION>
ITEM
 NO.                                                          LOCATION IN PROSPECTUS
- -----                                               ------------------------------------------
<C>     <S>                                         <C>
   I.   Forepart of the Registration Statement and
        Outside Front Cover Page of Prospectus....  Outside Front Cover Page
  II.   Inside Front and Outside Back Cover Pages
        of Prospectus.............................  Inside Front Cover Page; Table of Contents
 III.   Summary Information, Risk Factors and
        Ratio of Earnings to Fixed Charges........  Prospectus Summary; Risk Factors; The
                                                    Company
  IV.   Use of Proceeds...........................  Use of Proceeds
   V.   Determination of Offering Price...........  Underwriting
  VI.   Dilution..................................  Not Applicable
 VII.   Selling Security Holders..................  Selling Stockholders
VIII.   Plan of Distribution......................  Outside Front Cover Page; Underwriting
  IX.   Description of Securities to be
        Registered................................  Outside Front Cover Page; Inside Front
                                                    Cover Page; Description of Capital Stock
   X.   Interests of Named Experts and Counsel....  Not Applicable
  XI.   Information with respect to the
        Registrant................................  Outside Front Cover Page; Prospectus
                                                    Summary; Risk Factors; The Company; Use of
                                                    Proceeds; Dividend Policy; Capitalization;
                                                    Selected Consolidated Financial and Other
                                                    Data; Management's Discussion and Analysis
                                                    of Financial Condition and Results of
                                                    Operations; Business; Regulation;
                                                    Description of Properties; Legal
                                                    Proceedings; Management; Selling
                                                    Stockholders; Description of Capital
                                                    Stock; Underwriting; Legal Matters;
                                                    Experts; Available Information; Financial
                                                    Statements
 XII.   Disclosure of Commission Position on
        Indemnification for Securities Act
        Liabilities...............................  Not Applicable
</TABLE>
<PAGE>   3
 
                             SUBJECT TO COMPLETION
                PRELIMINARY PROSPECTUS DATED             , 1996
PROSPECTUS
                            [              ] SHARES
 
                               BANK UNITED CORP.
[LOGO]                        CLASS A COMMON STOCK
                            ------------------------
 
    All of the shares of Class A common stock, par value $0.01 per share ("Class
A Common Stock"), of Bank United Corp. (the "Company") offered hereby are being
sold by certain of the limited and general partners of Hyperion Partners L.P., a
Delaware Limited Partnership ("Hyperion Partners") as well as three other
entities with which an affiliate of Hyperion Partners has a fiduciary
relationship (collectively, the "Selling Stockholders"). See "Selling
Stockholders". Prior to this offering (the "Offering"), there has been no public
market for the Class A Common Stock. The Company will not receive any of the
proceeds from the sale of the shares by the Selling Stockholders. It is
currently anticipated that the initial public offering price for Class A Common
Stock will be between $ .00 and $ .00 per share. See "Underwriting" for
information relating to determination of the initial public offering price.
 
    The Company has two classes of authorized common stock: Class A Common Stock
and Class B common stock, par value $0.01 per share ("Class B Common Stock" and
together with the Class A Common Stock, the "Common Stock"). Both classes of
Common Stock have identical dividend and other rights, except that the Class B
Common Stock is non-voting Common Stock which 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. See "Description of Capital
Stock". Therefore, shares of Common Stock transferred to a purchaser pursuant to
the Offering will be shares of Class A Common Stock after such transfer, whether
or not such shares were Class A Common Stock or Class B Common Stock while held
by a Selling Stockholder.
 
    Application will be made to have the Class A Common Stock quoted on the
NASDAQ Stock Market ("NASDAQ") under the symbol "    ".
 
    Shares of Class A Common Stock offered hereby are being reserved for sale to
certain employees and retirees of the Company and its affiliates at the initial
public offering price. See "Underwriting". Such employees and retirees will
purchase, in the aggregate, less than 10% of the Class A Common Stock offered in
the Offering.
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 11 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 (THE "FDIC"), THE OFFICE OF THRIFT SUPERVISION (THE "OTS") OR
  ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION, THE FDIC, THE OTS
   OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
     OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
     OFFENSE.
 
THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
     ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
     ASSOCIATION, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
        GOVERNMENTAL AGENCY.
 
<TABLE>
<S>                                   <C>                      <C>                      <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
                                                                                               PROCEEDS
                                             PRICE TO               UNDERWRITING              TO SELLING
                                              PUBLIC                DISCOUNT(1)            STOCKHOLDERS(2)
- --------------------------------------------------------------------------------------------------------------
Per Share..........................             $                        $                        $
- --------------------------------------------------------------------------------------------------------------
Total(3)...........................             $                        $                        $
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) The Company and the Selling Stockholders have severally agreed to indemnify
    the Underwriters against certain liabilities, including liabilities under
    the Securities Act of 1933, as amended (the "Securities Act"). See
    "Underwriting".
 
(2) Before deducting expenses payable by the Company estimated to be $2,000,000.
 
(3) The Selling Stockholders have granted to the Underwriters an option,
    exercisable within 30 days after the date hereof, to purchase up to
    additional shares of Class A Common Stock on the same terms and conditions
    as set forth above to cover over-allotments, if any. If such option is
    exercised in full, the total Price to Public, Underwriting Discount and
    Proceeds to the Selling Stockholders will be $       , $       and $       ,
    respectively. See "Underwriting".
                            ------------------------
 
    The shares of Class A Common Stock are being offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Class A Common Stock will be made
in New York, New York on or about          , 1996.
                            ------------------------
 
MERRILL LYNCH & CO.
                              LEHMAN BROTHERS
 
                                                    SMITH BARNEY INC.
 
                            ------------------------
                  The date of this Prospectus is      , 1996.
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
     MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
     SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
     UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
     OF ANY SUCH STATE.
<PAGE>   4
 
                               BANK UNITED CORP.
 
                                BANKING NETWORK
 
                                      LOGO
 
                            ------------------------
                           United States Map Showing
                          Community Banking Branches,
                         Commercial Banking Offices and
                    States in which mortgages are originated
 
     IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET, ON THE NASDAQ OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                            ------------------------
 
                                        2
<PAGE>   5
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the detailed
information, definitions and financial statements appearing elsewhere herein.
Investors should carefully review the entire Prospectus. The fiscal year for
Bank United Corp. and its wholly owned subsidiary, Bank United (the "Bank"),
ends September 30, and, unless otherwise indicated, references to particular
years are to fiscal years ending September 30 of the year indicated. As used
herein, the term "Company" refers to Bank United Corp. and its predecessors, and
its consolidated subsidiaries, unless the context otherwise requires. See page
129 for the Index of Defined Terms used in this Prospectus.
 
                                  THE COMPANY
 
     Bank United Corp. is a broad-based financial services provider to consumers
and businesses in Texas and other selected regional markets throughout the
United States. Through the Bank, its principal subsidiary, the Company operates
67 Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3 
billion, total deposits of $5.0 billion and total stockholders' equity of 
$526.4 million. Upon completion of the Offering, the Company will be the 
largest publicly traded depository institution headquartered in Texas, in terms
of both assets and deposits.
 
     The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. The Bank is a federally chartered savings bank,
the deposits of which are insured by the Savings Association Insurance Fund (the
"SAIF") which is administered by the FDIC. The Company has no significant assets
other than its equity interest in the Bank. In June 1996, the Company changed
its name to Bank United Corp.
 
                               BUSINESS STRATEGY
 
     From its incorporation in December 1988 until the early 1990's, the
Company's operations were designed to minimize interest rate and credit risk
while maximizing the net value of the Company's assets and liabilities. To this
end, Company management's strategy focused on traditional thrift and mortgage
banking activities, certain wholesale activities (primarily related to
mortgage-backed securities ("MBS") and mortgage servicing rights ("MSRs")) and
internal as well as external growth. In addition, over this period the Company
benefited substantially from certain federal financial assistance and tax
benefits received and recorded in connection with its acquisitions of certain
assets and certain liabilities of failed thrift institutions during the period
1988-1992. As of March 31, 1996, the Company's stockholders' equity was $526.4
million (not adjusted for the dividend paid and related contractual payments
made to the FDIC in May 1996), a more than fourfold increase from $118.0
million, which represents total stockholders' equity at December 1988, adjusted
for subsequent capital contributions totaling $57.9 million.
 
     Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lending lines of business. During this time, the Company increased its
originations and the size of its portfolio of multi-family, residential
construction, consumer and commercial loans as well as the level of lower cost
transaction and commercial deposit accounts. To support this strategy, the
Company has hired experienced commercial banking professionals and has engaged
in more aggressive marketing campaigns. In addition to its efforts to increase
originations of commercial and consumer loans, the Company plans to increase the
retention of higher yielding single family and multi-family mortgage loans that,
in the past, may have been sold or securitized.
 
                                        3
<PAGE>   6
 
                              OPERATIONAL OVERVIEW
 
     The Company's operating structure reflects its current strategy, with four
business groups in two business segments.
 
                        [Chart showing Business Groups]

     - Community Banking Group.  The Community Banking Group's principal
       activities include deposit gathering, consumer lending, small-business
       banking and investment product sales. The Community Banking Group, which
       has marketed itself under the name "Bank United" since 1993, operates a
       67 branch community banking network, a 24-hour telephone banking center
       and a 62-unit ATM network, which together serve as the platform for the
       Company's consumer and small business banking activities. The Company's
       branch network includes 34 branches in the greater Houston area, 29
       branches in the Dallas/Ft. Worth metropolitan area, and two branches each
       in Austin and San Antonio. In addition, the Company plans to open at
       least three supermarket-based banking branches in 1996. Through its
       branch network, the Company maintains more than 400,000 accounts with an
       estimated 182,000 households and businesses.
 
     - Commercial Banking Group.  The Commercial Banking Group provides credit
       and a variety of cash management and other services to certain real
       estate and real estate related businesses. The Commercial Banking Group
       conducts its activities through four units: Mortgage Banker Finance
       ("MBF"), a financial services provider to small- to medium-sized mortgage
       companies; Multi-Family Lending; Residential Construction Lending; and
       Commercial Real Estate Lending. Business is solicited in Texas and in
       targeted regional markets throughout the United States. The Commercial
       Banking Group is expanding its products and industry specialties to
       include health care lending, asset-based lending and other commercial and
       industrial loan products.
 
     - Financial Markets Group.  The Financial Markets Group manages the
       Company's asset portfolio activities, including loan acquisition and
       management and the securitization of whole loans. Additionally, under the
       supervision of the Bank's Asset and Liability Committee (the "ALCO"), the
       Financial
 
                                        4
<PAGE>   7
 
Markets Group is responsible for the Company's investment portfolio, for
interest rate risk hedging strategies, and for securing funding sources other
than consumer and commercial deposits.
 
     - Mortgage Banking Group.  The Mortgage Banking Group principally engages
       in three activities: retail mortgage originations, wholesale mortgage
       originations and mortgage servicing. The Mortgage Banking Group
       originates and services first mortgage loans for single family residences
       for both the Company's portfolio and for sale to investors. At December
       31, 1995, the Company, with originations of $3.4 billion in fiscal 1995,
       was ranked by the American Banker as among the 30 largest originators of
       single family loans in the nation. In addition, the Company was ranked by
       the American Banker as one of the 40 largest single family loan servicers
       in the nation at December 31, 1995. The Company had an $11.6 billion
       servicing portfolio at March 31, 1996. The Mortgage Banking Group
       operates under the names "Bank United Mortgage" in Texas and Virginia and
       "Commonwealth United Mortgage" elsewhere in the United States.
 
                           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 1988 has served as Chairman of the Board of the Company and,
until June   , 1996, also as President and Chief Executive Officer ("CEO") of
the Company and Chairman of the Board of the Bank.
 
  Dividend Distribution and Restructuring
 
     In May 1996, the Company paid a dividend of $100 million on its common
stock to Hyperion Holdings and other holders of its common stock. The proceeds
of this dividend received by Hyperion Holdings were distributed by Hyperion
Partners to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners. During June 1996, the following
actions were taken in the order indicated (collectively, the "Restructuring"):
(i) Hyperion Holdings exchanged shares of a newly created class of its
non-voting common stock for certain shares of its voting common stock held by
Hyperion Partners; (ii) Hyperion Partners then distributed the Hyperion Holdings
common stock to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners (the "Distribution"); and (iii)
following the Distribution, Hyperion Holdings was merged with and into the
Company (the "Merger"), with the result that holders of Hyperion Holdings voting
and nonvoting common stock received shares of Class A Common Stock and Class B
Common Stock and the holders of Class C Common Stock (as defined below) received
shares of Class B Common Stock as set forth under "Selling Stockholders". As
part of the Restructuring, the common stock of Hyperion Holdings and the Class C
Common Stock were converted 1,800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Offering is intended to establish a public market for the
Class A Common Stock while providing the Selling Stockholders with liquidity for
their current holdings in the Company.
 
  Management
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Restructuring and the
Offering, Mr. Burkholder will also become Chairman of the Board of the Bank as
well as President and CEO of the Company. The executive management group of the
Bank consists of seven individuals who have worked together for the past six
years, giving them a thorough understanding of the businesses they have
developed together. They average more than 20 years of related industry
experience, the majority of which comes from commercial banking. As a team, they
have brought the discipline and sophistication of commercial banking to the
Bank. The next level of senior management is composed of 42 executives, a third
of whom were hired directly from commercial banks. The balance of the senior
management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".
 
                                        5
<PAGE>   8
 
     Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company as well as President and CEO of the
Company, and will continue, after the Offering, to serve as Chairman of the
Board of the Company. The Company is contemplating entering into a consulting
agreement with Mr. Ranieri pursuant to which he would serve as a consultant to
the Company for a three year period. See "Business -- Management" and
"Management -- Certain Relationships and Related Transactions".
 
  Future Tax Benefits
 
     In connection with the acquisition from the Federal Savings and Loan
Insurance Corporation (the "FSLIC") of certain of the assets and the assumption
of all the deposits and certain other liabilities of United Savings Association
of Texas ("Old USAT"), an insolvent thrift (the "Acquisition"), and the related
Assistance Agreement (as defined below), the Company succeeded to and recorded
substantial net operating loss carryforwards ("NOLs") which have resulted in
certain tax benefits. As of March 31, 1996, the Company had NOLs of $808.0
million available to reduce taxable income in future years. Pursuant to the Tax
Benefits Agreement (as defined below), the Bank is required to pay to the FSLIC
Resolution Fund ("FRF") a specified portion of net tax benefits obtained through
the taxable year ending nearest to September 30, 2003. See
"Regulation -- Taxation -- FSLIC Assistance".
 
     The Offering is structured with the intent to preserve the beneficial tax
attributes of the Company as described above. See "Regulation -- Taxation".
Accordingly, certain of the Selling Stockholders and other holders of the Common
Stock have agreed to limit their further disposition of Common Stock for up to
three years following the Offering except with the approval of the Board of
Directors of the Company (the "Company Board"). See "Description of Capital
Stock -- Common Stock". The limitations on transfers will allow the Company to
record a $101.7 million tax benefit in the quarter ended June 30, 1996. See
"Risk Factors -- Limitations on Use of Tax Losses; Restrictions on Transfers of
Stock" and Note 21 to the Consolidated Financial Statements. Pro forma for the
$100 million dividend, the related contractually required payment to the FDIC of
$5.9 million, the Restructuring and the recognition of the $101.7 million tax
benefit, stockholders' equity would have been $520.0 million as of March 31,
1996. See "Capitalization".
 
  Claims Related to Forebearance Agreements
 
     In connection with the original acquisition of the Bank by the Company, the
Federal Home Loan Bank (the "FHLB") approved a forbearance letter, issued on
February 15, 1989 (the "Forbearance Agreement"). Under the terms of the
Forbearance Agreement, the FSLIC agreed to waive or forbear from the enforcement
of certain regulatory provisions with respect to regulatory capital
requirements, liquidity requirements, accounting requirements and other matters.
After the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), the OTS took the position that the capital
standards set forth in FIRREA apply to all savings institutions, including those
institutions that had been operating under previously granted capital and
accounting forbearances, and that FIRREA eliminated these forbearances. On July
25, 1995, the Bank, the Company, and certain of their then-direct and indirect
parent entities filed suit against the United States in the Court of Federal
Claims for alleged failures of the United States to honor certain contractual
obligations, including obligations related to the Forbearance Agreement. The
lawsuit is in a preliminary stage. Discovery has been stayed pending the United
States Supreme Court's review of United States v. Winstar Corp., an action by
another thrift raising similar issues. The Company is unable to predict the
outcome of its suit against the United States and the amount of judgment for
damages, if any, that may be entered in favor of the Company. Consequently, no
assurances can be given as to the results of this suit. See "Legal Proceedings".
 
  Senior Note Exchange
 
     Substantially simultaneously with the consummation of the Offering, the
Company intends to commence an exchange offer (the "Exchange Offer") for its
outstanding Senior Notes due May 15, 1998 (the "Senior Notes"). The Exchange
Offer is intended to satisfy the condition of the Senior Notes pursuant to which
the interest rate on the Senior Notes will revert from 9.05% to 8.05% per annum
commencing with and including the date on which the Exchange Offer is
consummated. See Note 11 to the Consolidated Financial Statements.
 
                                        6
<PAGE>   9
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
 
     The following table presents summary selected historical financial data of
the Company. The information set forth below should be read in conjunction with
the consolidated financial statements of the Company and the Notes thereto set
forth elsewhere herein (the "Consolidated Financial Statements") and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The statement of operations data set forth below for each of the
three years ended September 30, 1995, 1994 and 1993 and the statement of
financial condition data at September 30, 1995 and 1994 are derived from, and
are qualified by reference to, the audited Consolidated Financial Statements.
The statement of operations data set forth below for each of the two years ended
September 30, 1992 and 1991 and the statement of financial condition data at
September 30, 1993, 1992 and 1991 are derived from the Company's audited
consolidated financial statements. Information at or for the six months ended
March 31, 1996 and 1995 is not audited, but, in the opinion of management,
includes all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of operations and financial condition for
those periods. Results of operations for the six months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.
 
<TABLE>
<CAPTION>
                                           AT OR FOR THE
                                         SIX MONTHS ENDED
                                             MARCH 31,                       AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                     -------------------------   ---------------------------------------------------------------
                                        1996          1995          1995          1994         1993       1992(1)      1991(1)
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                                  <C>           <C>           <C>           <C>          <C>          <C>          <C>
STATEMENT OF FINANCIAL CONDITION
  DATA:(2)
Total assets........................ $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
Loans...............................   7,878,080     6,161,432     8,260,240    5,046,174    4,862,379    4,101,716    3,431,154
Mortgage-backed securities..........   1,954,070     2,600,876     2,398,263    2,828,903    2,175,925      833,425      419,064
Deposits............................   4,963,321     5,015,713     5,182,220    4,764,204    4,839,388    4,910,760    6,054,474
FHLB advances.......................   4,139,023     3,284,373     4,383,895    2,620,329    2,185,445      632,345      287,345
Securities sold under agreements to
  repurchase........................     949,936       839,939     1,172,533      553,000      310,000           --           --
Minority interest -- Bank Preferred
  Stock(3)..........................     185,500        85,500       185,500       85,500       85,500           --           --
Total stockholders' equity..........     526,441       476,693       496,103      451,362      389,203      232,373      161,760
Book value per common share(4)...... $     18.24   $     16.52   $     17.19   $    15.64   $    13.48   $     8.19   $     6.87
STATEMENT OF OPERATIONS DATA:(2)
Interest income..................... $   421,221   $   327,586   $   746,759   $  494,706   $  482,490   $  502,854   $  422,184
Interest expense....................     309,289       239,960       552,760      320,924      300,831      348,291      330,659
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net interest income...............     111,932        87,626       193,999      173,782      181,659      154,563       91,525
Provision for credit losses.........       5,850         4,157        24,293        6,997        4,083       21,133        4,122
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net interest income after
    provision for credit losses.....     106,082        83,469       169,706      166,785      177,576      133,430       87,403
Non-interest income.................      54,609        66,653       114,981      118,889      146,691      103,790       44,930
Non-interest expense................      99,304       101,645       194,576      199,593      201,964      180,415      113,627
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Income before income taxes,
    minority interest and
    extraordinary loss..............      61,387        48,477        90,111       86,081      122,303       56,805       18,706
Income tax expense (benefit)........      25,278        20,186        37,415      (31,899)     (26,153)         200         (409)
Less minority interest(3)(5)........       9,350         4,632        10,977        9,010        6,537           --           --
Extraordinary loss(6)...............          --            --            --           --       14,549           --           --
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net income........................ $    26,759   $    23,659   $    41,719   $  108,970   $  127,370   $   56,605   $   19,115
                                     ===========   ===========   ===========   ==========   ==========   ==========   ==========
Operating earnings(7)............... $    55,039   $    48,849   $    91,295   $   75,514   $   77,105   $   50,024   $   16,510
Earnings per common share(4)........ $      0.87   $      0.76   $      1.35   $     3.55   $     4.11   $     1.85   $     0.71
CERTAIN RATIOS AND OTHER DATA:(2)(8)
Return on average assets............        0.46%         0.50%         0.40%        1.32%        1.74%        0.89%        0.42%
Return on average common equity.....       10.45         10.23          8.77        26.32        44.87        28.18        13.95
Stockholders' equity to assets......        4.67          4.70          4.14         5.07         4.61         3.71         2.35
Tangible stockholders' equity to
  tangible assets...................        4.48          4.40          3.93         4.68         4.14         2.58         1.10
Net yield on interest-earning
  assets............................        2.00          1.92          1.92         2.20         2.61         2.60         2.16
Non-interest expense to average
  total assets......................        1.72          2.13          1.86         2.41         2.76         2.85         2.50
Efficiency ratio(9).................       60.16         62.45         59.50        66.38        65.11        63.98        75.14
Allowance for credit losses to net
  nonaccrual loans..................       38.00         31.43         48.74        30.73        71.71        74.04        30.00
Allowance for credit losses to total
  loans.............................        0.46          0.40          0.44         0.46         0.61         0.68         0.29
Net loan charge-offs to average
  loans.............................        0.15          0.09          0.16         0.30         0.05         0.07         0.04
Nonperforming assets to total
  assets............................        1.10          1.04          0.84         1.09         0.72         0.89         0.59
REGULATORY CAPITAL RATIOS OF THE
  BANK:(2)(10)
  Tangible Capital..................        6.88%         5.65%         6.20%        6.01%        6.17%        4.24%        2.64%
  Core Capital......................        6.96          5.77          6.29         6.17         6.43         5.04         3.59
  Total Risk-Based Capital..........       14.20         12.43         13.45        14.02        14.87        12.19         9.37
</TABLE>
 
                                        7
<PAGE>   10
 
<TABLE>
<CAPTION>
                                          AT OR FOR THE
                                        SIX MONTHS ENDED
                                            MARCH 31,                       AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                    -------------------------   ---------------------------------------------------------------
                                       1996          1995          1995          1994         1993       1992(1)      1991(1)
                                    -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                                 <C>           <C>           <C>           <C>          <C>          <C>          <C>
OTHER DATA:
Number of Community Banking Group
  branches(1).....................           67            64            65           62           62           65           74
Number of Commercial Banking Group
  origination offices.............            9             8             9            5            3            2            1
Number of Mortgage Banking Group
  origination offices.............          112           131           122          145          109           93           72
Mortgage Banking Group servicing
  portfolio.......................  $11,594,485   $12,031,533   $12,532,472   $8,920,760   $8,073,226   $7,187,000   $4,681,712
Mortgage Banking Group
  originations....................    2,021,127     1,553,255     3,447,250    5,484,111    6,737,762    6,118,363    3,195,873
Financial Markets Group loans
  purchased.......................       80,948       769,995     2,640,755    1,312,827    1,202,970      912,847    1,885,956
</TABLE>
 
- ---------------
 (1) The Bank acquired from the Resolution Trust Company ("RTC") $2.2 billion in
     deposit liabilities during fiscal 1991. Pursuant to the Bank's plan of
     acquisition, rates on these deposits were reduced after acquisition and, as
     expected, approximately $766 million of deposits were withdrawn from the
     Bank during fiscal 1992. Also, the Bank consolidated overlapping branch
     locations that resulted from these acquisitions. See "The
     Company -- History".
 
 (2) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events and see "Capitalization". On a pro forma basis,
     stockholder's equity would have been $520.0 million as of March 31, 1996.
 
 (3) During fiscal 1993, the Bank issued its 10.12% Noncumulative Preferred
     Stock, Series A, and, during fiscal 1995, the Bank issued its 9.60%
     Noncumulative Preferred Stock, Series B (the Preferred Stock, Series A and
     Series B, is collectively referred to as the "Bank Preferred Stock"). None
     of the shares of Bank Preferred Stock are owned by the Company. Certain
     Selling Stockholders and directors and managers of the Company own shares
     of the Bank Preferred Stock. See "Management -- Security Ownership of
     Certain Beneficial Owners and Management -- Principal Stockholders, Bank
     Preferred Stock".
 
 (4) Per share results have been restated to reflect an 1,800 to one stock
     conversion effective June 1996 in connection with the Restructuring. See
     Note 21 to the Consolidated Financial Statements.
 
 (5) All of the outstanding shares of common stock, par value $0.01, of the Bank
     (the "Bank Common Stock") are currently owned by the Company. The Bank has
     issued to the FDIC warrants (the "Warrants") to acquire 158,823 shares of
     Bank Common Stock (representing 5.56% of the Bank Common Stock as of March
     31, 1996 and September 30, 1995, assuming exercise of the Warrants), for an
     exercise price of $0.01 per share. See "Business -- The Assistance
     Agreement -- Warrant Agreement" and Note 16 to the Consolidated Financial
     Statements.
 
 (6) Reflects costs and charges associated with the issuance of the Senior
     Notes. See Note 11 to the Consolidated Financial Statements.
 
 (7) Operating earnings represents income before taxes, minority interest, and
     extraordinary loss and excludes net gains (losses) on securities, MBS, and
     other loans.
 
 (8) Ratio, yield, and rate information are based on weighted average daily
     balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
     1994, and 1993 and average monthly balances for prior periods, with the
     exception of return on average common equity which is based on average
     monthly balances for all periods presented. Interim rates and yields are
     annualized.
 
 (9) Efficiency ratio represents non-interest expenses (excluding goodwill
     amortization) divided by net interest income plus non-interest income,
     excluding net gains (losses) on securities, MBS, and other loans.
 
(10) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events. On a pro forma basis, the regulatory ratios for tangible
     capital, core capital and total risk-based capital would have been 5.89%,
     5.97% and 12.12%, respectively, as of March 31, 1996.
 
                                        8
<PAGE>   11
 
                                    THE OFFERING
 
<TABLE>
<S>                                    <C>
Class A Common Stock offered by the
  Selling Stockholders...............  shares Class A Common Stock(1)
Common Stock to be Outstanding after
  the Offering.......................  shares Class A Common Stock(2)
                                       shares Class B Common Stock
       Total.........................  shares of Common Stock(3)
Use of Proceeds......................  All of the shares of Class A Common Stock are being
                                       offered by the Selling Stockholders. The Company will
                                       not receive any of the proceeds from the Offering.
Dividend Policy......................  The Company intends, subject to its financial results,
                                       contractual, legal and regulatory restrictions, and
                                       other factors that the Company Board may deem
                                       relevant, to declare and pay a quarterly dividend of
                                       $          per share of Common Stock beginning in the
                                                   quarter of 199  . The declaration of
                                       dividends by the Company and the amount thereof,
                                       however, will be at the discretion of the Company
                                       Board.
Proposed NASDAQ Symbol...............
</TABLE>
 
- ---------------
(1) Excludes        shares of Class A Common Stock that the Underwriters have
    the option to purchase to cover over-allotments, if any. The Offering will
    include shares of Class B Common Stock that will convert automatically to
    shares of Class A Common Stock in the Offering.
 
(2) Excludes shares issuable upon exercise of options to be issued to employees
    of the Company and shares to be issued, or issuable upon exercise of options
    to be issued, to non-employee directors of the Company. See
    "Management -- Executive Management Compensation Plans" and "-- Compensation
    of Directors".
 
(3) 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 at the election of the holders, subject to certain
    restrictions. See "Description of Capital Stock".
 
                                SELLING STOCKHOLDERS
 
     The outstanding shares of Class A Common Stock and Class B Common Stock are
primarily owned by the limited and general partners of Hyperion Partners as
described more fully under "Selling Stockholders". The following table sets
forth information concerning each person who, following the Offering, will
beneficially own (within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) more than 5% of the total number
of outstanding shares of Class A Common Stock and Class B Common Stock:
<TABLE>
<CAPTION>
                    SHARES OF                         SHARES OF                                           SHARES OF
                     CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                     COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                   STOCK OWNED     PERCENT OWNED     STOCK OWNED     PERCENT OWNED    STOCK OFFERED      STOCK OWNED
      NAME       BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                 ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
<S>              <C>              <C>              <C>              <C>              <C>               <C>
 
<CAPTION>
                                     SHARES OF       CLASS B
                                      CLASS B        COMMON
                      CLASS A          COMMON        STOCK--
                   COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                   PERCENT OWNED       AFTER          AFTER
      NAME         AFTER OFFERING     OFFERING      OFFERING
                  ----------------  ------------  -------------
<S>              <C>                <C>           <C>
</TABLE>
 
     In connection with the preservation of the Company's NOLs, each of the
Selling Stockholders and each of LW-SP1 (as defined below) and LW-SP2 (as
defined below) has agreed to hold its Common Stock pursuant to the Letter
Agreement (as defined below). Among other things, each 5% Stockholder (as
defined below) may sell only up to 45% of its shares of Common Stock in the
Offering, with the exception of LW-SP1
 
                                        9
<PAGE>   12
 
and LW-SP2, affiliates of Lehman Brothers Inc., which are prohibited from
selling any shares until after August 8, 1998, and each other Selling
Stockholder may sell up to 16% of its shares in the Offering (subject to
increase under certain conditions). Selling Stockholders have also agreed to
refrain from selling any shares of Common Stock for (i) one year or (ii) six
months after the Offering, in the case of such shares that were received in
respect of (i) general partnership interests or (ii) limited partnership
interests in Hyperion Partners, respectively. Additionally, the Company's
Restated Certificate of Incorporation (the "Certificate") and By-Laws (the
"By-Laws") prohibit the acquisition or transfer of shares of Common Stock held
by 5% Stockholders for three years following the Offering unless the Company
Board earlier determines that such acquisition or transfer would not be
reasonably likely to have a material adverse effect on the tax position of the
Company. Moreover, the Company Board has the discretion to waive these
limitations or take certain other actions that could trigger an Ownership Change
(as defined below). See "Selling Stockholders -- Selling Stockholder Letter
Agreements", "Risk Factors -- Limitations on Use of Tax Losses; Restrictions or
Transfers of Stock" and "Description of Capital Stock -- Common
Stock -- Restrictions on Transfers of Stock".
 
                                       10
<PAGE>   13
 
                                  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 is
subject may become more acute in periods of economic slowdown or recession.
During such periods, payment delinquencies and foreclosures generally increase
and could result in an increased incidence of claims and legal actions against
the Company. In addition, such conditions could lead to a potential decline in
demand for the Company's products and services.
 
EVOLUTION OF BUSINESS
 
     The Company's strategy in recent years has been to emphasize and grow its
Community Banking Group and Commercial Banking Group and to reduce the
significance over time of its residential mortgage lending business. See
"Business -- Business Strategy". The Community Banking Group and Commercial
Banking Group are expected to continue to represent a growing portion of the
Company's business. This strategic shift has occurred at a time of increasing
competitive pressures in the mortgage banking business. Community and commercial
banking activities, while potentially more profitable, generally entail a
greater degree of credit risk than does single family lending, the historical
focus of the Company.
 
     In furtherance of the increasing emphasis on its community and commercial
banking businesses, the Company is in the process of evaluating its strategic
alternatives with respect to its mortgage banking business, including a sale or
restructuring of all or part of its mortgage origination business. No assurances
can be given regarding the timing or impact of any such sale or restructuring on
the Company's residential mortgage lending business.
 
     Consistent with the Company's current business strategy, the Bank has
applied to establish a national bank subsidiary. If the Bank were to establish a
national bank subsidiary, the Company would become subject to regulation as a
bank holding company by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). Current rules and regulations of the Federal
Reserve Board would subject the Company to capital requirements that are not
currently applicable to the Company as a savings and loan holding company, and
would impose statutory limitations on the type of business activities in which
the Company may engage at the holding company level, which activities currently
are not restricted.
 
INTEREST RATE RISK
 
     The Company's net interest income is the differential or "spread" between
the interest earned on loans and investments and the interest paid on deposits,
borrowings and notes payable. The Company has traditionally managed its business
to limit its overall exposure to changes in interest rates; however, under the
Company Board's current policies, management has more latitude to increase the
Company's interest rate sensitivity position within certain limits. See
"Business -- Business Strategy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". As a result, changes in market
interest rates may have a greater impact on the Company's financial performance
in the future than they have had historically.
 
     An increase in the general level of interest rates may affect the Company's
net interest spread due to the periodic caps which limit the interest rate
change on the Company's MBS and loans that pay interest at adjustable rates.
Additionally, an increase in interest rates may, among other things, reduce the
demand for loans and the Company's ability to originate loans. A decrease in the
general level of interest rates may affect the Company through, among other
things, increased prepayments on its loan and servicing portfolios and increased
competition for deposits. Accordingly, changes in the level of market interest
rates affect the
 
                                       11
<PAGE>   14
 
Company's net interest spread, loan origination volume, loan and servicing
portfolios, and the overall results of the Company.
 
COMPETITION
 
     The Company experiences substantial competition both in attracting and
retaining deposits and in making loans. Its most direct competition for deposits
historically has come from other thrift institutions, commercial banks and
credit unions doing business in the Houston and Dallas/Fort Worth metropolitan
areas. In addition, as with all banking organizations, the Company has
experienced increasing competition from nonbanking sources. For example, the
Company also competes for funds with full service and discount broker-dealers
and with other investment alternatives, such as mutual funds and corporate and
governmental debt securities. The Company's competition for loans comes
principally from other thrift institutions, commercial banks, mortgage banking
companies, consumer finance companies, insurance companies and other
institutional lenders. A number of institutions with which the Company competes
for deposits and loans have significantly greater assets and capital than the
Company.
 
FUNDING AND LIQUIDITY
 
     In recent years, the Company has relied primarily on collateralized
borrowings (borrowings from FHLB of Dallas ("FHLB Dallas") and borrowings on
securities sold under agreement to repurchase ("reverse repurchase agreement"))
to fund its asset growth. At March 31, 1996, such borrowings funded 45% of the
Company's assets. The Company's collateralized borrowings have an average
maturity of approximately six months.
 
     The Company borrows funds from the FHLB Dallas under a security and pledge
agreement that restricts the amount of such borrowings to 65% of fully disbursed
single family loans, unless assets are physically pledged to the FHLB Dallas,
not to exceed 45% of total assets in any event. At March 31, 1996, the amounts
available under these restrictions were $4.7 billion and $5.1 billion,
respectively. The Company had $4.1 billion of outstanding advances at March 31,
1996.
 
     The Company's ability to borrow on reverse repurchase agreements is limited
to the amount and market value of collateral that is available to collateralize
through reverse repurchase agreements. At March 31, 1996, the Company had $1.2
billion in such collateral, $995 million of which was collateralizing such
reverse repurchase agreements. See "-- Interest Rate Risk". There can be no
assurance that the Company will continue to be able to arrange collateralized
borrowings or other borrowing arrangements to fund continued growth in its
assets.
 
CONCENTRATION OF LOAN PORTFOLIO
 
     The Company's current single family mortgage loan portfolio is concentrated
in certain geographical regions, particularly California. The performance of
such loans may be affected by changes in local economic and business conditions.
The California economy since the early 1990s has experienced an economic
recession, although the economy has recently shown signs of improvement.
Unfavorable or worsened economic conditions in California could have a material
adverse effect on the Company's financial condition and results of operations.
 
ACTIVE PURCHASER OF LOAN PORTFOLIOS
 
     The Company has been an active purchaser and securitizer of residential
mortgage loans originated by other financial institutions. See
"Business -- Financial Markets Group". While the Company intends to continue to
pursue this strategy on a selective basis, no assurance can be given as to the
continued availability of portfolio acquisition opportunities or the Company's
ability to obtain such portfolios on favorable terms.
 
     When purchased by the Company, loan portfolios generally do not contain
delinquent or defaulted loans and may contain loans that have been outstanding
for a relatively short period of time. Consequently, the
 
                                       12
<PAGE>   15
 
delinquency and loss experience of the Company's loan portfolios to date are not
necessarily indicative of future results.
 
LIMITATIONS ON USE OF TAX LOSSES; RESTRICTIONS ON TRANSFERS OF STOCK
 
     As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. Such tax deductions would be subject to
significant limitation under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code") if the Company undergoes an ownership change (as defined
below, an "Ownership Change"). In the event of an Ownership Change, Section 382
of the Code imposes an annual limitation on the amount of taxable income a
corporation may offset with NOLs and certain recognized built-in losses. The
limitation imposed by Section 382 of the Code for any post-change year would be
determined by multiplying the value of the Company's stock (including both
Common Stock and preferred stock) at the time of the Ownership Change by the
applicable long-term tax exempt rate (which was 5.78% for June 1996). Any unused
annual limitation may be carried over to later years, and the limitation may
under certain circumstances be increased by the built-in gains in assets held by
the Company at the time of the change that are recognized in the five-year
period after the change. Under current conditions, if an Ownership Change were
to occur, the Company's annual NOL utilization would be limited to a minimum of
approximately $31.8 million.
 
     The Company would undergo an Ownership Change if, among other things, the
stockholders who own or have owned, directly or indirectly, 5% or more of the
Common Stock or are otherwise treated as 5% stockholders or a "higher tier
entity" under Section 382 of the Code and the regulations promulgated thereunder
("5% Stockholders"), increase their aggregate percentage ownership of such stock
by more than 50 percentage points over the lowest percentage of such stock owned
by such stockholders at any time during the Testing Period (generally the
preceding three years). In applying Section 382 of the Code, at least a portion
of the stock sold pursuant to the Offering would be considered to be acquired by
a new 5% stockholder even if no person acquiring the stock in fact owns as much
as 5% of the Company's stock. While the application of Section 382 of the Code
is highly complex and uncertain in some respects, the sale of shares of Class A
Common Stock as contemplated by this Prospectus is not expected to cause an
Ownership Change. In addition, events could occur prior to or after the Offering
that are beyond the control of the Company which could result in an Ownership
Change. See "Regulation -- Taxation -- Net Operating Loss Limitations".
 
     In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Offering
of shares of Common Stock that would either cause a person or entity to become a
5% Stockholder or increase a 5% Stockholder's percentage ownership interest.
"Transfers" are defined to include any sale, transfer, assignment, conveyance,
pledge, hedge, short sale, hypothecation or other disposition or the issuance of
any option to sell, transfer, assign, convey, pledge or otherwise dispose. While
such Transfers are deemed prohibited by the Certificate and the Company is
authorized not to recognize any transferee of such a Transfer as a stockholder
to the extent of such Transfer, these restrictions are incomplete since the
Company cannot, consistent with NASDAQ requirements, prevent the settlement of
transactions through NASDAQ, and because the prohibition on Transfers by 5%
Stockholders does not limit transactions in the securities of such 5%
Stockholders that could give rise to ownership shifts within the meaning of the
applicable Section 382 rules. Moreover, the Company Board retains the discretion
to waive these limitations or to take certain other actions that could trigger
an Ownership Change, including through the issuance of additional shares of
Common Stock in subsequent public or private offerings or through subsequent
merger or acquisition transactions.
 
     Because the Company will have utilized a substantial portion of its
available ownership limitation in connection with the Offering, the Company may
not be able to engage in significant transactions that would create a further
shift in ownership within the meaning of Section 382 of the Code within the
following three-year period without triggering an Ownership Change. There can be
no assurance that future actions on the part of the Company's stockholders or
the Company itself will not result in the occurrence of an Ownership Change. See
"Regulation -- Taxation -- Net Operating Loss Limitations".
 
                                       13
<PAGE>   16
 
HOLDING COMPANY STRUCTURE; ABILITY TO PAY DIVIDENDS
 
     As a holding company without significant assets other than the Bank Common
Stock, the Company's ability to pay dividends on the Common Stock and to meet
its other cash obligations, including debt service on the Senior Notes and its
other debt obligations, is dependent upon the receipt of dividends from the Bank
on the Bank Common Stock. The declaration of dividends by the Bank on all
classes of its capital stock is subject to the discretion of the Board of
Directors of the Bank, the terms of the Bank Preferred Stock, applicable
regulatory requirements and compliance with the covenants of the Senior Notes.
In addition, the ability of the Company to pay dividends on the Common Stock is
subject to the terms 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 with the cash flow necessary to meet its debt service
obligations in respect of the Senior Notes and to pay dividends to the holders
of Common Stock, subject to applicable regulatory restrictions, no assurance can
be given that future circumstances might not exist which would limit or preclude
the declaration of such dividends. After giving effect to a dividend paid, a tax
benefit recorded and other subsequent events which occurred during the third
quarter of fiscal 1996, pro forma as of March 31, 1996, the Bank would be
permitted to pay $159.6 million of dividends on its capital stock without prior
approval of the OTS, and the Company would be able to pay $62.7 million of
dividends on its Common Stock under the covenants of the Senior Notes. See
"Regulation -- Safety and Soundness Regulations -- Capital
Requirements -- Capital Distributions", "Dividend Policy", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity" and Notes 11, 15, 16 and 21 to
the Consolidated Financial Statements.
 
REGULATION
 
     Both the Company, as a savings and loan holding company, and the Bank, as a
federal stock savings bank, are subject to significant regulation. Statutes and
regulations now affecting the Company and the Bank, respectively, may be changed
at any time, and the interpretation of these statutes and regulations by
examining authorities is also subject to change. There can be no assurance that
future changes in the regulations or in their interpretation will not adversely
affect the business of the Company. As a savings and loan holding company, the
Company is subject to regulation and examination by the OTS. As a federal
savings bank, the Bank is subject to examination from time to time by the OTS,
its primary regulator, and the FDIC, as administrator of the Bank Insurance Fund
(the "BIF") and the SAIF. There can be no assurance that the OTS or the FDIC
will not, as a result of such examinations or otherwise, impose various
requirements or regulatory sanctions upon the Bank or the Company respectively.
See "Regulation". As indicated above under "-- Evolution of Business", the Bank
has applied to establish a national bank subsidiary, which, if established,
would subject such subsidiary, the Bank and the Company to significant
additional regulation under various federal bank statutes.
 
RECAPITALIZATION OF THE SAIF AND ITS IMPACT ON SAIF PREMIUMS; OTHER LEGISLATIVE
PROPOSALS
 
     Deposits of the Bank are currently insured by the SAIF, which is
administered by the FDIC. Both the SAIF and the BIF, the deposit insurance fund
that covers most commercial bank deposits, are statutorily required to achieve
and maintain a reserve ratio equal to 1.25% of estimated insured deposits. As a
result of the BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered
the deposit insurance premium assessment rate for BIF members to between 0.04%
and 0.31% of insured deposits, while retaining the existing assessment rate of
0.23% to 0.31% of insured deposits for members of the SAIF. On November 14,
1995, the FDIC further reduced insurance premiums on BIF deposits by 0.04% of
insured deposits, creating an assessment range of 0% to 0.27% of insured
deposits, subject to a statutory requirement that all institutions pay at least
$2,000 annually. Approximately 92% of BIF members qualify for the lowest
assessment rate. As a result of the significant disparity in the deposit
insurance premiums paid by "well-capitalized" SAIF members, such as the Bank,
and well-capitalized BIF members, SAIF members are at a competitive disadvantage
to BIF members with respect to the pricing of loans and deposits and the ability
to achieve lower operating costs.
 
                                       14
<PAGE>   17
 
     Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. These proposals feature a one-time assessment (which
reports estimate from 0.75% of deposits to 0.90% of deposits) on SAIF-insured
institutions with the aim of fully recapitalizing the SAIF. Such an assessment
could result in an amount payable by the Bank, net of tax, of as much as $23.7
million to $28.5 million. See "Regulation". At this time, no assurance can be
given as to whether any BIF/SAIF legislative alternatives will become law.
 
     Members of Congress have expressed their intention to consider legislation
in 1996 that generally would require federal savings associations, such as the
Bank, to convert to a national bank charter (or a state charter), and
legislation has been proposed in Congress that envisions such action as part of
a BIF/SAIF recapitalization package. It is uncertain to what extent, if at all,
the existing branch and investment powers of federal savings associations, such
as the Bank, that are impermissible for national banks would be grandfathered.
In addition, the proposals express the intent that savings and loan holding
companies such as the Company, convert to bank holding companies. It is also
uncertain to what extent, if at all, the existing powers of savings and loan
holding companies that are impermissible for bank holding companies, would be
grandfathered. None of the present activities of the Company would be
impermissible if the Company were to convert to a bank holding company or to
establish a national bank subsidiary. In addition, unless such legislation
provides grandfathering or other remedial provisions, a charter conversion could
result in recapture of deductions for bad debts previously taken by a thrift for
tax purposes. If this legislation requires the recapture of the pre-1988 tax bad
debt reserve, the Bank would be required to record an after-tax charge to
earnings of approximately $18 million. Other legislation, which has been passed
by each house of Congress, would require recapture of a thrift's post-1987 bad
debt reserve over a six taxable-year period with the opportunity to defer
recapture for up to two years if certain residential loan requirements are met.
There would be no financial statement impact from the recapture of the post-1987
tax bad debt reserves, because the Bank has already provided for this liability.
There can be no assurance as to the outcome of these various legislative
proposals, the effect of which could be material to the financial condition and
results of operations of the Company and the Bank.
 
FEDERAL PROGRAMS
 
     The continuation of programs administered by the Federal National Mortgage
Association (the "FNMA"), the Federal Home Loan Mortgage Corporation (the
"FHLMC") and the Government National Mortgage Association (the "GNMA"), which
facilitate the issuance of MBS, as well as the Company's continued eligibility
to participate in such programs, enhances the Company's ability to generate
funds by sales of mortgage loans or MBS. A portion of the Company's business is
also dependent upon the continuation of various programs administered by the
Federal Housing Administration (the "FHA"), which insures mortgage loans, and
the Department of Veterans' Affairs (the "VA"), which partially guarantees
mortgage loans.
 
     Any discontinuation of, or significant reduction in, the operation of such
programs would have a material adverse effect on the Company's mortgage banking
operations. The Company expects to remain eligible to participate in such
programs; however, any significant impairment of its eligibility could have a
material adverse impact on its operations. See "Business -- Mortgage Banking
Group".
 
LIMITATIONS ON STOCK OWNERSHIP
 
     In addition to restrictions on Common Stock ownership necessary to avoid an
Ownership Change and preserve the Company's NOLs, see " --Limitations on Use of
Tax Losses; Restrictions on Transfers of Stock", with certain limited
exceptions, federal regulations prohibit a person or company or a group of
persons deemed to be acting in concert from, directly or indirectly, acquiring
more than 10% of any class of voting stock or obtaining the ability to control
in any manner the election of a majority of the directors or otherwise direct
the management or policies of a savings institution, such as the Bank, without
prior notice or application to and the approval of the OTS. See
"Regulation -- Regulation of Savings and Loan Holding Companies".
 
                                       15
<PAGE>   18
 
ANTI-TAKEOVER PROVISIONS
 
     The Certificate and the By-Laws, and applicable provisions of the Delaware
General Corporation Law (the "DGCL"), contain several provisions that may make
more difficult the acquisition of control of the Company without the approval of
the Company Board. Certain provisions of the Certificate and the By-Laws, among
other things, (i) authorize the issuance of additional shares of Common Stock
and shares of "blank check" Preferred Stock; (ii) classify the Company Board
into three classes, each of which (after an initial transition period) will
serve for staggered three year periods; (iii) provide that a director of the
Company may be removed by the stockholders only for cause; (iv) provide that
only the Company Board or the Chairman of the Board of the Company may call
special meetings of the stockholders; (v) provide that the stockholders may take
action only at a meeting of the stockholders or by unanimous written consent;
(vi) provide that stockholders must comply with certain advance notice
procedures in order to nominate candidates for election to the Company Board or
to place stockholders' proposals on the agenda for consideration at meetings of
the stockholders; and (vii) provide that the stockholders may amend or repeal
any of the foregoing provisions of the Certificate or the By-Laws only by a vote
of 80% of the stock entitled to vote generally in the election of directors (the
"Voting Stock"). With certain exceptions, Section 203 of the DGCL ("Section
203") imposes certain restrictions on mergers and other business combinations
between the Company and any holder of 15% or more of the Common Stock. See
"Description of Capital Stock -- Certain Provisions of the Certificate and
By-Laws; Anti-takeover Effects" and "-- Delaware Business Combination Statute".
 
CONCENTRATION OF OWNERSHIP
 
     Prior to June 18, 1996, the Company was indirectly owned by Hyperion
Partners, the general partner of which is indirectly controlled by three
individuals, including Lewis S. Ranieri, who served as Chairman of the Board,
President and CEO of the Company and Chairman of the Board of the Bank. As a
result of the Restructuring the limited and general partners of Hyperion
Partners primarily hold the outstanding Common Stock. See "The
Company -- Background of the Offering" and "Selling Stockholders". While it is
anticipated that no single stockholder of the Company will own in excess of 10%
of the voting stock of the Company immediately following the Offering, the
Selling Stockholders will continue to hold a significant ownership interest in
the Company, and certain Selling Stockholders have agreed to limit their further
disposition of Class A Common Stock. Following the consummation of the Offering,
Lewis S. Ranieri will serve as non-executive Chairman of the Board of the
Company, and Barry C. Burkholder, who is currently President and CEO of the
Bank, will also become Chairman of the Board of the Bank as well as the
President and CEO of the Company. While the Company is contemplating entering
into a consulting agreement with Mr. Ranieri pursuant to which he will serve as
a consultant to the Company for a period of three years, he may devote a
substantial amount of time to other business ventures, including competitive
activities through Hyperion Partners II, L.P. ("Hyperion Partners II") and its
affiliates.
 
CONVERSION OF CLASS B COMMON STOCK; DILUTION OF VOTING POWER
 
     Certain Selling Stockholders will retain shares of Class B Common Stock
(which have no voting rights) which they may elect to convert to Class A Common
Stock subject to certain restrictions. See "Description of Capital
Stock -- Common Stock -- Conversion". Class B Common Stock is also converted to
Class A Common Stock automatically upon transfer to a person who is not an
affiliate of the holder, including in any such transfer effected pursuant to the
Offering. Transfers of Class B Common Stock by certain persons are subject to
certain restrictions. See "Description of Capital Stock -- Common
Stock -- Restrictions on Transfers of Stock".
 
NO PRIOR MARKET FOR THE CLASS A COMMON STOCK
 
     Prior to the Offering, there was no public market for the Class A Common
Stock. The initial public offering price of the Class A Common Stock will be
determined through negotiations between the Company and the Underwriters, and
may not be indicative of the market price for the Class A Common Stock after the
Offering. The Company believes that certain factors, such as fluctuations in
operating results of the Company or of its competitors and market conditions
generally for similar stocks, could cause the market price of the
 
                                       16
<PAGE>   19
 
Class A Common Stock to fluctuate substantially. Such market volatility may
adversely affect the market price of the Class A Common Stock. Although the
Company intends to have the Class A Common Stock quoted on NASDAQ, there can be
no assurance that an active public market will develop for such stock or, if
developed, will be sustained following the Offering. See "Underwriting".
 
LIABILITY UNDER REPRESENTATIONS AND WARRANTIES AND OTHER CREDIT RISKS
 
     In the ordinary course of business, the Company has liability under
representations and warranties made to purchasers and insurers of mortgage loans
and to purchasers of MSRs. In connection with MSRs that the Company purchases,
it may have liability as a successor to third-party originators' representations
and warranties. Under certain circumstances, the Company may become liable for
the unpaid principal and interest on defaulted loans if there has been a breach
of representations or warranties. In the case of any mortgage loans found to be
defective with respect to representations or warranties made or succeeded to by
the Company, the Company may be required to repurchase such mortgage loans, with
any subsequent loss on resale or foreclosure being borne by the Company. The
Company's losses from breaches of representations and warranties have not been
material to date.
 
LITIGATION
 
     The operations of financial institutions, such as the Company, are subject
to substantial statutory and regulatory compliance obligations. These
requirements are complex, and even inadvertent noncompliance could result in
liability. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, alleging violations of various statutory and regulatory provisions
relating to mortgage lending and servicing, including the Truth-in-Lending Act
(the "TILA"), the Real Estate Settlement Procedures Act (the "RESPA"), the Equal
Credit Opportunity Act (the "ECOA"), the Fair Housing Act (the "FH Act") and
various state laws. While the Company has had various claims asserted against it
under these statutes, management does not expect these claims to have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.
 
     Maxxam, Inc. ("Maxxam") has filed a petition for review in a Federal
appeals court and a motion to intervene in Federal District Court, each
challenging the December 30, 1988 order of the FSLIC approving the Acquisition.
See "The Company -- History". Maxxam contends that it should have been selected
as the winning bidder. Management of the Company believes, after consultation
with legal counsel, that these claims are barred by applicable time limits, have
no basis under existing law, and will not have a material adverse effect on the
Bank's or the Company's financial condition, results of operations or liquidity.
See "Legal Proceedings".
 
                                       17
<PAGE>   20
 
                                  THE COMPANY
 
GENERAL
 
     The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Offering, the Company will be the largest
publicly traded depository institution headquartered in Texas, in terms of both
assets and deposits.
 
     The Bank is a federally chartered savings bank, the deposits of which are
insured by the SAIF, which is administered by the FDIC. The Company has no
significant assets other than its equity interest in the Bank. In June 1996, the
Company changed its name to Bank United Corp. The Company's address is 50
Charles Lindbergh Blvd., Uniondale, NY 11553, and its phone number is (516)
745-6644.
 
HISTORY
 
     The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. In the Acquisition, the Company initially
acquired from the FSLIC certain of the assets and assumed all the deposits and
certain other liabilities of Old USAT, an insolvent thrift. In connection with
the Acquisition, the Company entered into an Assistance Agreement which, among
other things, provided for federal financial assistance to the Bank. On December
23, 1993, the Company and the FDIC entered into an agreement providing for the
termination of the Assistance Agreement. See "Business -- The Assistance
Agreement".
 
     Immediately after the Acquisition, the Bank operated 19 banking branches,
primarily in the greater Houston metropolitan area, with no significant loan
origination capabilities. Through both acquisitions and internal growth, the
Bank has substantially expanded its Texas community banking branch network,
built a nationwide mortgage banking business, and established itself as a
provider of a broad array of financial products, including commercial banking
services and products. In 1990, 1991, and 1992, the Bank entered into various
agreements with the RTC, whereby the Bank purchased certain assets and assumed
certain liabilities, primarily deposit liabilities, of six thrift institutions
in RTC receivership. In connection with these acquisitions, the Bank received
cash from the RTC. The amount of cash received from the RTC was based on the
amount by which the sum of the liabilities assumed exceeded the sum of the
market values of the assets purchased, less a purchase premium. In 1990, the
Bank consummated its agreement to purchase certain assets and assume certain
liabilities relating to the loan origination operations of Commonwealth Mortgage
of America, L.P. Since July 1992, and particularly in 1994, the Bank has entered
into agreements to purchase several mortgage origination networks.
 
BACKGROUND OF THE OFFERING
 
     The Company was organized, and through June 17, 1996 operated, as a
subsidiary of Hyperion Holdings. During that period, all of the outstanding
shares of Hyperion Holdings were owned by Hyperion Partners. The general partner
of Hyperion Partners is indirectly controlled by three individuals, including
Lewis S. Ranieri, who, from December 1988, has served as Chairman of the Company
Board and, until June   , 1996, also as President and CEO of the Company and
Chairman of the Board of the Bank.
 
     Dividend Distribution and Restructuring
 
     During May 1996, the Company paid a dividend of $100 million on its Common
Stock to Hyperion Holdings and other holders of its Common Stock. The proceeds
of this dividend received by Hyperion Holdings were distributed by Hyperion
Partners to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners. During June 1996, the Restructuring
was effected as follows: (i) Hyperion Holdings exchanged shares of a newly
created class of its nonvoting common stock for certain shares of its voting
common stock held by Hyperion Partners; (ii) Hyperion Partners then distributed
 
                                       18
<PAGE>   21
 
the Hyperion Holdings common stock to its limited and general partners in
accordance with the limited partnership agreement of Hyperion Partners; and
(iii) following the Distribution, Hyperion Holdings was merged with and into the
Company, with the result that holders of Hyperion Holdings voting and nonvoting
common stock received shares of Class A Common Stock and Class B Common Stock
and the holders of Class C Common Stock received shares of Class B Common Stock.
As part of the Restructuring, the common stock of Hyperion Holdings and the
Class C Common Stock were converted 1800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Offering is intended to establish a public market value
for the Class A Common Stock while providing the Selling Stockholders with
liquidity for their current holdings in the Company.
 
     Management
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Restructuring and the
Offering, Mr. Burkholder will also become Chairman of the Board of the Bank as
well as President and CEO of the Company. The executive management group of the
Bank consists of seven individuals who have worked together for the past six
years, giving them a thorough understanding of the businesses they have
developed together. They average more than 20 years of related industry
experience, the majority of which comes from commercial banking. As a team, they
have brought the discipline and sophistication of commercial banking to the
Bank. The next level of senior management comprises 42 executives, a third of
whom were hired directly from commercial banks. The balance of the senior
management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".
 
     Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Offering, to serve as non-executive
Chairman of the Board of the Company. The Company is contemplating entering into
a consulting agreement with Mr. Ranieri pursuant to which he would serve as a
consultant to the Company for a three year period.
 
     Future Tax Benefits
 
     In connection with the Acquisition and the Assistance Agreement, the
Company succeeded to and recorded substantial NOLs which have resulted in
certain tax benefits. As of March 31, 1996, the Company had NOLs of $808.0
million available to reduce taxable income in future years. Pursuant to the Tax
Benefits Agreement (as defined below), the Bank is required to pay to the FRF a
certain portion of net tax benefits obtained through the taxable year ending
nearest to September 30, 2003. See "Regulation -- Taxation -- FSLIC Assistance".
 
     The Offering is structured with the intent to preserve the beneficial tax
attributes of the Company as described below. See "Regulation -- Taxation".
Accordingly, certain of the Selling Stockholders have agreed to limit their
further disposition of Common Stock for up to three years following the Offering
except with approval of the Company Board. See "Description of Capital
Stock -- Common Stock -- Restrictions on Transfers of Common Stock". The
limitations on transfers will allow the Company to record a $101.7 million tax
benefit in the quarter ended June 30, 1996. See "Risk Factors -- Limitations on
Use of Tax Losses; Restrictions on Transfers of Stock" and Note 21 to the
Consolidated Financial Statements.
 
     Senior Note Exchange
 
     Substantially simultaneously with the consummation of the Offering, the
Company intends to commence the Exchange Offer for the Senior Notes. The
Exchange Offer is intended to satisfy the condition of the Senior Notes pursuant
to which the interest rate on the Senior Notes will revert from 9.05% to 8.05%
per annum commencing with and including the date on which the Exchange Offer is
consummated. See Note 11 to the Consolidated Financial Statements.
 
     Claims Related to Forbearance Agreement
 
     In connection with the Acquisition, the FHLB approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory
 
                                       19
<PAGE>   22
 
provisions with respect to regulatory capital requirements, liquidity
requirements, accounting requirements and other matters. Following enactment of
FIRREA, the OTS took the position that the capital standards set forth in FIRREA
apply to all savings institutions, including those institutions that had been
operating under previously granted capital and accounting forbearances, and that
FIRREA eliminated these forbearances. On July 25, 1995, the Bank, the Company,
and certain of their then-direct and indirect parent entities filed suit against
the United States in the Court of Federal Claims for alleged failures of the
United States to honor certain contractual obligations, including obligations
related to the Forbearance Agreement. The lawsuit is in a preliminary stage.
Discovery has been stayed pending the United States Supreme Court's review of
United States v. Winstar Corp, an action by another thrift raising similar
issues. The Company is unable to predict the outcome of its suit against the
United States and the amount of judgment for damages, if any, that may be
entered in favor of the Company. Consequently, no assurances can be given as to
the results of this suit. See "Legal Proceedings".
 
                                USE OF PROCEEDS
 
     The sale of the shares of Class A Common Stock offered hereby is for the
account of the Selling Stockholders. Accordingly, the Company will not receive
any proceeds from the sale to the public of the shares of Class A Common Stock
offered hereby. See "Selling Stockholders".
 
                                DIVIDEND POLICY
 
     The Company Board currently intends to declare and pay quarterly dividends
on its Common Stock. It is expected that the first quarterly dividend payment
will be $          per share (a rate of $          annually), with the initial
dividend to be declared and paid in the      quarter of fiscal year      . The
declaration and payment of dividends by the Company are subject to the
discretion of the Company Board and limitations imposed by the Senior Notes on
Restricted Payments (as defined in the Senior Notes), including dividends. At
March 31, 1996, pro forma after giving effect to the Restructuring, the Company
would be permitted to pay $62.7 million in dividends on its capital stock. The
Company's ability to pay dividends and to meet its other cash obligations,
including debt service on the Senior Notes, is dependent on the receipt of
dividends from the Bank. The declaration of dividends by the Bank on all classes
of its capital stock is subject to the discretion of the Board of Directors of
the Bank, the terms of the Bank Preferred Stock, applicable regulatory
requirements and compliance with the covenants of the Senior Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity". Any determination as to the
payment of dividends will depend upon, among other things, general business
conditions, the Company's financial results, contractual, legal and regulatory
restrictions regarding the payment of dividends by the Company's subsidiaries,
the credit ratings of the Company and such other factors as the Company Board
may consider to be relevant. Dividends may not be paid on the Bank Common Stock
if full dividends on the Bank Preferred Stock have not been paid for the four
most recent quarterly dividend periods. Thus, if for any reason the Bank failed
to declare and pay full quarterly dividends on the Bank Preferred Stock, the
Company would not receive any cash dividends from the Bank until four full
quarterly dividends on the Bank Preferred Stock had been paid. See "Risk
Factors -- Holding Company Structure; Ability to Pay Dividends". The Company has
not historically paid dividends, with the exception of a $100 million dividend
paid to holders of Class A Common Stock and its former Class C Common Stock, par
value $.01 per share, of the Company (the "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
Warrants. Thus, the dividends historically paid by the Company are not
indicative of its future dividend policy.
 
                                       20
<PAGE>   23
 
                                 CAPITALIZATION
 
     The following table sets forth the historical capitalization of the Company
at March 31, 1996 and the pro forma capitalization of the Company at March 31,
1996 after giving effect to (i) the Restructuring and an associated 1,800 to one
Common Stock conversion, (ii) a $100 million dividend paid in May 1996 and a
$5.9 million contractually required payment to the FDIC, (iii) a $101.7 million
tax benefit recorded in June 1996, (iv) a $6.2 million charge, after tax, in
connection with the Executive Management Incentive Compensation Plans (as
defined below) and (v) estimated expenses related to the Offering. See Note 21
to the Consolidated Financial Statements. In addition to the long-term debt of
the Company reflected below, at March 31, 1996, the Bank had long-term debt
consisting of deposits, FHLB advances, and certain other funding liabilities
incurred in the ordinary course of business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital Resources
and Liquidity" and Notes 8, 9, 10 and 11 to the Consolidated Financial
Statements.
 
<TABLE>
<CAPTION>
                                                                      AT MARCH 31, 1996
                                                                  -------------------------
                                                                  HISTORICAL     PRO FORMA
                                                                  ----------     ----------
                                                                       (IN THOUSANDS)
    <S>                                                           <C>            <C>
    Long-Term Debt -- Senior Notes(1)...........................    $115,000       $115,000
    Minority Interest(2)........................................     185,500        185,500
    Stockholders' Equity:
      Preferred Stock(3)........................................          --             --
      Common Stock(4)...........................................           2              2
      Paid-in capital(5)........................................     118,009        122,009
      Retained earnings.........................................     411,498        401,098
      Unrealized gains (losses) on securities and
         mortgage-backed securities available for sale, net of
         tax....................................................      (3,068)        (3,068)
                                                                    --------       --------
      Total stockholders' equity................................     526,441        520,041
                                                                    --------       --------
         Total Consolidated Capitalization......................    $826,941       $820,541
                                                                    ========       ========
    Ratio of equity to assets...................................        4.67%          4.62%
    Ratio of tangible equity to tangible assets.................        4.48%          4.42%
    Shares outstanding(6)
      Class A...................................................  23,828,400
      Class B...................................................          --             --
      Class C...................................................   5,034,600
    Book value per common share(6)..............................      $18.24             --
    Tangible book value per share (6)...........................      $17.44             --
    Regulatory capital of the Bank(7)(8)
      Tangible Capital
         Amount.................................................    $770,764       $658,664
         Ratio..................................................        6.88%          5.89%
      Core Capital
         Amount.................................................    $780,227       $668,127
         Ratio..................................................        6.96%          5.97%
      Total Risk-Based Capital
         Amount.................................................    $816,772       $704,672
         Ratio..................................................       14.20%         12.12%
</TABLE>
 
- ---------------
(1) The Senior Notes currently bear a stepped up rate of 9.05% per annum pending
     consummation of the Exchange Offer, following which the rate will revert to
     8.05% per annum.
 
                                       21
<PAGE>   24
 
(2) Minority interest consists of $185.5 million stated value of the Bank
     Preferred Stock. In addition, the Warrants represent a potential additional
     minority interest in the Bank. See Notes 7 and 16 to the Consolidated
     Financial Statements.
 
(3) The Company had 2,500 shares of Preferred Stock authorized, none of which
     were issued as of March 31, 1996.
 
(4) The Company has reserved           shares of its Common Stock for issuance
     and to be available for grants under three separate plans. See
     "Management -- The 1996 Incentive Compensation Plan", "-- Executive
     Management Compensation Plan" and "-- The Director Stock Compensation
     Plan".
 
(5) Offering expenses estimated to be $2,000,000.
 
(6) Historical and pro forma per share results have been restated to reflect an
     1,800 to one Common Stock conversion, effective June 18, 1996, in
     connection with the Restructuring. Pro forma per share amounts also include
     the effects of stock issued pursuant to the 1996 Incentive Compensation
     Plan.
 
(7) The Bank's portion of the $101.7 million tax benefit recorded in June 1996
     was $85.2 million and has been excluded for purposes of computing the
     Bank's regulatory capital ratios. OTS regulations limit the amount of
     deferred tax asset an institution may include in its regulatory capital.
 
(8) The Bank's pro forma regulatory capital ratios reflect a $100 million
     dividend payment from the Bank to the Company and a related contractually
     required payment of $5.9 million to the FDIC. These payments were made in
     May 1996.
 
                                       22
<PAGE>   25
 
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The following selected consolidated financial and other data as of and for
each of the years in the five-year period ended September 30, 1995 are derived
from the Company's audited Consolidated Financial Statements. The information
set forth below should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Consolidated Statements of
Financial Condition as of September 30, 1995 and 1994, and the Consolidated
Statements of Operations for each of the years in the three year period ended
September 30, 1995, and the report thereon of Deloitte & Touche LLP are included
elsewhere in this Prospectus. The selected consolidated financial and other data
as of and for the six months ended March 31, 1996 and 1995 are derived from the
unaudited consolidated financial statements included in the Consolidated
Financial Statements which, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments), which are
necessary for a fair presentation of the results for such periods. The results
of operations for the six months ended March 31, 1996 are not necessarily
indicative of the results of operations to be obtained for the entire fiscal
year.
 
           FIVE-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                        AT MARCH 31,                                 AT SEPTEMBER 30,
                                  -------------------------   ---------------------------------------------------------------
                                     1996          1995          1995          1994         1993       1992(1)      1991(1)
                                  -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                               <C>           <C>           <C>           <C>          <C>          <C>          <C>
SUMMARY OF FINANCIAL CONDITION:
ASSETS(2)
Cash and cash equivalents.......  $   135,691   $    90,912   $   112,931   $   76,938   $   65,388   $  94,723    $ 217,630
Securities purchased under
  agreements to resell and
  federal funds sold............      659,279       636,274       471,052      358,710      547,988     206,000    1,632,600
Trading account assets..........        1,267         1,044         1,081        1,011        1,006      94,691           --
Securities......................       58,351       114,254       116,013      114,115       43,430       4,909        6,800
Mortgage-backed securities......    1,954,070     2,600,876     2,398,263    2,828,903    2,175,925     833,425      419,064
Loans...........................    7,878,080     6,161,432     8,260,240    5,046,174    4,862,379   4,101,716    3,431,154
Covered Assets and related
  assets(3).....................           --            --            --           --      392,511     610,901      779,304
All other assets................      579,898       539,985       623,954      484,310      351,929     308,918      390,295
                                  -----------   -----------    ----------   ----------   ----------   ----------
        Total assets............  $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
                                  ===========   ===========    ==========   ==========   ==========   ==========
LIABILITIES, MINORITY INTEREST,
  AND STOCKHOLDERS' EQUITY(2)
Deposits........................  $ 4,963,321   $ 5,015,713   $ 5,182,220   $4,764,204   $4,839,388   $4,910,760   $6,054,474
FHLB advances...................    4,139,023     3,284,373     4,383,895    2,620,329    2,185,445     632,345      287,345
Securities sold under agreements
  to repurchase.................      949,936       839,939     1,172,533      553,000      310,000          --           --
Note payable to related party...           --            --            --           --           --       4,090        4,090
Long-term debt ("15.75%
  Notes").......................           --            --            --           --           --     102,000      107,000
Senior Notes....................      115,000       115,000       115,000      115,000      115,000          --           --
All other liabilities...........      387,415       327,559       448,283      320,766      516,020     373,715      262,178
                                  -----------   -----------    ----------   ----------   ----------   ----------
    Total liabilities...........   10,554,695     9,582,584    11,301,931    8,373,299    7,965,853   6,022,910    6,715,087
                                  -----------   -----------    ----------   ----------   ----------   ----------
    Minority interest -- Bank
      Preferred Stock(4)........      185,500        85,500       185,500       85,500       85,500          --           --
    Total stockholders'
      equity....................      526,441       476,693       496,103      451,362      389,203     232,373      161,760
                                  -----------   -----------    ----------   ----------   ----------   ----------
        Total liabilities,
          minority interest, and
          stockholders'
          equity................  $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
                                  ===========   ===========    ==========   ==========   ==========   ==========
</TABLE>
 
                                       23
<PAGE>   26
 
<TABLE>
<CAPTION>
                                                  AT OR FOR
                                               THE SIX MONTHS
                                               ENDED MARCH 31,              AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                             -------------------   --------------------------------------------------------
                                               1996       1995       1995       1994       1993      1992(1)      1991(1)
                                             --------   --------   --------   --------   --------   ----------   ----------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>          <C>
SUMMARY OF OPERATIONS(2)
Interest income............................  $421,221   $327,586   $746,759   $494,706   $482,490    $502,854     $422,184
Interest expense...........................   309,289    239,960    552,760    320,924    300,831     348,291      330,659
                                             --------   --------   --------   --------   --------    --------
  Net interest income......................   111,932     87,626    193,999    173,782    181,659     154,563       91,525
Provision for credit losses................     5,850      4,157     24,293      6,997      4,083      21,133        4,122
                                             --------   --------   --------   --------   --------    --------
  Net interest income after provision for
    credit losses..........................   106,082     83,469    169,706    166,785    177,576     133,430       87,403
Non-interest income
  Net gains (losses)
    Sales of single family servicing rights
      and single family warehouse loans....    19,157     38,464     60,495     63,286     67,403      67,223       30,541
    Securities and mortgage-backed
      securities...........................     2,863          8         26     10,404     43,702       2,022        1,440
    Other loans............................     3,485       (380)    (1,210)       163      1,496       4,759          756
  Loan servicing fees and charges..........    22,107     22,813     43,508     31,741     21,780      20,823        6,076
  Other fees and charges...................     6,997      5,748     12,162     13,295     12,310       8,963        6,117
                                             --------   --------   --------   --------   --------    --------
  Total non-interest income................    54,609     66,653    114,981    118,889    146,691     103,790       44,930
                                             --------   --------   --------   --------   --------    --------
Non-interest expense
  Compensation and benefits................    39,898     43,192     83,520     86,504     81,472      69,476       46,580
  Amortization of intangibles..............     9,801     10,718     21,856     18,247     24,469      22,832       14,789
  Other....................................    49,605     47,735     89,200     94,842     96,023      88,107       52,258
                                             --------   --------   --------   --------   --------    --------
  Total non-interest expense...............    99,304    101,645    194,576    199,593    201,964     180,415      113,627
                                             --------   --------   --------   --------   --------    --------
  Income before income taxes, minority
    interest, and extraordinary loss.......    61,387     48,477     90,111     86,081    122,303      56,805       18,706
Income tax expense (benefit)(5)............    25,278     20,186     37,415    (31,899)   (26,153)        200         (409)
                                             --------   --------   --------   --------   --------    --------
  Income before minority interest and
    extraordinary loss.....................    36,109     28,291     52,696    117,980    148,456      56,605       19,115
Less minority interest
  Bank Preferred Stock dividends(4)........     9,126      4,326     10,600      8,653      6,537          --           --
  Payments in lieu of dividends(6).........       224        306        377        357         --          --           --
                                             --------   --------   --------   --------   --------    --------
  Income before extraordinary loss.........    26,759     23,659     41,719    108,970    141,919      56,605       19,115
Extraordinary loss(7)......................        --         --         --         --     14,549          --           --
                                             --------   --------   --------   --------   --------    --------
  Net income...............................  $ 26,759   $ 23,659   $ 41,719   $108,970   $127,370    $ 56,605     $ 19,115
                                             ========   ========   ========   ========   ========    ========
Operating earnings(8)......................  $ 55,039   $ 48,849   $ 91,295   $ 75,514   $ 77,105    $ 50,024     $ 16,510
Earnings per common share(9)
  Income before extraordinary loss.........  $   0.87   $   0.76   $   1.35   $   3.55   $   4.61    $   1.85     $   0.71
  Extraordinary loss.......................        --         --         --         --       0.50          --           --
                                             --------   --------   --------   --------   --------    --------
  Net income...............................  $   0.87   $   0.76   $   1.35   $   3.55   $   4.11    $   1.85     $   0.71
                                             ========   ========   ========   ========   ========    ========
Book value per common share(9).............  $  18.24   $  16.52   $  17.19   $  15.64   $  13.48    $   8.19     $   6.87
CERTAIN RATIOS AND OTHER DATA(2)(10)
Regulatory capital ratios of the Bank(11):
  Tangible Capital.........................      6.88%      5.65%      6.20%      6.01%      6.17%       4.24%        2.64%
  Core Capital.............................      6.96       5.77       6.29       6.17       6.43        5.04         3.59
  Total Risk-Based Capital.................     14.20      12.43      13.45      14.02      14.87       12.19         9.37
Return on average assets...................      0.46       0.50       0.40       1.32       1.74        0.89         0.42
Return on average common equity............     10.45      10.23       8.77      26.32      44.87       28.18        13.95
Stockholders' equity to assets.............      4.67       4.70       4.14       5.07       4.61        3.71         2.35
Tangible stockholders' equity to tangible
  assets...................................      4.48       4.40       3.93       4.68       4.14        2.58         1.10
Net yield on interest-earning assets(12)...      2.00       1.92       1.92       2.20       2.61        2.60         2.16
Interest rate spread(12)...................      1.66       1.61       1.61       1.95       2.41        2.54         2.15
</TABLE>
 
                                       24
<PAGE>   27
 
<TABLE>
<CAPTION>
                                      AT OR FOR THE SIX MONTHS
                                           ENDED MARCH 31,                    AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                      -------------------------   ---------------------------------------------------------------
                                         1996          1995          1995          1994         1993       1992(1)      1991(1)
                                      -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                                   <C>           <C>           <C>           <C>          <C>          <C>          <C>
CERTAIN RATIOS AND OTHER
  DATA -- CONTINUED(2)(10)
Average interest-earning assets to
  average interest-bearing
  liabilities.......................         1.06x         1.06x         1.06x        1.06x        1.04x        1.01x        1.00x
Non-interest expense to average
  total assets......................         1.72%         2.13%         1.86%        2.41%        2.76%        2.85%        2.50%
Net operating expense ratio(13).....         0.77          0.74          0.76         0.97         0.76         1.21         1.51
Efficiency ratio(14)................        60.16         62.45         59.50        66.38        65.11        63.98        75.14
Nonperforming assets to total
  assets............................         1.10          1.04          0.84         1.09         0.72         0.89         0.59
Nonaccrual loans to total loans.....         1.21          1.29          0.91         1.51         0.85         0.92         0.98
Allowance for credit losses to net
  nonaccrual loans..................        38.00         31.43         48.74        30.73        71.71        74.04        30.00
Allowance for credit losses to
  nonperforming assets..............        29.36         23.62         36.65        24.18        49.28        50.54        25.05
Allowance for credit losses to total
  loans.............................         0.46          0.40          0.44         0.46         0.61         0.68         0.29
Net loan charge-offs to average
  loans.............................         0.15          0.09          0.16         0.30         0.05         0.07         0.04
Full-time equivalent employees......        2,642         2,684         2,663        2,894        3,122        2,720        2,023
Number of Community Banking
  branches(1).......................           67            64            65           62           62           65           74
Number of Commercial Banking
  origination offices...............            9             8             9            5            3            2            1
Number of Mortgage Banking
  origination offices...............          112           131           122          145          109           93           72
Mortgage Banking servicing
  portfolio.........................  $11,594,485   $12,031,533   $12,532,472   $8,920,760   $8,073,226   $7,187,000   $4,681,712
Mortgage Banking originations.......    2,021,127     1,553,255     3,447,250    5,484,111    6,737,762    6,118,363    3,195,873
Financial Markets loans purchased...       80,948       769,995     2,640,755    1,312,827    1,202,970      912,847    1,885,956
</TABLE>
 
- ---------------
 
 (1) The Bank acquired from the RTC $2.2 billion in deposit liabilities during
     fiscal 1991. Pursuant to the Bank's plan of acquisition, rates on these
     deposits were reduced after acquisition and, as expected, approximately
     $766 million of deposits were withdrawn from the Bank during fiscal 1992.
     Also, the Bank consolidated overlapping branch locations that resulted from
     these acquisitions. See "The Company -- History".
 
 (2) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events and see "Capitalization". On a pro forma basis,
     stockholders' equity would have been $520.0 million as of March 31, 1996.
 
 (3) Reflects assets governed under the Assistance Agreement between the Bank
     and the FRF. See "Business -- The Assistance Agreement".
 
 (4) During fiscal 1993, the Bank issued Bank Preferred Stock, Series A, and
     during fiscal 1995, the Bank issued Bank Preferred Stock, Series B. None of
     the shares of Bank Preferred Stock are owned by the Company. Certain
     Selling Stockholders and directors and management of the Company own shares
     of the Bank Preferred Stock. See "Management -- Security Ownership of
     Certain Beneficial Owners and Management -- Principal Stockholders, Bank
     Preferred Stock".
 
 (5) Fiscal 1994 and 1993 include tax benefits recognized as a result of
     Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
     for Income Taxes". See Note 13 to the Consolidated Financial Statements. A
     tax benefit in the amount of $101.7 million was recognized in the third
     quarter of fiscal 1996.
 
 (6) All of the outstanding Bank Common Stock is currently owned by the Company.
     The Bank has issued to the FDIC Warrants to acquire 158,823 shares of Bank
     Common Stock (representing 5.56% of the Bank Common Stock as of March 31,
     1996 and September 30, 1995, assuming exercise in full of the Warrants), at
     an exercise price of $0.01 per share. Payments in lieu of dividends relate
     to the Warrants. See "Business -- The Assistance Agreement -- Warrant
     Agreement" and Note 16 to the Consolidated Financial Statements.
 
 (7) Reflects costs and charges associated with the issuance of the Senior
     Notes. See Note 11 to the Consolidated Financial Statements.
 
 (8) Operating earnings represents income before taxes, minority interest, and
     extraordinary loss and excludes net gains (losses) on securities, MBS, and
     other loans.
 
 (9) Per share results have been restated to reflect an 1,800 to one Common
     Stock conversion effective June 1996 in connection with the Restructuring.
     See Note 21 to the Consolidated Financial Statements.
 
(10) Ratio, yield, and rate information are based on weighted average daily
     balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
     1994, and 1993 and average monthly balances for prior periods, with the
     exception of return on average common equity, which is based on average
     monthly balances for all periods presented. Interim rates and yields are
     annualized.
 
(11) Regulatory capital ratios presented are those of the Bank. No regulatory
     capital ratios are presented for the Company because there are no such
     applicable requirements for savings and loan holding companies such as the
     Company. For a discussion of the regulatory capital requirements applicable
     to the Bank, see "Regulation -- Safety and Soundness Regulations -- Capital
     Requirements".
 
(12) Net yield on interest-earning assets represents net interest income as a
     percentage of average interest-earning assets. Interest rate spread
     represents the difference between the average yield on interest-earning
     assets and the average rate on interest-bearing liabilities.
 
(13) Net operating expense ratio represents total non-interest expense less
     total non-interest income as a percentage of average assets for each
     period.
 
(14) Efficiency ratio represents non-interest expenses (excluding goodwill
     amortization) divided by net interest income plus non-interest income,
     excluding net gains (losses) on securities, MBS and other loans.
 
                                       25
<PAGE>   28
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
DISCUSSION OF RESULTS OF OPERATIONS
 
  Overview.
 
     Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  Net income was $26.8 million for the six months ended March 31, 1996,
compared to $23.7 million for the six months ended March 31, 1995. The increase
primarily reflects the higher levels of interest-earning assets for the six
months ended March 31, 1996, partially offset by the effect of increased
dividends paid by the Bank on the Bank Preferred Stock (reflected as minority
interest on the Consolidated Statements of Operations) and lower gains on sales
of single family MSRs and single family warehouse loans. Loan servicing fees and
charges decreased during the six months ended March 31, 1996 as compared to the
six months ended March 31, 1995. As of March 31, 1996, the principal balances of
the single family servicing portfolio was $11.6 billion.
 
     Operating earnings represents income before taxes, minority interest, and
extraordinary losses and excludes net gains (losses) on securities, MBS, and
other loans. Operating earnings were $55.0 million for the six months ended
March 31, 1996, compared to $48.8 million for the six months ended March 31,
1995. This increase primarily reflects the higher levels of interest-earning
assets, partially offset by a decrease in gains on sales of single family MSRs
and warehouse loans, as noted above.
 
     1995 Compared to 1994.  Net income was $41.7 million for fiscal 1995,
compared to $109.0 million for fiscal 1994. The decrease primarily reflects the
effect of a tax benefit of $58.2 million recognized in fiscal 1994 for the
expected utilization of NOLs under SFAS No. 109, a lower interest rate spread
realized on its interest-earning assets, lower gains on sales of securities and
MBS and higher provisions for credit losses in fiscal 1995. Net income for
fiscal 1995 was favorably impacted by the effect of higher levels of
interest-earning assets during fiscal 1995 compared to fiscal 1994 and an
increase in the single family servicing portfolio. The single family servicing
portfolio increased to $12.5 billion at September 30, 1995 compared to $8.9
billion at September 30, 1994, contributing to increased loan servicing fees and
charges during fiscal 1995.
 
     Operating earnings were $91.3 million for fiscal 1995, compared to $75.5
million for fiscal 1994. This increase primarily reflects the higher levels of
interest-earning assets and increased loan servicing fees and charges, partially
offset by higher provisions for credit losses, as noted above.
 
     1994 Compared to 1993.  Net income was $109.0 million for fiscal 1994,
compared to $127.4 million for fiscal 1993. The decrease is primarily a result
of lower gains on sales of securities and MBS in fiscal 1994, unfavorable
changes in net interest rate spread and higher provisions for credit losses in
fiscal 1994. Net income for fiscal 1994 was favorably impacted by an increase in
the single family servicing portfolio. The single family servicing portfolio
increased to $8.9 billion at September 30, 1994, from $8.1 billion at September
30, 1993, contributing to increased loan servicing fees and charges during
fiscal 1994. Tax benefits of $58.2 million and $44.2 million were recognized in
fiscal 1994 and 1993, respectively, for the expected utilization of NOLs under
SFAS No. 109.
 
     Operating earnings were $75.5 million for fiscal 1994, compared to $77.1
million for fiscal 1993. This decrease primarily reflects the effect of
unfavorable changes in the net interest rate spread and higher provisions for
credit losses, partially offset by increased loan servicing fees and charges, as
noted above.
 
                                       26
<PAGE>   29
 
     The following table sets forth a reconciliation of Bank and Company net
income.
 
<TABLE>
<CAPTION>
                                                               FOR THE SIX MONTHS
                                                                 ENDED MARCH 31,        FOR THE YEAR ENDED SEPTEMBER 30,
                                                               -------------------     ----------------------------------
                                                                1996        1995         1995         1994         1993
                                                               -------     -------     --------     --------     --------
                                                                                     (IN THOUSANDS)
<S>                                                            <C>         <C>         <C>          <C>          <C>
BANK
Net income...................................................  $41,358     $33,516     $ 62,708     $124,761     $163,671
Preferred stock dividends....................................   (9,126)     (4,326)     (10,600)      (8,653)      (6,537)
                                                               -------     -------     --------     --------     --------
  Net income available for Bank's common stock...............   32,232      29,190       52,108      116,108      157,134
Dividends to Company.........................................   (3,810)     (5,209)      (6,409)     (11,435)     (15,224)
Payments in lieu of dividends................................     (224)       (306)        (377)        (357)          --
                                                               -------     -------     --------     --------     --------
Undistributed income of Bank.................................   28,198      23,675       45,322      104,316      141,910
                                                               -------     -------     --------     --------     --------
COMPANY
Dividends from Bank..........................................    3,810       5,209        6,409       11,435       15,224
Interest expense.............................................   (5,205)     (5,202)     (10,407)     (10,177)     (14,261)
Other (expense) income, net..................................      (44)        (23)         395        3,396         (954)
Extraordinary loss...........................................       --          --           --           --      (14,549)
                                                               -------     -------     --------     --------     --------
  Net (loss) income of Company without including
    undistributed income of Bank.............................   (1,439)        (16)      (3,603)       4,654      (14,540)
                                                               -------     -------     --------     --------     --------
Consolidated net income(1)...................................  $26,759     $23,659     $ 41,719     $108,970     $127,370
                                                               =======     =======     ========     ========     ========
</TABLE>
 
- ---------------
(1) See Note 21 to the Consolidated Financial Statements for the effect of a
    dividend paid and a tax benefit recorded during the third quarter of fiscal
    1996 and other subsequent events.
 
  Net Interest Income
 
     Net interest income is based on the relative amounts of interest-earning
assets and interest-bearing liabilities and the spread between the yields earned
on assets and rates paid on liabilities. Net interest rate spread is affected by
changes in general market interest rates, including changes in the relationship
between short- and long-term interest rates (the yield curve), the effects of
periodic caps on the Bank's adjustable-rate mortgage and MBS portfolios and the
interest rate sensitivity position or "gap". The Bank has traditionally managed
its business to limit its overall exposure to changes in interest rates. See
"Business -- Business Strategy". Nevertheless, different aspects of its business
remain subject, in varying degrees, to risk from interest rate changes.
 
                                       27
<PAGE>   30
 
                      AVERAGE BALANCES AND AVERAGE YIELDS
<TABLE>
<CAPTION>
                                                                                                             FOR THE YEAR ENDED
                                                      FOR THE SIX MONTHS ENDED MARCH 31,                       SEPTEMBER 30,
                                      ------------------------------------------------------------------   ----------------------
                                                    1996                              1995                          1995
                                      --------------------------------   -------------------------------   ----------------------
                                        AVERAGE                YIELD/     AVERAGE                YIELD/      AVERAGE
                                        BALANCE     INTEREST   RATE(3)    BALANCE     INTEREST   RATE(3)     BALANCE     INTEREST
                                      -----------   --------   -------   ----------   --------   -------   -----------   --------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                   <C>           <C>        <C>       <C>          <C>        <C>       <C>           <C>
INTEREST-EARNING ASSETS:
 Short-term interest-earning
   assets...........................  $   575,936   $ 17,360     5.93%   $  462,791   $ 14,415     6.16%   $   466,276   $ 29,675
 Trading account assets.............        1,148         35     6.10         1,063         29     5.46          1,079         62
 Securities(1)......................       84,659      2,112     4.99       117,075      2,950     5.05        116,934      5,893
 Mortgage-backed securities(1)......    2,177,645     70,699     6.49     2,734,073     87,134     6.37      2,618,990    173,155
 Loans(2)...........................    8,092,849    323,930     8.01     5,751,629    218,370     7.59      6,707,868    526,528
 FHLB stock.........................      227,895      7,085     6.22       155,307      4,688     6.05        180,416     11,446
 Covered Assets and related
   assets...........................           --         --       --            --         --       --             --         --
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
   TOTAL INTEREST-EARNING ASSETS....   11,160,132    421,221     7.55     9,221,938    327,586     7.10     10,091,563    746,759
Non-interest-earning assets.........      379,397                           310,660                            345,500
                                      -----------                        ----------                        -----------
   Total assets.....................  $11,539,529                        $9,532,598                        $10,437,063
                                      ===========                        ==========                        ===========
INTEREST-BEARING LIABILITIES:
 Deposits:
   Transaction accounts.............  $   243,668      1,440     1.18    $  228,716      1,694     1.49    $   225,799      3,384
   Insured money fund accounts......    1,316,051     33,013     5.02       995,160     23,567     4.75      1,032,873     57,848
   Savings accounts.................      145,427      1,883     2.59       193,759      2,620     2.71        171,308      4,715
   Certificates of deposits.........    3,358,442    102,174     6.08     3,436,942     94,623     5.52      3,560,420    198,419
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
     Total deposits.................    5,063,588    138,510     5.47     4,854,577    122,504     5.06      4,990,400    264,366
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
 FHLB advances......................    4,346,960    136,501     6.18     3,068,768     92,281     5.95      3,560,844    224,767
 Reverse repurchase agreements and
   federal funds purchased..........      982,169     29,073     5.82       675,452     19,973     5.85        888,453     53,220
 Note payable to related party......           --         --       --            --         --       --             --         --
 Long-term debt.....................           --         --       --            --         --       --             --         --
 Senior Notes.......................      115,000      5,205     9.05       115,000      5,202     9.05        115,000     10,407
 Other..............................           --         --       --            --         --       --             --         --
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
   TOTAL INTEREST-BEARING
     LIABILITIES....................   10,507,717    309,289     5.89     8,713,797    239,960     5.49      9,554,697    552,760
 Non-interest-bearing liabilities
   and stockholders' equity.........    1,031,812                           818,801                            882,366
                                      -----------                        ----------                        -----------
   Total liabilities and
     stockholders' equity...........  $11,539,529                        $9,532,598                        $10,437,063
                                      ===========                        ==========                        ===========
Net interest income/interest rate
 spread.............................                $111,932     1.66%                $ 87,626     1.61%                 $193,999
                                                    ========     ====                 ========     ====                  ========
Net yield on interest-earning
 assets.............................                             2.00%                             1.92%
                                                                 ====                              ====
Ratio of average interest-earning
 assets to average interest-bearing
 liabilities........................         1.06                              1.06                               1.06
                                              ---                               ---                                ---
                                              ---                               ---                                ---
 
<CAPTION>
 
                                                            1994                             1993
                                               ------------------------------   ------------------------------
                                      YIELD/    AVERAGE                YIELD/    AVERAGE                YIELD/
                                       RATE     BALANCE     INTEREST    RATE     BALANCE     INTEREST    RATE
                                      ------   ----------   --------   ------   ----------   --------   ------
 
<S>                                   <C>      <C>          <C>        <C>      <C>          <C>        <C>
INTEREST-EARNING ASSETS:
 Short-term interest-earning
   assets...........................   6.36%   $  461,530   $ 19,019    4.12 %  $  408,972   $ 14,301    3.50 %
 Trading account assets.............   5.75         1,026       (144)  (14.04)     176,617      6,224    3.52
 Securities(1)......................   5.04       108,751      5,007    4.60         1,707         63    3.69
 Mortgage-backed securities(1)......   6.61     2,595,163    151,972    5.86     1,336,709     83,525    6.25
 Loans(2)...........................   7.85     4,524,158    308,804    6.83     4,488,405    344,515    7.68
 FHLB stock.........................   6.34       132,277      5,558    4.20        89,927      3,095    3.44
 Covered Assets and related
   assets...........................     --        74,547      4,490    6.02       469,742     30,767    6.55
                                       ----    ----------   --------   ------   ----------   --------   -----
   TOTAL INTEREST-EARNING ASSETS....   7.40     7,897,452    494,706    6.26     6,972,079    482,490    6.92
Non-interest-earning assets.........              386,175                          346,698
                                               ----------                       ----------
   Total assets.....................           $8,283,627                       $7,318,777
                                               ==========                       ==========
INTEREST-BEARING LIABILITIES:
 Deposits:
   Transaction accounts.............   1.50    $  237,537      3,753    1.58    $  230,649      4,843    2.10
   Insured money fund accounts......   5.60       582,126     18,508    3.18       476,835     13,471    2.83
   Savings accounts.................   2.75       284,885      7,311    2.57       341,785      7,055    2.06
   Certificates of deposits.........   5.57     3,662,043    179,462    4.90     3,816,152    200,614    5.26
                                       ----    ----------   --------   ------   ----------   --------   -----
     Total deposits.................   5.30     4,766,591    209,034    4.39     4,865,421    225,983    4.64
                                       ----    ----------   --------   ------   ----------   --------   -----
 FHLB advances......................   6.31     2,285,630     91,060    3.98     1,344,129     48,594    3.62
 Reverse repurchase agreements and
   federal funds purchased..........   5.99       274,666     10,574    3.85       346,009     11,180    3.23
 Note payable to related party......     --            --         --      --         3,595        601   16.72
 Long-term debt.....................     --            --         --      --        63,715     10,214   16.03
 Senior Notes.......................   9.05       115,000     10,177    8.85        42,806      3,446    8.05
 Other..............................     --         3,350         79    2.36        11,123        813    7.31
                                       ----    ----------   --------   ------   ----------   --------   -----
   TOTAL INTEREST-BEARING
     LIABILITIES....................   5.79     7,445,237    320,924    4.31     6,676,798    300,831    4.51
 Non-interest-bearing liabilities
   and stockholders' equity.........              838,390                          641,979
                                               ----------                       ----------
   Total liabilities and
     stockholders' equity...........           $8,283,627                       $7,318,777
                                               ==========                       ==========
Net interest income/interest rate
 spread.............................   1.61%                $173,782    1.95 %               $181,659    2.41 %
                                       ====                 ========   ======                ========   =====
Net yield on interest-earning
 assets.............................   1.92%                            2.20 %                           2.61 %
                                       ====                            ======                           =====
Ratio of average interest-earning
 assets to average interest-bearing
 liabilities........................                 1.06                             1.04
                                                      ---                              ---
                                                      ---                              ---
</TABLE>
 
- ---------------
 
(1) For purposes of computing yields, the effects of SFAS No. 115, "Accounting
    for Certain Investments in Debt and Equity Securities", have been excluded
    from the average balances.
 
(2) Includes nonaccrual loans.
 
(3) Annualized.
 
                                       28
<PAGE>   31
 
     The following table analyzes net interest income in terms of changes in the
volume of interest-earning assets and interest-bearing liabilities and changes
in yields and rates. The table reflects the extent to which changes in the
interest income and interest expense are attributable to changes in volume
(changes in volume multiplied by prior year rate) and changes in rate (changes
in rate multiplied by prior year volume). Changes attributable to the combined
impact of volume and rate have been allocated proportionately to changes due to
volume and changes due to rate.
 
                              RATE/VOLUME ANALYSIS
 
<TABLE>
<CAPTION>
                                     FOR THE SIX MONTHS
                                       ENDED MARCH 31,                         FOR THE YEAR ENDED SEPTEMBER 30,
                                -----------------------------   ---------------------------------------------------------------
                                        1996 VS. 1995                   1995 VS. 1994                    1994 VS. 1993
                                -----------------------------   ------------------------------   ------------------------------
                                 VOLUME     RATE       NET       VOLUME      RATE       NET       VOLUME      RATE       NET
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
                                                                        (IN THOUSANDS)
<S>                             <C>        <C>       <C>        <C>        <C>        <C>        <C>        <C>        <C>
INTEREST INCOME
  Short-term interest-earning
    assets....................  $  3,496   $  (551)  $  2,945   $    198   $ 10,458   $ 10,656   $  1,984   $  2,734   $  4,718
  Trading account assets......         2         4          6         (7)       213        206     (1,058)    (5,310)    (6,368)
  Securities..................      (801)      (37)      (838)       390        496        886      4,924         20      4,944
  Mortgage-backed
    securities................   (18,037)    1,602    (16,435)     1,418     19,765     21,183     73,970     (5,523)    68,447
  Loans.......................    93,144    12,416    105,560    166,278     51,446    217,724      2,725    (38,436)   (35,711)
  FHLB stock..................     2,266       131      2,397      2,453      3,435      5,888      1,677        786      2,463
  Covered Assets and related
    assets....................        --        --         --     (4,490)        --     (4,490)   (23,971)    (2,306)   (26,277)
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
        Total.................    80,070    13,565     93,635    166,240     85,813    252,053     60,251    (48,035)    12,216
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
INTEREST EXPENSE
  Deposits....................     5,554    10,452     16,006     10,219     45,113     55,332     (4,640)   (12,309)   (16,949)
  FHLB advances...............    40,476     3,744     44,220     65,246     68,461    133,707     37,186      5,280     42,466
  Reverse repurchase
    agreements and federal
    funds purchased...........     9,189       (89)     9,100     34,151      8,495     42,646     (2,535)     1,929       (606)
  Note payable to related
    party.....................        --        --         --         --         --         --       (601)        --       (601)
  Long-term debt..............        --        --         --         --         --         --    (10,214)        --    (10,214)
  Senior Notes................        --         3          3         --        230        230      6,357        374      6,731
  Other.......................        --        --         --        (79)        --        (79)      (373)      (361)      (734)
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
        Total.................    55,219    14,110     69,329    109,537    122,299    231,836     25,180     (5,087)    20,093
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
  NET CHANGE IN NET INTEREST
    INCOME....................  $ 24,851   $  (545)  $ 24,306   $ 56,703   $(36,486)  $ 20,217   $ 35,071   $(42,948)  $ (7,877)
                                ========   =======   ========   ========   ========   ========   ========   ========   ========
</TABLE>
 
     Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  Net interest income increased $24.3 million or 28% to $111.9 million for
the six months ended March 31, 1996, compared to $87.6 million for the six
months ended March 31, 1995. The increase in net interest income is primarily
attributable to a $1.9 billion, or 21%, increase in average interest-earning
assets and, to a lesser extent, to a five basis point increase in the net
interest rate spread.
 
     Interest-earning assets are primarily comprised of single family mortgage
loans and MBS. Interest-bearing liabilities primarily include deposits and FHLB
advances. The increase in average interest-earning assets during the six months
ended March 31, 1996 can be principally attributed to single family loan
purchases during the second half of fiscal 1995, approximating $1.9 billion. The
increase in average interest-earning assets was funded primarily with FHLB
advances and reverse repurchase agreements. See "-- Discussion of Financial
Condition".
 
     Approximately 79% of the Company's interest-earning assets at March 31,
1996 were adjustable-rate assets, a portion of which are tied to indices that
normally lag the changes in market interest rates. Substantially all of the
Company's adjustable-rate assets are subject to periodic and/or lifetime
interest rate caps. Periodic caps limit the amount by which the interest rate on
a particular mortgage loan may increase at its next interest rate reset date. In
a rising-rate environment, the interest rate spread may be negatively
 
                                       29
<PAGE>   32
 
impacted when the repricing of interest-earning assets is limited by caps on
periodic interest rate adjustments, compared to market interest rate movements.
 
     The periodic caps on loans and MBS with adjustable rates limited the
increase in income relative to the cost of deposits and borrowings, as market
interest rates increased during the six months ended March 31, 1995. Net
interest rate spread for the six months ended March 31, 1996 reflects an
improvement over the six months ended March 31, 1995 due to a lessening of the
impact of caps as market interest rates began to level off during the first six
months of fiscal 1996. As of March 31, 1996, substantially all of the mortgages
subject to caps would have no limitation on their next scheduled rate reset. The
net interest rate spread was also positively impacted during the six months
ended March 31, 1996 due to higher yields earned on loans purchased in the later
part of fiscal 1995.
 
     1995 Compared to 1994.  Net interest income increased $20.2 million, or
12%, to $194.0 million for fiscal 1995, compared to $173.8 million for fiscal
1994. Average interest-earning assets increased $2.2 billion, or 28%, during the
period, principally attributed to single family loan purchases during the second
half of fiscal 1995. The increase in average interest-earning assets was funded
primarily with FHLB advances and reverse repurchase agreements. Increased net
interest income resulting from higher volumes of interest-earning assets was
offset, to some extent, by unfavorable changes in the net spread between the
yield on interest-earning assets and cost of funds. The net interest rate spread
decrease of 34 basis points was the result of the rapid rise in market interest
rates during the early part of fiscal 1995. Increases in market interest rates
and the effect of lagging rate indices and caps on adjustable-rate assets and
the sale of higher yielding assets in fiscal 1994 all contributed to the drop in
net interest rate spread.
 
     1994 Compared to 1993.  Net interest income decreased $7.9 million, or 4%,
to $173.8 million for fiscal 1994, compared to $181.7 million for fiscal 1993.
This decrease was principally the result of unfavorable changes in net spread
between the yield on interest-earning assets and the cost of funds. Net interest
rate spread decreased 46 basis points primarily as a result of a reduction in
the yield on interest-earning assets from the sales and securitizations of high
yielding assets. In connection with the securitization of loans from the Bank's
own portfolio, the Bank sold the higher-yielding subordinated classes and
retained the lower-yielding, higher quality securities. Although general market
rates increased during the later portion of fiscal 1994, proceeds from sales and
increased prepayments could not be reinvested at the same rates as the assets
sold or prepaid. Partially offsetting the decrease in net interest rate spread
was a $925.4 million, or 13%, increase in average interest-earning assets during
fiscal 1994 reflecting growth in the loan and MBS portfolios, funded primarily
with FHLB advances.
 
  Provision for Credit Losses
 
     Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  The provision for credit losses increased to $5.9 million for the six
months ended March 31, 1996 from $4.2 million for the six months ended March 31,
1995. Loss experience on the unsecured consumer line of credit portfolio
resulted in increased consumer provisions of $3.0 million for the six months
ended March 31, 1996, compared to $1.8 million for the six months ended March
31, 1995, reflecting increased volume and increased charge-offs. Consumer loans
increased to $130.4 million at March 31, 1996, from $109.4 million at March 31,
1995, while consumer charge-offs increased to $3.0 million for the six months
ended March 31, 1996, from $1.2 million for the six months ended March 31, 1995.
See "-- Asset Quality" and Note 5 to the Consolidated Financial Statements.
 
     1995 Compared to 1994.  The provision for credit losses increased to $24.3
million for fiscal 1995 compared to $7.0 million for fiscal 1994. This increase
primarily resulted from increased provisions for credit losses for single family
loans, which increased to $18.5 million for fiscal 1995 compared to $2.4 million
for fiscal 1994, primarily as a result of an increase in the single family loans
portfolio to $7.1 billion at September 30, 1995 from $4.2 billion at September
30, 1994, which included loan purchases totaling $2.7 billion and originations
retained for portfolio of $1.0 billion during fiscal 1995. The growth in the
consumer lending business and loss experience on the unsecured consumer line of
credit portfolio also increased consumer provisions to $4.2 million for fiscal
1995, from $2.8 million for fiscal 1994. Consumer loans increased to $123.1
million at September 30, 1995, from $108.2 million at September 30, 1994, while
 
                                       30
<PAGE>   33
 
consumer charge-offs increased to $2.8 million for fiscal 1995, from $1.3
million for fiscal 1994. See "-- Asset Quality" and Note 5 to the Consolidated
Financial Statements.
 
     1994 Compared to 1993.  The provision for credit losses increased to $7.0
million for fiscal 1994 compared to $4.1 million for fiscal 1993. The higher
provision during fiscal 1994 is due primarily to the growth in the consumer
lending business and loss experience on the unsecured consumer line of credit
portfolio. Consumer loans increased to $108.2 million at September 30, 1994,
from $57.9 million at September 30, 1993, and the consumer provision increased
to $2.8 million for fiscal 1994 from $264,000 for fiscal 1993. Consumer
charge-offs increased to $1.4 million for fiscal 1994 from $72,000 for fiscal
1993. Although single family loan purchases totaled $1.4 billion for fiscal 1994
and originations retained for portfolio were $1.3 billion for fiscal 1994, the
effect of these purchases and originations on the provision for credit losses
was partially offset by the effect of securitizations of $1.2 billion of loans
into MBS. The securitization process resulted in lower allowance requirements
because of the credit enhancement as a result of selling the subordinated
securities. See "-- Asset Quality" and Note 5 to the Consolidated Financial
Statements.
 
     Non-Interest Income
 
     Non-interest income includes gains from sales of single family servicing
rights and single family warehouse loans, gains (losses) on securities and MBS,
gains (losses) on other loans, loan servicing fees and charges, and other fees
and charges.
 
                     NON-INTEREST INCOME AND PRINCIPAL SOLD
 
<TABLE>
<CAPTION>
                                        FOR THE SIX MONTHS                FOR THE YEAR ENDED
                                          ENDED MARCH 31,                   SEPTEMBER 30,
                                     -------------------------   ------------------------------------
                                        1996           1995         1995         1994         1993
                                     ----------     ----------   ----------   ----------   ----------
                                                              (IN THOUSANDS)
<S>                                  <C>            <C>          <C>          <C>          <C>
NON-INTEREST INCOME
  Net gains (losses)
     Sales of single family
       servicing rights............  $       --     $   28,304   $   34,080   $   67,198   $   63,257
     Single family warehouse
       loans.......................      19,157         10,160       26,415       (3,912)       4,146
                                     ----------     ----------   ----------   ----------   ----------
                                         19,157         38,464       60,495       63,286       67,403
     Securities and mortgage-backed
       securities..................       2,863              8           26       10,404       43,702
     Other loans...................       3,485           (380)      (1,210)         163        1,496
  Loan servicing fees and
     charges.......................      22,107         22,813       43,508       31,741       21,780
  Other fees and charges...........       6,997          5,748       12,162       13,295       12,310
                                     ----------     ----------   ----------   ----------   ----------
          Total non-interest
            income.................  $   54,609     $   66,653   $  114,981   $  118,889   $  146,691
                                      =========      =========    =========    =========    =========
PRINCIPAL SOLD
  MSRs.............................  $  875,235     $2,028,813   $2,854,114   $4,521,491   $4,572,361
  Single family warehouse loans....   1,516,799        902,509    2,100,662    4,786,413    6,244,262
</TABLE>
 
     Six Months Ended March 31, 1996 Compared to Six Months Ended March 31,
1995.  Non-interest income was $54.6 million for the six months ended March 31,
1996 compared to $66.7 million for the six months ended March 31, 1995,
resulting in a decrease of $12.1 million. During the six months ended March 31,
1996 and 1995, $875.2 million and $2.0 billion, respectively, of single family
MSRs were sold. The decrease in single family servicing sales during the six
months ended March 31, 1996 reflects management's decision to retain a greater
portion of MSRs in response to the implementation of SFAS No. 122, "Accounting
for Mortgage Servicing Rights, an Amendment of FASB Statement No. 65". See
"Business -- Loan Servicing Portfolio". The 1995 period includes substantial
gains on sales of servicing rights originated in prior years. Excluding gains
from sales of single family MSRs and single family warehouse loans, non-interest
income increased $7.3 million for the six months ended March 31, 1996 compared
to the six months ended March 31, 1995, primarily due to increased gains on
sales of securities and MBS and other loans.
 
                                       31
<PAGE>   34
 
     Gains on sales of single family warehouse loans were $19.2 million during
the six months ended March 31, 1996, compared to $10.2 million during the six
months ended March 31, 1995, reflecting an increase in the volume of single
family warehouse loans sold.
 
     Net gains on securities and MBS were $2.9 million and $8,000 for the six
months ended March 31, 1996 and 1995, respectively. During the six months ended
March 31, 1996, the net gains on MBS were from the sale of $198.8 million of
MBS. See "-- Discussion of Financial Condition".
 
     Net gains (losses) on other loans were $3.5 million and $(380,000) for the
six months ended March 31, 1996 and 1995, respectively. During the six months
ended March 31, 1996, the Bank sold $93.7 million of single family loans held by
the Financial Markets Group for a gain of $1.5 million and $164.5 million of
multi-family loans for a gain of $2.6 million. See "-- Discussion of Financial
Condition".
 
     During the six months ended March 31, 1996 loan servicing fees and charges
decreased $706,000, or 3% from the prior year period. This decrease is due to a
slight decrease in the portfolio of single family loans serviced for others,
$6.4 billion at March 31, 1996 compared to $6.9 billion at March 31, 1995.
 
     Other fees and charges were $7.0 million in the first six months of fiscal
1996 compared to $5.7 million in the first six months of fiscal 1995. The
increase was primarily due to growth in mutual fund and annuity sales. The
growth in these alternative products reflected the low interest rate
environment, more experienced salespeople, and increased marketing of those
products.
 
     1995 Compared to 1994.  Non-interest income was $115.0 million for fiscal
1995, a $3.9 million decrease from $118.9 million for fiscal 1994. This decrease
is attributable, in part, to a $2.8 million decrease in gains on sales of single
family MSRs and single family warehouse loans which were $60.5 million and $63.3
million, respectively, for fiscal 1995 and 1994.
 
     In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement requires that, among other things, the book value of
mortgage loans be allocated at the time of origination between the MSRs and the
related loans, provided there is a plan to sell or securitize such loans. With
the implementation of SFAS No. 122, the original cost basis of the loan is
allocated between the loan and the MSRs, thus increasing the gains on sales of
loans and reducing the gains on sales of MSRs.
 
     The implementation of SFAS No. 122 resulted in the capitalization of $28.7
million of originated MSRs during fiscal 1995 and an increase to net income and
stockholders' equity of $9.8 million. This implementation also had the effect of
decreasing the gains on sales of single family MSRs by $17.7 million and
increasing the gains on single family warehouse loans by $34.6 million.
Excluding the effects of implementing SFAS No. 122, the gains on sales of single
family MSRs and the gains (losses) on single family warehouse loans would have
been $51.8 million and $(8.2) million, respectively. In accordance with the
requirements of SFAS No. 122, the prior year amounts have not been restated. See
Notes 1 and 6 to the Consolidated Financial Statements.
 
     Excluding the effects of SFAS No. 122 in fiscal 1995, the gains on single
family MSRs were $51.8 million, compared to $67.2 million for fiscal 1994.
During fiscal 1995, single family MSRs were sold at an average premium of 181
basis points, compared to 149 basis points during fiscal 1994. The average
premiums on MSRs sold in fiscal 1994 were lower compared to fiscal 1995,
reflecting the lower interest rate environment during the first half of fiscal
1994. The rise in market interest rates during the second half of fiscal 1994,
and continuing through the beginning of fiscal 1995 had a positive effect on the
average premiums on servicing rights sold, reflecting an increase in the value
of the servicing portfolio due to actual and anticipated declines in
prepayments. The increase in interest rates during the second half of fiscal
1994 and during fiscal 1995 resulted in a decrease in originations. The decrease
in originations and the retention of a greater proportion of originated loans
for the Bank's own portfolio decreased the volume of MSRs available for sale
during fiscal 1995.
 
     Excluding the effects of SFAS No. 122 in fiscal 1995, the gains (losses) on
single family warehouse loans were $(8.2) million in fiscal 1995 and $(3.9)
million in 1994. The decrease reflects the increasingly competitive pricing in
the market during that period and decreased volumes sold.
 
                                       32
<PAGE>   35
 
     Net gains on securities and MBS were $26,000 and $10.4 million for fiscal
1995 and 1994, respectively. The gains in fiscal 1994 primarily relate to the
sale of $213.0 million of MBS created when the Bank securitized single family
loans from its own portfolio.
 
     Loan servicing fees and charges increased $11.8 million, or 37%, during
fiscal 1995 compared to fiscal 1994. The increase was due primarily to an
increase in the portfolio of single family loans serviced for others and an
increase in the average fees collected on those loans due to a change in the
composition of that portfolio. The portfolio of single family loans serviced for
others increased to $7.2 billion at September 30, 1995, compared to $4.7 billion
at September 30, 1994, primarily due to loan originations and purchases of MSRs.
See "-- Discussion of Financial Condition". The increase in the single family
loan servicing portfolio during fiscal 1995 includes $3.4 billion of loans
associated with MSRs purchased in fiscal 1994 that were not transferred to the
Bank until fiscal 1995 and were not included in the portfolio as of September
30, 1994. See Note 6 to the Consolidated Financial Statements.
 
     1994 Compared to 1993.  Non-interest income was $118.9 million for fiscal
1994 compared to $146.7 million for fiscal 1993. This $27.8 million decrease is
primarily attributable to a $33.3 million decrease in gains on securities and
MBS partially offset by a $10.0 million increase in loan servicing fees and
charges.
 
     Gains from sales of single family MSRs totaled $67.2 million in 1994, an
increase of $3.9 million, or 6%, from 1993. Although the dollar amount of single
family servicing sales decreased slightly to $4.5 billion in 1994 from $4.6
billion in 1993, the gains on sales of single family MSRs increased as a result
of an increase in the average servicing premium realized in such sales. The
average net servicing price was 149 basis points in 1994, up from 138 basis
points in 1993. During 1994, sales of single family MSRs were reduced and an
increased amount of originations were retained for the Company's own portfolio
along with the related MSRs, which contributed to the net increase of $847.5
million in the single family servicing portfolio in 1994. During 1994, the
single family servicing portfolio increased to $8.9 billion at September 30,
1994 from $8.1 billion at September 30, 1993. As of September 30, 1994, $3.4
billion of loans associated with the MSRs purchased in 1994 had not been
transferred to the Company and thus are not included in the single family
servicing portfolio balance of $8.9 billion.
 
     The Company realized a net loss on single family warehouse loans of $3.9
million in fiscal 1994, compared to a net gain of $4.1 million in fiscal 1993,
primarily due to the increasingly competitive pricing in the market during
fiscal 1994. Additionally, volume sold decreased to $4.8 billion during fiscal
1994 as compared to $6.2 billion during fiscal 1993.
 
     Gains on securities and MBS were $10.4 million in fiscal 1994 and $43.7
million in fiscal 1993. These gains relate to the sale of $213.0 million and
$359.4 million of MBS in fiscal 1994 and 1993, respectively, that were created
when the Bank securitized single family loans from its own portfolio. See
"-- Discussion of Financial Condition". The gains in 1993 reflect the
realization of gains on mortgages acquired at a substantial discount in
connection with the Acquisition.
 
     Loan servicing fees and charges of $31.7 million in 1994 increased $10.0
million, or 46%, over 1993. The increase primarily reflects an increase in the
portfolio of single family loans serviced for others to $4.7 billion at
September 30, 1994 from $4.0 billion at September 30, 1993.
 
                                       33
<PAGE>   36
 
  Non-Interest Expense
 
     Non-interest expense comprises the following significant items:
 
                              NON-INTEREST EXPENSE
 
<TABLE>
<CAPTION>
                                        FOR THE SIX MONTHS
                                         ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                       --------------------     ----------------------------------
                                        1996         1995         1995         1994         1993
                                       -------     --------     --------     --------     --------
                                       (IN THOUSANDS)
<S>                                    <C>         <C>          <C>          <C>          <C>
Compensation and benefits............  $39,898     $ 43,192     $ 83,520     $ 86,504     $ 81,472
Occupancy............................    9,439        9,072       18,713       17,196       15,971
Data processing......................    8,120        8,116       16,360       15,821       15,072
Advertising and marketing............    4,053        4,782        9,262       10,796        8,772
Amortization of intangibles..........    9,801       10,718       21,856       18,247       24,469
SAIF deposit insurance premiums......    6,129        5,630       11,428       11,329       10,162
Furniture and equipment..............    3,128        3,219        6,428        6,810        5,535
Other................................   18,736       16,916       27,009       32,890       40,511
                                       -------     --------     --------     --------     --------
     Total non-interest expense......  $99,304     $101,645     $194,576     $199,593     $201,964
                                       =======     ========     ========     ========     ========
</TABLE>
 
     Six Months Ended March 31, 1996 Compared to Six Months Ended March 31,
1995.  Non-interest expense was $99.3 million for the six months ended March 31,
1996 and $101.6 million for the six months ended March 31, 1995, or 1.72% and
2.13%, respectively, of average total assets for those same periods.
Compensation and benefits was the largest component of non-interest expense,
representing $39.9 million, or 40%, of total non-interest expense for the six
months ended March 31, 1996 and $43.2 million, or 42%, for the six months ended
March 31, 1995. Loan origination volume directly impacts the level of
compensation expense. Advertising expenses were also lower in the six months
ended March 31, 1996 compared to the six months ended March 31, 1995, reflecting
advertising expenses in connection with the introduction of community banking
products in the prior period. Reduced compensation and advertising expenses were
partially offset by increased other non-interest expenses. During the six months
ended March 31, 1996, $408,000 of gains on sales of real estate owned ("REO")
properties were recognized and included in other non-interest expense. Gains of
$1.7 million were recognized in the six months ended March 31, 1995.
 
     1995 Compared to 1994.  Non-interest expense was $194.6 million for fiscal
1995 compared to $199.6 million for fiscal 1994, or 1.86% and 2.41%,
respectively, of average total assets for those periods. Compensation and
benefits was $83.5 million for fiscal 1995 and $86.5 million for fiscal 1994, or
43% of total non-interest expense for both of these periods. Advertising
expenses were lower during fiscal 1995 reflecting the introduction of community
banking products in the prior year. During fiscal 1995 and 1994, $11.2 million
and $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Amortization of intangibles increased in
fiscal 1995, reflecting increased amortization of MSRs due to servicing
acquisitions.
 
     1994 Compared to 1993.  Non-interest expense was $199.6 million for fiscal
1994 compared to $202.0 million for fiscal 1993, or 2.41% and 2.76%,
respectively, of average total assets for those periods. Compensation and
benefits was $86.5 million, or 43%, of total non-interest expense for fiscal
1994 and $81.5 million, or 40%, for fiscal 1993. Advertising expenses were
higher during fiscal 1994 due to advertising expenses in connection with the
introduction of community banking products during that period. During fiscal
1994, $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Losses on sales of REO properties of
$120,000 were recognized in fiscal 1993. Amortization of intangibles decreased
in fiscal 1994 due to the reduction of goodwill; such a reduction is required
under SFAS No. 109 for tax benefits derived from acquisitions. See "Regulation
- -- Taxation".
 
                                       34
<PAGE>   37
 
Income Taxes
 
     The provision for income taxes is comprised of current federal income
taxes, deferred federal income taxes, state income taxes, and payments due in
lieu of taxes. The provision for income taxes was an expense of $25.3 million
and $20.2 million for the six months ended March 31, 1996 and 1995,
respectively, and an expense of $37.4 million in fiscal 1995, compared to
benefits of $31.9 million and $26.2 million in fiscal 1994 and 1993,
respectively. During fiscal 1994 and 1993, tax benefits of $58.2 million and
$44.2 million, respectively, were recorded. The benefits recorded reflect the
application of SFAS No. 109, which was implemented effective October 1, 1992.
Such benefits arose due to the expected utilization of net operating loss
carryforwards against future taxable income. No tax benefits were recorded in
fiscal 1995 or the first half of fiscal 1996. See Note 13 to the Consolidated
Financial Statements.
 
     During the third quarter of fiscal 1996, the Company recorded a $101.7
million tax benefit for the expected utilization of NOLs against future taxable
income. See Note 21 to the Consolidated Financial Statements.
 
Minority Interest
 
     Dividends on Bank Preferred Stock paid by the Bank increased to $9.1
million for the six months ended March 31, 1996 from $4.3 million for the six
months ended March 31, 1995, due to the Bank's issuance of Bank Preferred Stock,
Series B during the fourth quarter of fiscal 1995. These shares are not owned by
the Company and, accordingly, are reflected as minority interest in the
Consolidated Financial Statements. Certain of the Selling Stockholders and
certain directors and managers of the Company are owners of the Bank Preferred
Stock. See "Management -- Security Ownership of Certain Beneficial Owners and
Management -- Principal Stockholders, Bank Preferred Stock".
 
DISCUSSION OF FINANCIAL CONDITION
 
Overview
 
     The Company, through its principal subsidiary, the Bank, operates a
broad-based financial services company. Historically, the Company focused on
traditional single family mortgage lending and deposit gathering, as well as
retail and wholesale mortgage banking activities. Over the past few years, the
Company's management has pursued a strategy designed to reduce the Bank's
reliance on its thrift and mortgage banking lines of business by developing
potentially higher margin community banking and commercial banking lines of
business. Over this time, the Company has increased its portfolio of
multi-family, residential construction, consumer and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. In addition to its efforts to increase originations of commercial and
consumer loans, the Company plans to increase the retention of higher yielding
single family and multi-family mortgage loans that, in the past, may have
otherwise been sold or securitized.
 
                                       35
<PAGE>   38
 
     The following chart reflects activity in the MBS portfolio.
 
                           MORTGAGE-BACKED SECURITIES
 
<TABLE>
<CAPTION>
                                      FOR THE SIX MONTHS
                                       ENDED MARCH 31,            FOR THE YEAR ENDED SEPTEMBER 30,
                                   ------------------------    --------------------------------------
                                      1996          1995          1995          1994          1993
                                   ----------    ----------    ----------    ----------    ----------
                                                             (IN THOUSANDS)
<S>                                <C>           <C>           <C>           <C>           <C>
Beginning balance................  $2,398,263    $2,828,903    $2,828,903    $2,175,925    $  833,425
  Loans securitized..............          --            --            --     1,182,172       572,582
  Purchases......................       3,841        38,515        38,745       667,298     1,212,592
  Net change in unrealized gains
     (losses) before tax.........       5,209         2,109         8,577       (71,815)       53,414
  Sales..........................    (198,753)      (77,646)      (77,610)     (212,954)     (359,417)
  Repayments.....................    (251,481)     (194,029)     (406,710)     (922,439)     (330,270)
  Transfers(1)...................          --            --            --            --       191,801
  Other..........................      (3,009)        3,024         6,358        10,716         1,798
                                   ----------    ----------    ----------    ----------    ----------
Ending balance...................  $1,954,070    $2,600,876    $2,398,263    $2,828,903    $2,175,925
                                   ==========    ==========    ==========    ==========    ==========
</TABLE>
 
- ---------------
(1) Principally related to the implementation of SFAS No. 115, "Accounting for
    Certain Investments in Debt and Equity Securities". These securities were
    transferred from the trading portfolio.
 
                                       36
<PAGE>   39
 
     The following chart reflects activity in the loan portfolio.
 
                                     LOANS
 
<TABLE>
<CAPTION>
                                  FOR THE SIX MONTHS
                                    ENDED MARCH 31,             FOR THE YEAR ENDED SEPTEMBER 30,
                               -------------------------    -----------------------------------------
                                  1996           1995          1995           1994           1993
                               -----------    ----------    -----------    -----------    -----------
                                                           (IN THOUSANDS)
<S>                            <C>            <C>           <C>            <C>            <C>
Beginning balance............  $ 8,260,240    $5,046,174    $ 5,046,174    $ 4,862,379    $ 4,101,716
  Originations
     Single family(1)........    1,945,434     1,453,267      3,226,324      5,424,550      6,645,096
     Single family
       residential
       construction..........      208,847       100,328        239,481        133,609        129,254
     Consumer................       53,570        41,734         99,249         94,153         64,742
     Multi-family, commercial
       real estate, and
       business credit.......      146,309       162,897        307,636        230,995         60,489
  Purchases
     Single family...........      145,277       772,031      2,705,858      1,373,727      1,261,849
     Consumer................           --            68             68         24,982          9,133
     Multi-family and
       commercial real
       estate................        7,927        56,093         56,093         68,466             --
  Net change in mortgage
     banker finance line of
     credit..................       32,437       (76,009)       (38,124)      (238,223)       385,548
  Repayments.................   (1,109,850)     (460,020)    (1,192,156)      (862,420)      (957,327)
  Securitized loans sold or
     transferred(2)..........   (1,335,333)     (802,549)    (1,864,313)    (5,595,325)    (6,439,835)
  Sales......................     (452,211)     (125,145)      (308,612)      (457,272)      (402,029)
  Other......................      (24,567)       (7,437)       (17,438)       (13,447)         3,743
                               -----------    ----------    -----------    -----------    -----------
Ending balance...............  $ 7,878,080    $6,161,432    $ 8,260,240    $ 5,046,174    $ 4,862,379
                               ===========    ==========    ===========    ===========    ===========
</TABLE>
 
- ---------------
(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
    $529.0 million of loans originated for the Company's portfolio during the
    six months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
    1993, respectively.
 
(2) Includes $1.3 billion, $802.5 million, $1.9 billion, $4.4 billion, and $5.9
    billion of loans securitized by the mortgage banking segment and sold to
    third parties during the six months ended March 31, 1996 and 1995 and during
    fiscal 1995, 1994, and 1993, respectively.
 
1996 Activity. Total assets decreased by $716.9 million, or 6%, to $11.3 billion
at March 31, 1996 from $12.0 billion at September 30, 1995. This decrease
primarily resulted from loan and MBS sales and repayments.
 
     Securities purchased under agreements to resell ("repurchase agreements")
and federal funds sold increased to $659.3 million at March 31, 1996 from $471.1
million at September 30, 1995. The increase primarily reflects the Company's
decision to borrow and invest funds on a short-term basis.
 
     Securities decreased $57.6 million, to $58.4 million at March 31, 1996 from
$116.0 million at September 30, 1995 reflecting the sale of $67.4 million in
Treasury securities.
 
     MBS decreased $444.2 million during the six months ended March 31, 1996,
primarily due to sales and repayments. During the six months ended March 31,
1996, the Company sold $198.8 million in MBS for a gain of $2.8 million,
compared to $77.6 million in sales for a gain of $5,000 during the six months
ended March 31, 1995. The increase in repayments resulted from a decline in
market interest rates.
 
                                       37
<PAGE>   40
 
     In November 1995, the Financial Accounting Standards Board (the "FASB")
issued "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities". This implementation guide provided
the Company the opportunity to reassess the appropriateness of the
classification of its securities. It further stated that reclassifications of
securities from the held to maturity category resulting from this one-time
reassessment would not call into question the intent to hold other securities to
maturity in the future. During the first quarter of fiscal 1996, the Company
reassessed its securities portfolios and reclassified $1.2 billion in MBS from
the held to maturity portfolio to the available for sale portfolio. An
unrealized gain of $4.2 million before tax, or $2.6 million after tax, was
recorded in stockholders' equity as a result of this transfer. At March 31, 1996
and 1995, the Company had unrealized losses on securities and MBS available for
sale, net of tax, of $3.1 million and $11.8 million, respectively. See Note 4 to
the Consolidated Financial Statements.
 
     During the six months ended March 31, 1996, total loans decreased $382.2
million, primarily due to sales and repayments. During this period, the Bank
sold $93.7 million of single family portfolio loans for a gain of $1.5 million
and $164.5 million of multi-family loans for a gain of $2.6 million.
 
     The increase in single family loan originations during the six months ended
March 31, 1996 resulted from a decline in market interest rates in comparison to
a year ago. The decline in market interest rates prompted borrowers to refinance
their mortgages at lower rates of interest, resulting in an increase in
repayments as well as in single family mortgage loan originations. Refinancings
approximated $831.4 million and $214.2 million, or 41%, and 14% of total single
family mortgage loan originations during the six months ended March 31, 1996 and
1995, respectively. While fundings of multi-family, commercial real estate and
business credit loans decreased $16.6 million during the six months ended March
31, 1996 as compared to the six months ended March 31, 1995, commitments to fund
multi-family loans increased $42.7 million or 58%, to $116.7 million for the six
months ended March 31, 1996, as compared to $74.0 million for the six months
ended March 31, 1995. At March 31, 1996, $64.5 million of multi-family loan
commitments had not yet been funded. The increase in commitments to fund
multi-family loans, as well as the increase in residential construction loan
originations during the six months ended March 31, 1996, as compared to the six
months ended March 31, 1995, reflects the geographic expansion of these
products.
 
     Increased consumer loan originations during the six months ended March 31,
1996 as compared to the six months ended March 31, 1995 are primarily due to
increased home improvement loan originations evidencing increased marketing
efforts.
 
     The decline in market interest rates during the six months ended March 31,
1996 resulted in a $32.4 million increase, to $141.8 million at March 31, 1996,
in the MBF line of credit portfolio.
 
     Single family loan purchases were $145.3 million during the six months
ended March 31, 1996, compared to $772.0 million during the six months ended
March 31, 1995. The decrease in purchases reflects a decrease in available
products at attractive yields.
 
     In the aggregate, FHLB advances, reverse repurchase agreements and federal
funds purchased decreased $467.5 million to $5.1 billion at March 31, 1996 from
$5.6 billion at September 30, 1995, reflecting a reduction in the Bank's asset
base.
 
     The decrease in commercial deposits, as well as the decrease in advances
from borrowers for taxes and insurance, reflects the payment of property taxes
during the six months ended March 31, 1996. See "Business -- Commercial Banking
Group -- Mortgage Banker Finance". Consumer and wholesale deposits also
decreased, primarily due to maturities of certificates of deposit that were not
renewed.
 
     1995 Activity.  Total assets increased to $12.0 billion at September 30,
1995 from $8.9 billion at September 30, 1994, reflecting an increase of $3.1
billion. The majority of this increase occurred in the loan portfolio, primarily
as a result of single family adjustable-rate loan originations retained for the
Bank's portfolio and purchases of single family loans.
 
                                       38
<PAGE>   41
 
     Repurchase agreements and federal funds sold increased to $471.1 million at
September 30, 1995 from $358.7 million at September 30, 1994. The increase
primarily reflected the Company's decision to borrow and invest funds on a
short-term basis.
 
     MBS decreased $430.6 million during fiscal 1995, primarily due to
repayments of $406.7 million. The decrease in purchases to $38.7 million for
fiscal 1995 from $667.3 million for fiscal 1994 reflected lower yields available
in the marketplace on MBS during fiscal 1995. The decreased volume of MBS sales,
to $77.6 million for fiscal 1995 as compared to $213.0 million during fiscal
1994, primarily resulted from reduced sales of securitized assets. There were no
loans securitized during fiscal 1995, as compared to $1.2 billion securitized
during fiscal 1994. The $515.7 million decrease in repayments for fiscal 1995,
as compared to fiscal 1994, reflected a decrease in prepayments resulting
primarily from rising interest rates, beginning in the second half of fiscal
1994.
 
     At September 30, 1995 and 1994, unrealized losses on securities and MBS
available for sale, net of tax, were $6.6 million and $13.4 million,
respectively. The decrease resulted principally from a decline in market prices
due to increased interest rates in the second half of fiscal 1994 and
prepayments of certain high yielding securities. See Note 4 to the Consolidated
Financial Statements.
 
     During fiscal 1995, loans increased $3.2 billion, primarily as a result of
the retention of single family adjustable-rate loan originations for the Bank's
portfolio and purchases of single family loans.
 
     While the total loan portfolio increased, single family loan originations
decreased $2.2 billion, or 41%, in fiscal 1995 compared to fiscal 1994 and $1.2
billion, or 18%, in fiscal 1994 compared to fiscal 1993. The decrease in single
family loan originations during fiscal 1995 and 1994 can be attributed to higher
interest rates during those periods leading to a decline in mortgage loan
refinance activity during fiscal 1995 and 1994. Refinancings approximated $600.6
million and $2.0 billion, or 17% and 37%, respectively, of total originations in
fiscal 1995 and 1994. Despite lower origination volumes, the Bank retained a
greater percentage of originations for its portfolio due to an increase in the
proportion of adjustable-rate loans as compared to fixed-rate loans originated
by the mortgage banking segment. During fiscal 1995, 30% of single family loan
originations were retained for portfolio, as compared to 24% in fiscal 1994. The
higher market interest rates also resulted in a decline in the MBF line of
credit portfolio.
 
     During fiscal 1994 and 1995, despite the decline in single family mortgage
loan originations, the Bank's single family loan portfolio increased as a result
of purchases from third parties. The Bank also began retaining a larger
percentage of its single family mortgage loan originations for its portfolio
than it had historically. While purchases of single family loans increased
during these periods, purchases of MBS decreased. During fiscal 1995, yields on
loan purchases were higher than yields on MBS purchased. During fiscal 1995,
$2.7 billion of single family loans yielding 8.46% were purchased, including a
$1.3 billion purchase consisting of adjustable-rate loans, compared to $38.7
million of MBS purchased at a yield of 5.93%.
 
     Increased single family residential construction, multi-family, and
commercial real estate loan originations in fiscal 1995 reflect geographic
expansion of these products.
 
     Total deposits increased $418.0 million, to $5.2 billion at September 30,
1995, from $4.8 billion at September 30, 1994. The majority of the increase is
due to an increase in commercial deposits from MBF customers, reflecting the
Bank's effort to build its customer base for this type of deposit.
 
     In the aggregate, FHLB advances, reverse repurchase agreements, and federal
funds purchased increased to $5.6 billion at September 30, 1995 from $3.2
billion at September 30, 1994, primarily to fund asset originations and
purchases. In connection with the increase in FHLB advances, FHLB stock was
purchased to maintain the required balance of such stock. The Bank is in
compliance with such stock requirements at September 30, 1995.
 
     During fiscal 1995, the Bank issued the Bank Preferred Stock, Series B.
Costs incurred in connection with the stock issuance were recorded as a
reduction to paid-in capital. The Bank's total capital was increased by $96.2
million as a result of the Offering.
 
                                       39
<PAGE>   42
 
     1994 Activity.  Total assets increased $469.6 million to $8.9 billion at
September 30, 1994 from $8.4 billion at September 30, 1993. The primary reason
for the increase was the Bank's acquisition of single family loans and MBS.
 
     MBS increased during 1994, primarily as a result of the securitization of a
portion of the single family loan portfolio and from purchases. During fiscal
1994, $1.2 billion of single family portfolio loans were securitized by the
Company. See Note 4 to the Consolidated Financial Statements. The securitization
process created $1.2 billion in MBS. The securitization process created both
senior and subordinated MBS. Approximately $39.1 million of MBS, which were the
subordinate portions of the securitizations, were sold. The MBS that were
created and retained were rated in one of the two highest rating categories by
the rating agencies of Moody's Investors Service, Inc., Standard & Poor's
Corporation and Fitch Investors Service, Inc.
 
     Unrealized losses on securities and MBS available for sale, net of tax,
resulted in an unrealized loss of $13.4 million at September 30, 1994, down from
an unrealized gain of $33.4 million at September 30, 1993. This decrease
resulted principally from a decline in market prices due to increased interest
rates in the second half of fiscal 1994, sales of certain securities with gains,
and prepayments of certain high yielding securities. See Notes 3 and 4 to the
Consolidated Financial Statements.
 
     Loans also increased during 1994, principally due to originations and
purchases of single family and multi-family loans. Single family loan
originations, however, decreased $1.2 billion, or 18%, as compared to the prior
year. Conversely, multi-family originations increased $170.5 million compared to
the prior year. During 1994, the Bank retained $1.3 billion of single family
loan originations for the held to maturity portfolio. These increases in the
portfolio were offset by loan sales and with the securitization of single family
loans during the year, as discussed above. The effect of lower refinance
activity resulting from higher interest rates during the second half of 1994
contributed to the decrease in single family loan originations, and a lower MBF
line of credit portfolio.
 
     MSRs increased $46.0 million to $56.7 million at September 30, 1994 from
$10.7 million at September 30, 1993. During 1994, the Bank acquired or entered
into contracts to acquire MSRs associated with $3.9 billion in single family
loans at a premium of $50.9 million and $31.2 million in multi-family loans at a
premium of $59,000. See Note 6 to the Consolidated Financial Statements.
 
     On December 23, 1993, the Bank entered into the Settlement Agreement
providing, among other things, for the termination of the Assistance Agreement
and the disposition of all remaining Covered Assets (as defined below). Covered
Assets and related assets decreased $392.5 million during 1994. For a
description of the Settlement Agreement, see "Business -- The Assistance
Agreement" and Note 7 to the Consolidated Financial Statements.
 
     Other assets increased $84.6 million during 1994 primarily due to an
increase in the Company's deferred tax asset as a result of the recognition of
additional tax benefits. See Note 13 to the Consolidated Financial Statements.
 
     Total deposits decreased $75.2 million during fiscal 1994. Retail deposits
decreased $390.9 million to $3.9 billion at September 30, 1994, from $4.3
billion at September 30, 1993. The Company's pricing strategy decreased rates
offered on deposits, resulting in an increase in the runoff of the Company's
certificates of deposits ("CDs"). Offsetting the decrease in retail deposits was
a $402.5 million increase in commercial deposits primarily due to the
introduction of commercial banking services (i.e. cash management and deposit
services) to the Company's MBF customers during 1994.
 
     FHLB advances, reverse repurchase agreements, and federal funds purchased
increased to $3.2 billion at September 30, 1994 from $2.5 billion at September
30, 1993, primarily to fund asset originations and purchases and to replace
reduced deposit balances.
 
ASSET QUALITY
 
     The Company, like all financial institutions, is exposed to certain credit
risks related to the value of the collateral that secures loans held in its
portfolio and the ability of borrowers to repay their loans during the
 
                                       40
<PAGE>   43
 
term thereof. The Bank has a Credit Committee, which is comprised of senior
officers of the Bank, that closely monitors the loan and REO portfolios for
potential problems on a continuing basis and reports to the Board of Directors
of the Bank at regularly scheduled meetings.
 
     The Bank also has established an Asset Classification Committee, which is
comprised of senior management. This committee reviews the classification of
assets and reviews the allowance for losses. This committee reviews all assets
and periodically reports its findings directly to the Board of Directors of the
Bank. The asset classification policy sets forth certain requirements with
respect to how to classify certain assets. The Bank also has an Asset Review
Department, the function of which is to provide to the Board of Directors of the
Bank an independent ongoing review and evaluation of the quality of assets.
 
     Nonperforming assets consist of nonaccrual loans and REO. Loans are usually
placed on nonaccrual status when the loan is past due 90 days or more, or the
ability of a borrower to repay principal and interest is in doubt. The portion
of the purchase discount attributable to potential credit risk on certain
acquired delinquent single family loans is treated as non-accretable discount.
The Bank believes that these purchase discounts are sufficient to cover losses
from these portfolios and to provide a market rate of return. At September 30,
1994 and 1993, nonaccrual loans included $5.7 million and $9.0 million of single
family loans 90 days delinquent that were subject to government guaranty and
upon which interest continued to accrue. There were no such loans at March 31,
1996 and September 30, 1995. At March 31, 1996 and September 30, 1995, single
family nonaccrual loans included $10.1 million and $10.2 million, respectively,
of loans which were contractually current pursuant to the borrowers'
court-approved bankruptcy plans.
 
     The following tables present the Company's nonperforming assets.
 
                              NONPERFORMING ASSETS
 
<TABLE>
<CAPTION>
                                                                          AT SEPTEMBER 30,
                                                AT MARCH 31,     ----------------------------------
                                                    1996           1995         1994         1993
                                                ------------     --------     --------     --------
                                                                           (IN THOUSANDS)
<S>                                             <C>              <C>          <C>          <C>
Nonaccrual loans
  Single family(1)............................    $101,936       $ 83,954     $ 85,722     $ 61,451
  Single family residential construction......          35            505           --           --
  Consumer....................................         745            563          506          427
  Multi-family................................         510            213        3,802        3,233
  Commercial real estate......................         488             --        2,342           --
                                                  --------       --------     --------     --------
                                                   103,714         85,235       92,372       65,111
                                                  --------       --------     --------     --------
(Discounts)/Premiums
  Accretable(2)...............................        (449)          (560)        (669)        (781)
  Non-accretable..............................      (7,246)        (9,167)     (15,384)     (22,684)
                                                  --------       --------     --------     --------
                                                    (7,695)        (9,727)     (16,053)     (23,465)
                                                  --------       --------     --------     --------
     Net nonaccrual loans.....................      96,019         75,508       76,319       41,646
REO, primarily single family properties.......      28,266         24,904       20,684       18,954
                                                  --------       --------     --------     --------
          Total nonperforming assets..........    $124,285       $100,412     $ 97,003     $ 60,600
                                                  ========       ========     ========     ========
</TABLE>
 
- ---------------
 
(1) Originated single family nonaccrual loans to total single family nonaccrual
    loans were 29.06%, 20.64%, 13.66%, and 15.44% at March 31, 1996 and at
    September 30, 1995, 1994, and 1993, respectively.
 
(2) Accretable discount arises principally from the purchase of performing
    single family residential loans in the secondary market. The discount in
    effect functions principally as an additional reserve by lowering the book
    value of the outstanding loans. If the accretable discount is included with
    the allowance for credit losses, the resulting ratio of the allowance for
    credit losses to total loans would have been 0.77% at March 31, 1996.
 
                                       41
<PAGE>   44
 
                         SELECTED ASSET QUALITY RATIOS
 
<TABLE>
<CAPTION>
                                                  AT OR FOR
                                               THE SIX MONTHS           AT OR FOR THE YEAR ENDED
                                               ENDED MARCH 31,               SEPTEMBER 30,
                                               ---------------       ------------------------------
                                                    1996             1995        1994         1993
                                               ---------------       -----       -----       ------
<S>                                            <C>                   <C>         <C>         <C>
Allowance for credit losses to net nonaccrual
  loans......................................       38.00%           48.74%      30.73%       71.71%
Allowance for credit losses to nonperforming
  assets.....................................       29.36(2)         36.65       24.18        49.28
Allowance for credit losses and
  non-accretable discounts to net nonaccrual
  loans......................................       45.55            60.88       50.89       126.18
Allowance for credit losses to total loans...        0.46             0.44        0.46         0.61
Nonperforming assets to total assets.........        1.10(2)          0.84        1.09         0.72
Nonaccrual loans to total loans..............        1.21             0.91        1.51         0.85
Nonperforming assets to total loans and
  REO........................................        1.56             1.21        1.91         1.23
Net loan charge-offs to average loans(1)
     Total...................................        0.15             0.16        0.30         0.05
     Single family...........................        0.09             0.08        0.04         0.05
</TABLE>
 
- ---------------
(1) Annualized for the interim period.
 
(2) Excluding the $10.1 million of loans included above, which were
    contractually current pursuant to the borrowers' court-approved bankruptcy
    plans at March 31, 1996, the allowance for credit losses to nonperforming
    assets ratio would have been 31.96% and the nonperforming assets to total
    assets ratio would have been 1.01%.
 
             PORTFOLIO OF GROSS NON-ACCRUAL LOANS BY STATE AND TYPE
                               AT MARCH 31, 1996
 
<TABLE>
<CAPTION>
                                        SINGLE FAMILY                             COMMERCIAL
                                         RESIDENTIAL                                 REAL                   % OF
         STATE          SINGLE FAMILY   CONSTRUCTION    CONSUMER   MULTI-FAMILY     ESTATE       TOTAL      TOTAL
- ----------------------- -------------   -------------   --------   ------------   ----------   ----------   -----
                                                             (IN THOUSANDS)
<S>                     <C>             <C>             <C>        <C>            <C>          <C>          <C>
California.............   $  53,378         $  --         $  1         $ --          $ --       $  53,379    51.5%
Texas..................      10,895            35          730           --            --          11,660    11.2
Florida................       8,175            --           --           --            --           8,175     7.9
New Jersey.............       5,143            --           --           --            --           5,143     5.0
Illinois...............       5,023            --           --           --            --           5,023     4.8
New York...............       3,388            --           --           --            --           3,388     3.3
Connecticut............       1,802            --           --          510           488           2,800     2.7
Maryland...............       1,828            --           --           --            --           1,828     1.8
Pennsylvania...........       1,798            --           --           --            --           1,798     1.7
Virginia...............       1,352            --           --           --            --           1,352     1.3
Massachusetts..........       1,082            --           --           --            --           1,082     1.0
Louisiana..............       1,018            --           --           --            --           1,018     1.0
Other..................       7,054            --           14           --            --           7,068     6.8
                        -------------      ------       --------      -----         -----      ----------   -----
    Total..............   $ 101,936         $  35         $745         $510          $488       $ 103,714   100.0%
                        =============   =============   ========== =============  ============  =========   =====
% of Total.............        98.3%           --%         0.7%         0.5%          0.5%          100.0%
                        =============   =============   ========== =============  ============  =========
</TABLE>
 
     Total nonperforming assets increased $23.9 million to $124.3 million at
March 31, 1996 from $100.4 million at September 30, 1995. The single family
nonaccrual loans increased $18.0 million, reflecting, in part, the effects of
the loan purchases which occurred in the second half of 1995.
 
     The portion of the purchase discount attributable to potential credit risk
on certain acquired delinquent single family loans is treated as non-accretable
discount. The Bank believes that these purchase discounts are sufficient to
cover losses from these portfolios and to provide a market rate of return. The
non-accretable discount decreased $2.0 million to $7.2 million at March 31, 1996
from $9.2 million at September 30, 1995.
 
                                       42
<PAGE>   45
 
This decrease resulted primarily from loans being foreclosed upon and
transferred to REO. The non-accretable discount related to these loans was also
transferred. REO increased $3.4 million to $28.3 million at March 31, 1996 from
$24.9 million at September 30, 1995. This increase primarily resulted from
higher levels of delinquencies on a larger loan portfolio.
 
     Total nonperforming assets increased $3.4 million to $100.4 million at
September 30, 1995 from $97.0 million at September 30, 1994. The multi-family
and commercial real estate nonaccrual loans decreased $5.9 million from
September 30, 1994. This decrease resulted primarily from loans being paid in
full, and improvement in performance and cash flows. The non-accretable discount
decreased $6.2 million to $9.2 million at September 30, 1995 from $15.4 million
at September 30, 1994. This decrease resulted primarily from loans being
foreclosed upon and transferred to REO. The non-accretable discount related to
these loans was also transferred. REO increased $4.2 million to $24.9 million at
September 30, 1995 from $20.7 million at September 30, 1994. This increase
resulted primarily from increased volumes in the single family portfolio.
 
     Total nonperforming assets increased $36.4 million to $97.0 million at
September 30, 1994 from $60.6 million at September 30, 1993. The single family
nonaccrual loans increased $24.3 million to $85.7 million at September 30, 1994
from $61.4 million at September 30, 1993. This increase resulted primarily from
the purchase, at substantial discounts, of single family loans that were
delinquent at acquisition. The Company has historically purchased nonperforming
loans as part of a larger loan purchase from the RTC, the FDIC or liquidating
institutions, and realized profits by modifying, restructuring and liquidating
the loans as necessary. The non-accretable discount decreased $7.3 million to
$15.4 million at September 30, 1994 from $22.7 million at September 30, 1993.
The decrease resulted primarily from a reallocation of approximately $11.2
million of non-accretable discounts to accretable discounts due to improved
performance of the loans, offset by an increase in non-accretable discounts
related to the purchase discussed above.
 
     The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, an amendment of SFAS No. 114",
effective October 1, 1995. These statements address the accounting by creditors
for impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
At March 31, 1996, the recorded investment in impaired loans, pursuant to SFAS
No. 114, totaled $4.7 million. There was no allowance for credit losses
determined in accordance with SFAS No. 114 related to these impaired loans
because the measured values of the loans exceeded the Company's recorded
investments in the loans.
 
                                       43
<PAGE>   46
 
     The Company's criticized and classified assets are identified pursuant to
management's asset classification policy, which was established in accordance
with regulatory guidelines.
 
             RECONCILIATION OF CRITICIZED AND CLASSIFIED ASSETS TO
                              NONPERFORMING ASSETS
                               AT MARCH 31, 1996
 
<TABLE>
<CAPTION>
                                                      NONPERFORMING     PERFORMING       TOTAL
                                                      -------------     ----------     ----------
                                                                    (IN THOUSANDS)
<S>                                                   <C>               <C>            <C>
Criticized assets:
  Special Mention
     Single family residential construction.........    $      --        $    186       $     186
     Multi-family...................................           --          10,753          10,753
     Commercial real estate and business credit.....           --           2,501           2,501
                                                      -------------     ----------     ----------
          Total criticized assets...................           --          13,440          13,440
                                                      -------------     ----------     ----------
Classified:
  Substandard
     Single family..................................       94,962              --          94,962
     Single family residential construction.........           35              --              35
     Consumer.......................................          672              --             672
     Multi-family...................................          404          17,979          18,383
     Commercial real estate and business credit.....          395           2,939           3,334
     Real estate owned..............................       28,266              --          28,266
                                                      -------------     ----------     ----------
                                                          124,734          20,918         145,652
  Doubtful -- multi-family..........................           --             350             350
  Loss..............................................           --              --              --
                                                      -------------     ----------     ----------
          Total classified assets...................      124,734          21,268         146,002
                                                      -------------     ----------     ----------
          Total criticized and classified assets....    $ 124,734        $ 34,708       $ 159,442
                                                      =============     ==========       ========
Total classified assets as a % of total gross
  loans.............................................                                         1.84%
Total allowance for credit losses as a % of total
  classified assets.................................                                        24.99%
</TABLE>
 
     The Company establishes an allowance for credit losses based on
management's periodic evaluation of the loan portfolio and considers such
factors as historical loss experience, delinquency status, identification of
adverse situations that may affect the ability of obligators to repay, known and
inherent risks in the portfolio, assessment of economic conditions, regulatory
policies, and the estimated value of the underlying collateral, if any. Although
the Company's credit management systems have resulted in a very low loss
experience, there can be no assurance that such results will continue in the
future. The allowance for credit losses is based principally on delinquency
status and historical loss experience.
 
     The following table presents the Company's allowance for credit losses.
 
                          ALLOWANCE FOR CREDIT LOSSES
 
<TABLE>
<CAPTION>
                                               FOR THE SIX
                                              MONTHS ENDED          FOR THE YEAR ENDED SEPTEMBER
                                                MARCH 31,                        30,
                                           -------------------     -------------------------------
                                            1996        1995        1995        1994        1993
                                           -------     -------     -------     -------     -------
<S>                                        <C>         <C>         <C>         <C>         <C>
                                                               (IN THOUSANDS)
Beginning balance........................  $36,801     $23,454     $23,454     $29,864     $28,214
  Provision..............................    5,850       4,157      24,293       6,997       4,083
  Charge-offs net of recoveries..........   (6,162)     (2,572)    (10,946)    (13,407)     (2,433)
                                           -------     -------     -------     -------     -------
Ending balance...........................  $36,489     $25,039     $36,801     $23,454     $29,864
                                           =======     =======     =======     =======     =======
</TABLE>
 
                                       44
<PAGE>   47
 
                   ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
 
<TABLE>
<CAPTION>
                                              AT MARCH 31,                AT SEPTEMBER 30,
                                           -------------------     -------------------------------
                                            1996        1995        1995        1994        1993
                                           -------     -------     -------     -------     -------
                                           (IN THOUSANDS)
<S>                                        <C>         <C>         <C>         <C>         <C>
Single family..........................    $28,799     $16,784     $29,594     $15,905     $15,238
Single family residential
  construction.........................        483         473         361         399         306
Consumer...............................      3,339       2,455       3,247       1,822         355
Multi-family...........................      3,229       2,974       3,054       2,456       1,474
Commercial real estate and business
  credit...............................        183       2,112          97       2,112      11,382
Mortgage Banker Finance line of
  credit...............................        412         236         410         684         944
Single family mortgage warehouse.......         44           5          38          76         165
                                           -------     -------     -------     -------     -------
     Total.............................    $36,489     $25,039     $36,801     $23,454     $29,864
                                           =======     =======     =======     =======     =======
</TABLE>
 
     The allowance for credit losses decreased to $36.5 million at March 31,
1996 from $36.8 million at September 30, 1995. The single family allowance for
credit losses decreased to $28.8 million at March 31, 1996 from $29.6 million at
September 30, 1995. This decrease primarily resulted from a reduced level of
single family loans as repayments exceeded originations.
 
     The allowance for credit losses increased to $36.8 million at September 30,
1995 from $23.5 million at September 30, 1994. The single family allowance for
credit losses increased to $29.6 million at September 30, 1995 from $15.9
million at September 30, 1994. This increase primarily resulted from an increase
in the single family loan portfolio to $7.1 billion at September 30, 1995 from
$4.2 billion at September 30, 1994 due to purchases of $2.7 billion during
fiscal 1995 and additional originations retained for portfolio of $1.0 billion.
Purchases and originations of loans result in provisions for credit losses being
provided which increase the allowance for credit loss relating to these loans.
The consumer allowance for credit losses increased to $3.2 million at September
30, 1995 from $1.8 million at September 30, 1994. This increase primarily
resulted from increased losses related to this unsecured consumer line of credit
portfolio.
 
     The allowance for credit losses decreased to $23.5 million at September 30,
1994 from $29.9 million at September 30, 1993. The commercial real estate and
business credit allowance for credit losses decreased to $2.1 million at
September 30, 1994 from $11.4 million at September 30, 1993. This decrease
primarily resulted from a $10.1 million charge-off in fiscal 1994 related to a
single commercial real estate loan. See Note 5 to the Consolidated Financial
Statements.
 
     The Bank charges-off loans, other than consumer loans, when all attempts
have been exhausted to resolve any outstanding loan or legal issues. For
consumer loans, all loans are charged-off when they contractually become 120
days delinquent.
 
                                       45
<PAGE>   48
 
     The components of charge-offs and recoveries by property type for the
periods indicated are as follows:
 
                              NET LOAN CHARGEOFFS
 
<TABLE>
<CAPTION>
                                         FOR THE SIX MONTHS             FOR THE YEAR ENDED
                                           ENDED MARCH 31,                 SEPTEMBER 30,
                                         -------------------     ---------------------------------
                                          1996        1995         1995         1994        1993
                                         -------     -------     --------     --------     -------
                                                              (IN THOUSANDS)
<S>                                      <C>         <C>         <C>          <C>          <C>
Charge-offs
  Single family........................  $(3,242)    $(1,441)    $ (4,840)    $ (1,722)    $(2,167)
  Single family residential
     construction......................       --          --           --           --         (71)
  Consumer.............................   (3,008)     (1,190)      (2,847)      (1,365)        (72)
  Multi-family.........................       --          --           --         (233)         --
  Commercial real estate and business
     credit............................       --          --       (3,389)     (10,145)         --
  Single family mortgage warehouse.....       --          (2)          (2)          --        (148)
                                         -------     -------     --------     --------     -------
     Total charge-offs.................   (6,250)     (2,633)     (11,078)     (13,465)     (2,458)
                                         -------     -------     --------     --------     -------
Recoveries
  Single family........................       18          27           36           20           6
  Consumer.............................       70          32           94           38          19
  Multi-family.........................       --           2            2           --          --
                                         -------     -------     --------     --------     -------
     Total recoveries..................       88          61          132           58          25
                                         -------     -------     --------     --------     -------
     Total net charge-offs.............  $(6,162)    $(2,572)    $(10,946)    $(13,407)    $(2,433)
                                         =======     =======     ========     ========     =======
     Net loan charge-offs to average
       loans...........................     0.15%       0.09%        0.16%        0.30%       0.05%
</TABLE>
 
     Net loan charge-offs for all loan types increased to $6.2 million for the
six months ended March 31, 1996 from $2.6 million for the six months ended March
31, 1995. The Bank's loan portfolio consists primarily of single family mortgage
loans. Net charge-offs on the single family portfolio increased to $3.2 million
for the six months ended March 31, 1996 from $1.4 million for the six months
ended March 31, 1995. This resulted in net charge-offs as a percentage of single
family loans on average of 0.09% and 0.06%, respectively, for the six months
ended March 31, 1996 and 1995 (annualized). Net charge-offs on the consumer loan
portfolio increased to $2.9 million for the six months ended March 31, 1996 from
$1.2 million for the six months ended March 31, 1995. The increase primarily
relates to the unsecured consumer line of credit portfolio.
 
     Net loan charge-offs for all loans decreased to $10.9 million for fiscal
1995 compared to $13.4 million for fiscal 1994. Net charge-offs on the
commercial real estate and business credit portfolio decreased to $3.4 million
for fiscal 1995 compared to $10.1 million for fiscal 1994. The charge-off in
fiscal 1995 included a $3.4 million charge related to the sale of a single
commercial real estate loan. Excluding the commercial real estate loan
charge-offs, net charge-offs to average loans outstanding would have been $7.5
million and $3.3 million or 0.11% and 0.07%, respectively, for fiscal 1995
compared to fiscal 1994. Net charge-offs on the single family portfolio
increased to $4.8 million for fiscal 1995 compared to $1.7 million for fiscal
1994. This resulted in net charge-offs as a percentage of single family loans on
average of 0.08% and 0.04%, respectively, for fiscal 1995 compared to fiscal
1994. Net charge-offs on the consumer loan portfolio increased to $2.8 million
for fiscal 1995 compared to $1.3 million for fiscal 1994. This increase
primarily relates to the unsecured consumer line of credit portfolio.
 
     Net loan charge-offs for all loans increased to $13.4 million for fiscal
1994 compared to $2.4 million for fiscal 1993. This increase reflects a $10.1
million charge-off related to a single commercial real estate loan. Excluding
this commercial real estate loan charge-off, net charge-offs to average loans
outstanding would have been $3.3 million and $2.4 million or 0.07% or 0.05%,
respectively, for fiscal 1994 compared to fiscal 1993. Net charge-offs on the
single family portfolio decreased to $1.7 million for fiscal 1994 compared to
$2.2 million for fiscal 1993. This resulted in net charge-offs as a percentage
of single family loans on average of 0.04% and 0.05%, respectively, for fiscal
1994 compared to fiscal 1993. Net charge-offs on the consumer loan portfolio
increased to $1.3 million for fiscal 1994. This increase primarily relates to
the unsecured consumer line of credit portfolio.
 
                                       46
<PAGE>   49
 
     Excluding charge-offs associated with the single commercial real estate
loan, discussed above, net REO gains of $16.8 million exceeded net charge-offs
of $13.3 million for the three years ended September 30, 1995. REO gains have
historically been significant for the Company because of discounts attributable
to the original loan purchases.
 
     The Company's only credit product that has had charge-offs higher than its
original formula reserves is the unsecured consumer line of credit. The Company
began offering this product in 1993. The portfolio outstandings at March 31,
1996 were $56.0 million, for which allowances for credit losses were recently
increased from 4% to 6% of total outstandings. Due to the initial growth and
loss experience in this portfolio, the Company modified its underwriting,
approval and collection processes. Net of charge-offs, the portfolio has had
positive net interest income after loss provisions. The Company believes that
its current formula reserve policy is appropriate for this product.
 
CAPITAL RESOURCES AND LIQUIDITY
 
     Liquidity refers to the ability or the financial flexibility to manage
future cash flows to meet the needs of depositors and borrowers and fund
operations on a timely and cost-effective basis. The Bank is required by the OTS
to maintain average daily balances of liquid assets and short-term liquid assets
in amounts equal to 5% and 1%, respectively, of net-withdrawable deposits plus
borrowings payable on demand or with remaining maturities of one year or less.
The average daily liquidity ratio for March 31, 1996 was 5.84%, and the average
short-term liquidity ratio for March 31, 1996 was 3.51%.
 
     The primary sources of funds consist of deposits, advances from the FHLB,
reverse repurchase agreements, principal repayments on loans and MBS, and
proceeds from the issuance of Bank Preferred Stock. Liquidity may also be
provided from other sources including investments in short-term high credit
quality instruments. At March 31, 1996, these instruments generally comprised
repurchase agreements, federal funds sold, trading account assets, and MBS and
securities available for sale. These instruments totaled $2.0 billion at March
31, 1996 and $933.2 million, $905.4 million, and $2.4 billion at September 30,
1995, 1994, and 1993, respectively. Funding resources are principally used to
meet ongoing commitments to fund deposit withdrawals, repay borrowings, fund
existing and continuing loan commitments and maintain liquidity. See Notes 8, 9,
10, and 12 to the Consolidated Financial Statements.
 
     As a holding company without significant assets other than its equity
interest in the Bank, the Company's ability to pay interest and principal on the
Senior Notes and on its other debt and to fund its operations depends upon cash
dividends it receives from the Bank and is subject to limitations imposed by the
Senior Notes. The Bank's ability to pay dividends is, in turn, dependent upon
its ability to generate earnings and is subject to a number of regulatory and
other restrictions and risks. Dividends may not be paid on the Bank Common Stock
if full dividends on the Bank Preferred Stock have not been paid for the four
most recent quarterly dividend periods. Thus, if for any reason the Bank failed
to declare and pay full quarterly dividends on the Bank Preferred Stock, the
Company would not receive any cash dividends from the Bank until four full
quarterly dividends on the Bank Preferred Stock had been paid. See "-- Capital"
and Notes 11 and 15 to the Consolidated Financial Statements for a discussion of
the various dividend limitations.
 
     Deposits
 
     Deposits have provided the Company with a source of relatively stable and
low cost funds. Average deposits funded 44% of average total assets for the six
months ended March 31, 1996, 48% for fiscal 1995, 58% for fiscal 1994, and 66%
for fiscal 1993. The relationship of the Company's deposits to its average
assets has decreased over the past three years, while overall deposit levels
have remained constant. This change in the relationship of deposit funding is
due to the opportunities for leverage created by increased capital raised by the
Company through the issuance of preferred stock, in 1993 and 1995, and earnings
retained by the Company. Additionally, other financial instrument opportunities
available to consumers, who have traditionally invested in bank deposit
products, have become more widely used as an alternative to deposit products.
 
                                       47
<PAGE>   50
 
     The following table reflects net activity in the Company's deposit
accounts:
 
                            DEPOSIT ACCOUNT ACTIVITY
 
<TABLE>
<CAPTION>
                                       FOR THE SIX MONTHS              FOR THE YEAR ENDED
                                         ENDED MARCH 31,                  SEPTEMBER 30,
                                      ---------------------    -----------------------------------
                                        1996         1995        1995         1994         1993
                                      ---------    --------    ---------    ---------    ---------
                                                             (IN THOUSANDS)
<S>                                   <C>          <C>         <C>          <C>          <C>
Consumer Accounts:
  Checking accounts (including
     interest-bearing and
     non-interest bearing)..........  $  33,995    $  1,650    $   4,984    $   5,467    $  (3,437)
  Savings accounts..................     (6,798)    (61,520)     (83,089)     (97,286)     (94,857)
  Money market accounts.............     87,129     (19,140)     (24,028)      (1,275)     (26,918)
  Time deposits.....................   (193,275)     82,709       35,425     (389,465)       4,296
                                      ---------    --------    ---------    ---------    ---------
          Total consumer activity...    (78,949)      3,699      (66,708)    (482,559)    (120,916)
Commercial deposits.................   (134,763)    267,372      482,726      384,387       63,000
Wholesale deposits..................    (91,450)    (94,802)    (157,019)    (108,196)    (157,805)
                                      ---------    --------    ---------    ---------    ---------
Total activity before interest
  credited..........................   (305,162)    176,269      258,999     (206,368)    (215,721)
Interest credited...................     86,263      75,240      159,017      131,184      144,349
                                      ---------    --------    ---------    ---------    ---------
          Net change in deposits....  $(218,899)   $251,509    $ 418,016    $ (75,184)   $ (71,372)
                                      =========    ========    =========    =========    =========
</TABLE>
 
     The Company has historically utilized CDs to compete for consumer deposits.
Beginning in 1995, the Company's strategy has been to increase checking and
money market deposit accounts which are the core relationships that provide a
stable source of funding for the Company. As a complement to this strategy, the
Company continues to offer traditional deposit products, such as savings
accounts and CDs. See Note 8 to the Consolidated Financial Statements.
 
     The Company offers cash management services to its MBF customers. These
services are commercial deposit accounts comprised of (i) operating accounts of
MBF customers, (ii) escrow deposits, and (iii) principal and interest payments
on the loans serviced by the MBF customers. At March 31, 1996, these deposits
totaled $797.3 million. The Company also raises wholesale deposits from
institutional customers through its Financial Markets Group. These deposits tend
to be interest rate sensitive and are subject to withdrawal if the rates paid on
these deposits are not competitive with other market rates. While the Company
does not generally solicit brokered deposits, the Company may accept brokered
deposits when permitted by regulation and available at favorable rates.
 
     Borrowings
 
     The Company also relies upon borrowings, primarily collateralized
borrowings such as advances from the FHLB and reverse repurchase agreements, to
fund its assets. These sources of funds were the primary source of funds for the
recent asset growth and accounted for 46% of the funding of average assets for
the six months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994,
and 23% for fiscal 1993. Long-term fixed and variable rate advances are obtained
from the FHLB Dallas under a security and pledge agreement that restricts the
amount of borrowings to a percentage of (i) fully disbursed single family loans,
unless assets are physically pledged to the FHLB Dallas, and (ii) total assets.
At March 31, 1996, these limitations were 65% of the outstanding principal of
single family loans and 45% of total assets. See Notes 9 and 10 to the
Consolidated Financial Statements.
 
     Notes Payable
 
     In May 1989, the Bank issued $110 million of 15% subordinated capital notes
to raise regulatory capital as required by the Assistance Agreement. During
September 1990, the holders exchanged their notes for senior notes issued by the
Company with an interest rate of 15.75% (the "15.75% Notes") and the Bank
prepaid the 15% subordinated capital notes. In May 1993, the Company issued $115
million of Senior Notes at an initial rate of 8.05%. Simultaneously, the 15.75%
Notes and the note payable to related party were paid
 
                                       48
<PAGE>   51
 
off. The interest rate on the Senior Notes was subject to increase in certain
circumstances and the per annum interest rate was increased to 8.55% in October
1993, and to 9.05% in February 1994. The Senior Notes mature on May 15, 1998.
See Note 11 to the Consolidated Financial Statements. Substantially
simultaneously with the consummation of the Offering, the Company intends to
commence the Exchange Offer for the Senior Notes. The Exchange Offer is intended
to satisfy the condition of the Senior Notes pursuant to which the interest rate
on the Senior Notes will revert from 9.05% to 8.05% per annum commencing with
and including the date on which the Exchange Offer is consummated.
 
     Commitments
 
     At March 31, 1996, the Bank had mandatory forward delivery contracts for
single family loans of $514.8 million and had warehouse loans and a mortgage
pipeline of single family loans of $379.7 million and $190.8 million available
to fill these contracts. At March 31, 1996 the Bank had $1.3 billion of
commitments to extend credit. Because such commitments may expire without being
drawn upon, the commitments do not necessarily represent future cash
requirements. Scheduled maturities of CDs and borrowings (including advances
from the FHLB and reverse repurchase agreements) during the 12 months following
March 31, 1996, total $1.2 billion and $4.8 billion, respectively. Management
believes that the Bank has adequate resources to fund all of its commitments.
 
     Capital
 
     The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations. The Bank's capital level at March 31, 1996 and
September 30, 1995 qualified it as "well-capitalized", the highest of five tiers
under applicable regulatory definitions. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements" and Note 15 to the Consolidated Financial
Statements.
 
     The following table sets forth the regulatory capital ratios of the Bank as
of the dates indicated. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements".
 
                           REGULATORY CAPITAL RATIOS
 
<TABLE>
<CAPTION>
                                                 AT MARCH             AT SEPTEMBER 30,
                                                    31,         -----------------------------
                                                   1996          1995       1994       1993
                                                -----------     -------    -------    -------
    <S>                                         <C>             <C>        <C>        <C>
    Tangible Capital..........................      6.88%         6.20%      6.01%      6.17%
    Core Capital..............................      6.96%         6.29%      6.17%      6.43%
    Total Risk-Based Capital..................     14.20%        13.45%     14.02%     14.87%
</TABLE>
 
     During fiscal 1993, the Bank issued its Preferred Stock, Series A and
during fiscal 1995, the Bank issued its Preferred Stock, Series B. Shares
totalling $85.5 million were issued as a result of the Preferred Stock, Series A
offering and shares totalling $100 million were issued as a result of the
Preferred Stock, Series B offering. These shares are not owned by the Company.
Bank Preferred Stock, which is treated as core capital for regulatory purposes,
was issued to increase total capital to support further growth.
 
CONTINGENCIES AND UNCERTAINTIES
 
     A petition for review has been filed in the United States Court of Appeals
for the Fifth Circuit seeking to modify, terminate, and set aside the order
approving the Acquisition, which involved substantially all the Bank's initial
assets and liabilities. The same petitioner has filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the United States District
Court of Texas, also seeking to set aside the order approving the Acquisition.
The petitioner contends, in both cases, that it submitted the most favorable bid
to acquire the assets and liabilities of Old USAT and that it should have been
selected as the winning bidder.
 
     The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court of Texas case at a later date. Management believes, after
consultation with legal counsel, that the claims of the petitioner are barred by
applicable time
 
                                       49
<PAGE>   52
 
limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity. See "Legal Proceedings".
 
     As noted above, the Bank, in its various operations, is subject to
substantial statutory and regulatory compliance obligations. See "Regulation".
The Bank attempts in good faith to comply with the requirements of the various
statutes and regulations to which it is subject. These statutes and regulations
are complex, however, and even inadvertent noncompliance could result in civil
and, in some cases, criminal liability. In this regard, a substantial part of
the Bank's business has involved the origination, purchase, and sale of mortgage
loans. During the past several years, numerous individual claims and purported
consumer class action claims have been commenced against a number of financial
institutions, their subsidiaries, and other mortgage lending institutions,
alleging violations of various state and regulatory provisions relating to
mortgage lending and servicing, including the TILA and the RESPA.
 
     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. See "Legal Proceedings".
 
     Each house of Congress has passed legislation which, if it were to become
law, would require recapture of a thrift's post-1987 tax bad debt reserve over a
six-taxable-year period with the opportunity to defer recapture by up to two
years if certain residential loan requirements were met. A thrift's tax bad debt
reserve as of December 31, 1987 would not be subject to recapture. There would
be no financial statement impact on the Bank or the Company from this recapture
because a deferred tax liability has already been provided for on the Bank's
post-1987 tax bad debt reserves. At September 30, 1995, the Bank had
approximately $101 million of post-1987 tax bad debt reserves. The current tax
liability resulting from recapture of these reserves would be reduced by NOLs
available to offset this income. See "Risk Factors -- Recapitalization of the
SAIF and its Impact on SAIF Premiums; Other Legislative Proposals".
 
     As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. There can be no assurance that the tax
deductions associated with these NOLs will be allowed by the IRS. In addition,
such tax deductions would be subject to significant limitation under Section 382
of the Code if the Company undergoes an Ownership Change. In the event of an
Ownership Change, Section 382 of the Code imposes an annual limitation on the
amount of taxable income a corporation may offset with NOLs and certain
recognized built-in losses. See "Regulation -- Taxation -- Net Operating Loss
Limitations".
 
FEDERAL FINANCIAL ASSISTANCE
 
     The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement and the Settlement Agreement. These payments aggregated
$218.9 million in fiscal 1994, including the settlement payment of $195.3
million, and $70.9 million in fiscal 1993. Approximately $23.1 million in fiscal
1994 and $9.3 million in fiscal 1993 reflected financial assistance that was
recorded as income. Pursuant to the Settlement Agreement, all financial
assistance and related payments ceased to accrue as of December 28, 1993, and,
as of that date, the Bank no longer managed or owned any Covered Assets. There
was no material adverse effect on the Company or the Bank as a result of the
Settlement Agreement, the transfer of certain Covered Assets to the FDIC and the
retention of the remainder of such Covered Assets without financial assistance.
See "Business -- The Assistance Agreement".
 
                                       50
<PAGE>   53
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
     In March 1995, FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This statement
establishes accounting standards for recognizing and measuring impairment of
long-lived assets (and related goodwill) to be held and used and for such assets
held for disposal. The statement is effective for financial statements with
fiscal years beginning after December 15, 1995, with earlier application
encouraged. Implementation of this pronouncement should have no material adverse
effect on the Consolidated Financial Statements.
 
     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.
 
                                       51
<PAGE>   54
 
                                    BUSINESS
 
GENERAL
 
     The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, nine commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Offering, the Company will be the largest
publicly traded depository institution headquartered in Texas, in terms of both
assets and deposits.
 
     The Company's operating structure reflects its current business strategy,
with four business groups in two business segments.
 

                        [CHART SHOWING BUSINESS GROUPS]


                                       52



<PAGE>   55
 
     Operating earnings (loss) by business segment, for the Company, were as
follows:
 
                     OPERATING EARNINGS BY BUSINESS SEGMENT
 
<TABLE>
<CAPTION>
                              BANKING    MORTGAGE BANKING     BANK UNITED                       TOTAL OPERATING
                              SEGMENT         SEGMENT          CORP.(1)      ELIMINATIONS(2)      EARNINGS(3)
                              -------    -----------------    -----------    ---------------    ---------------
                                                      (IN MILLIONS)
<S>                           <C>        <C>                  <C>            <C>                <C>
Six months ended March 31,
  1996.......................  $58.3           $ 2.4             $(1.9)          $  (3.8)           $  55.0
  1995.......................   37.6            17.0              (0.6)             (5.2)              48.8
Years ended September 30,
  1995.......................   83.3            19.4              (5.0)             (6.4)              91.3
  1994.......................   63.2            24.4              (0.7)            (11.4)              75.5
  1993.......................   60.8            31.5                --             (15.2)              77.1
</TABLE>
 
- ---------------
(1) Principally interest expense on the Senior Notes.
 
(2) Reflecting the elimination of dividends received by the Company from the
    Bank.
 
(3) Operating earnings represents income before taxes, minority interest and
    extraordinary loss, and excludes net gains (losses) on securities, MBS and
    other loans.
 
BUSINESS STRATEGY
 
     The Company's initial strategy was to obtain assets and deposits through
the acquisition of failed thrifts and through purchases from the RTC during the
resolution of the banking and thrift problems that occurred in the late 1980s
and early 1990s. Operationally, the Company focused on traditional single family
mortgage lending and on deposit gathering. As a complement to these activities,
the Company entered the retail and wholesale mortgage banking businesses,
leveraging management's substantial experience in the origination, purchase,
sale, structuring, and securitization of mortgage loans and the purchase and
sale of MSRs.
 
     The Company's financial priorities initially were focused towards
minimizing interest rate and credit risk while maximizing the net value of the
Company's assets and liabilities. To this end, the Company maintained a highly
liquid pool of securitizable assets as its core portfolio holdings. Given the
liquid nature of its portfolio, the Company was very active in the buying and
selling of loans, MBS and MSRs when economically attractive.
 
     Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lines of business. During this time, the Company has increased its portfolio of
multi-family, residential construction, consumer, and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. To support this strategy, the Company has hired experienced commercial
banking professionals and engaged in more aggressive marketing campaigns. In
addition to its efforts to increase originations of commercial and consumer
loans, the Company plans to increase the retention of higher yielding single
family and multi-family mortgage loans that, in the past, may have been sold or
securitized.
 
MANAGEMENT
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Offering, Mr. Burkholder will
also become Chairman of the Board of the Bank and President and CEO of the
Company. The executive management group of the Bank is composed of seven
individuals who have worked together for the past six years, giving them a
thorough understanding of the businesses they have developed together. They
average more than 20 years of related industry experience, the majority of which
comes from commercial banks. As a team, they have brought the disciplines and
sophistication of commercial banking to the Bank. The next level
 
                                       53
<PAGE>   56
 
of senior management is composed of 42 executives, a third of whom were hired
directly from commercial banks. The balance of the senior management team has
experience working with various financial services companies, including mortgage
banks, thrifts and accounting firms. See "Management".
 
     Lewis A. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Offering, to serve as Chairman of the
Board of the Company. The Company is contemplating entering into a consulting
arrangement with Mr. Ranieri pursuant to which he would serve as a consultant to
the Company for a period of three years.
 
COMMUNITY BANKING GROUP
 
     The Community Banking Group, which has marketed itself under the name "Bank
United" since 1993, operates a 67 branch community banking network, a 24-hour
telephone banking center, and a 62-unit ATM network, which together serve as the
platform for the Company's consumer and small business banking activities. The
Company's branch network includes 34 branches in the greater Houston area, 29
branches in the Dallas/Ft. Worth metropolitan area, and two branches each in
Austin and San Antonio. In addition, the Company plans to open at least three
supermarket-based banking branches in 1996. Through its branch network, the
Company maintains more than 400,000 accounts with an estimated 182,000
households and businesses. The Community Banking Group's principal activities
include deposit gathering, consumer lending, small-business banking, and
investment product sales.
 
     Deposit Gathering
 
     The Community Banking Group offers a variety of traditional deposit
products and services, including checking and savings accounts, money market
accounts, and CDs. In addition, the Company offers deposit products and services
tailored specifically to small business needs. The Community Banking Group's
strategy is to become its customers' primary financial services provider by
emphasizing high levels of customer service and innovative products. The Company
has a history of introducing innovative products that have helped it increase
its competitive position within its primary banking markets. At March 31, 1996,
the Community Banking Group maintained over 310,000 deposit accounts with $3.9
billion in deposits.
 
     Consumer Lending
 
     Since 1992, the Community Banking Group has engaged in consumer lending for
its own portfolio. At March 31, 1996, consumer loans outstanding totaled $130.4
million. Through the Community Banking Group, the Company offers a variety of
consumer loan products, including home improvement loans, unsecured lines of
credit, and automobile loans. In addition, while the Company has offered its
customers credit cards since 1990, the Company intends to begin credit card
lending for its own portfolio in the fourth quarter of 1996. The consumer
lending division of the Community Banking Group also offers home equity lines of
credit ("HELOCs") outside of Texas. (Current laws prohibit HELOC lending in the
state of Texas; however, the Company has put in place the systems and controls
needed to manage a Texas-based HELOC operation in anticipation of Texas
legislative and constitutional changes that would authorize such lending.) The
Community Banking Group has developed the technology required for efficient loan
processing and underwriting, including credit scoring and such services as
taking loan applications by telephone.
 
     Small Business Banking
 
     The Community Banking Group provides a broad range of credit services to
its small business customers, including lines of credit, working capital loans,
equipment loans, owner-occupied real estate loans, and Small Business
Administration loans. At March 31, 1996, the Community Banking Group had
approximately 280 business credit loans outstanding, representing approximately
$26.1 million in loan commitments. At March 31, 1996, the Community Banking
Group also had approximately $7.5 million in approved, unclosed business credit
loans and another $5.6 million in pending applications for business credit
loans. The Community Banking Group's small business strategy is focused on
offering loan products and services tailored specifically to most small business
needs, with highly responsive credit decision-making. The Company is
aggressively seeking to increase its small business lending volume.
 
                                       54
<PAGE>   57
 
     Investment Product Sales
 
     Since 1993, a subsidiary of the Bank has been marketing investment products
to the Bank's consumer customer base. At March 31, 1996, the investment product
sales force was comprised of 23 commissioned Series 7 and Group I licensed
registered representatives. A broad range of investment products, including
stocks, bonds, mutual funds, annuities, and securities are offered by these
registered representatives.
 
COMMERCIAL BANKING GROUP
 
     The Commercial Banking Group provides credit and a variety of cash
management and other services to certain real estate and real estate related
businesses. The Commercial Banking Group conducts its activities through four
units: MBF, a financial service provider to small- and medium-sized mortgage
companies; Multi-Family Lending; Residential Construction Lending; and
Commercial Real Estate Lending. Business is solicited in Texas and in targeted
regional markets throughout the United States. The Commercial Banking Group
earns fees on committed lines and fees and interest on loans outstanding. The
Commercial Banking Group is expanding its products and industry specialties to
include health care lending, asset-based lending, and other industrial and
commercial loan products.
 
     Mortgage Banker Finance
 
     The Commercial Banking Group's MBF unit provides third-party mortgage
companies with credit facilities, including warehouse lines of credit, gestation
repurchase agreements, term loans secured by MSRs and working capital credit
lines, as well as cash management services. At March 31, 1996, the MBF unit had
$100.8 million in unfunded commitments and $141.8 million of loans outstanding.
Since 1994, the MBF unit has also offered commercial banking services (i.e.,
cash management, document custody and deposit services) to its mortgage banking
customers. Deposits related to MBF activities totaled $797.3 million at March
31, 1996.
 
     Multi-Family Lending
 
     Since 1990, the Commercial Banking Group has been providing multi-family
financing for established, operating multi-family properties, real estate
investment trusts and selected construction, acquisition, and rehabilitation
projects. At March 31, 1996, the Multi-Family Lending unit had $243.0 million in
multi-family commitments and $341.1 million in multi-family loans outstanding,
including $297.7 million in permanent loans and $43.4 million in construction
loans. Loans are solicited directly in Texas and in targeted regional markets
throughout the United States, through regional offices and selected preapproved
multi-family mortgage banking correspondents. From time to time, the Commercial
Banking Group also purchases servicing rights related to multi-family loans. At
March 31, 1996, the multi-family servicing portfolio totaled $669.2 million, of
which $373.5 million represented loans in the Company's portfolio.
 
     Residential Construction Lending
 
     Since 1989, the Commercial Banking Group has been active in making loans to
builders for the construction of single family residential properties and, on a
more limited basis, loans for acquisition and development of improved
residential lots. During fiscal 1994 and 1995, the Company expanded into several
other major markets outside of Texas, including Atlanta, Chicago, Denver,
Orlando, Phoenix, and Philadelphia. Current markets in Texas include Houston,
Dallas, Austin, and San Antonio. At March 31, 1996, the Company had $401.7
million in commitments and $179.5 million of residential construction loans
outstanding.
 
     Commercial Real Estate Lending
 
     The Commercial Banking Group is engaged in commercial real estate lending
in targeted sectors, emphasizing permanent mortgages on income producing
properties, such as assisted living facilities. At March 31, 1996, the Company
had $45.1 million in permanent commercial real estate loans outstanding.
 
                                       55
<PAGE>   58
 
FINANCIAL MARKETS GROUP
 
     The Financial Markets Group manages the Company's asset portfolio
activities, including loan acquisition and management and the securitization of
whole loans. Additionally, under the supervision of the ALCO, the Financial
Markets Group is responsible for the Company's investment portfolio, for
interest rate risk hedging strategies, and for securing funding sources other
than consumer and commercial deposits.
 
     Loan Acquisition and Management
 
     The Financial Markets Group acquires residential loans, primarily single
family loans, through traditional secondary market sources (mortgage companies,
financial institutions, and investment banks), as well as from the Mortgage
Banking Group. Since September, 1992, the Company has closed more than 50 loan
acquisition transactions representing more than $5.3 billion in loans. At March
31, 1996, the majority of the $7.5 billion of loans held to maturity by the
Company, which are primarily (88%) adjustable-rate loans, were managed by the
Financial Markets Group.
 
     Wholesale Fundings
 
     The Financial Markets Group arranges funding sources other than consumer
and commercial deposits for the Company. Wholesale funding sources include
advances from the FHLB Dallas, reverse repurchase agreements, commercial
borrowings, and brokered CDs. At March 31, 1996, wholesale activities provided
$5.3 billion in funding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Capital Resources and Liquidity" and
Notes 8, 9 and 10 to the Consolidated Financial Statements.
 
     Investment Portfolio Management
 
     The Financial Markets Group manages the Company's investment portfolio,
which totaled nearly $2.7 billion at March 31, 1996. The Financial Markets Group
seeks to maintain a portfolio of assets that provides for liquidity needs and
maintains an interest rate spread over matched funded liabilities, including
assets that may be pledged as collateral for secured borrowings, and that
maximize utilization of the Bank's risk-based capital. See
"Business -- Investment Portfolio" and Notes 2, 3 and 4 to the Consolidated
Financial Statements.
 
     Securitization of Whole Mortgage Loans
 
     The Financial Markets Group evaluates the Company's loan portfolio for
securitization opportunities and, when appropriate, creates MBS and retains the
master servicing. During the past three years, the Financial Markets Group has
structured seven securitization transactions, creating $1.8 billion in MBS. The
Company has sold substantially all of the non-investment grade securities
created, thus enhancing the Bank's risk-based capital ratios and credit quality.
These securitization activities are separate from the secondary marketing
activities of the Mortgage Banking Group.
 
MORTGAGE BANKING GROUP
 
     The Mortgage Banking Group operates under the names "Bank United Mortgage"
in Texas and Virginia and "Commonwealth United Mortgage" elsewhere in the United
States. The Mortgage Banking Group originates and services first mortgage loans
for single family residences for both the Company's portfolio and for sale to
investors. At December 31, 1995, with originations of $3.4 billion in fiscal
year 1995, the Company was ranked by the American Banker as among the 30 largest
originators of single family loans in the nation. In addition, the Company was
ranked by the American Banker as one of the 40 largest single family loan
servicers in the nation at December 31, 1995. The Company's servicing portfolio
at March 31, 1996 was $11.6 billion. To manage the risk on mortgage pipeline
loans, the Company estimates the portion of the loans that will close and then
enters into forward sales of such loans in the secondary market. Consistent with
the increasing emphasis on its community and commercial banking business, the
Company is in the process of evaluating its strategic alternatives with respect
to its mortgage banking business, including a sale or
 
                                       56
<PAGE>   59
 
restructuring of all or parts of its mortgage origination business. No
assurances can be made regarding the timing or impact of any such sale or
restructuring on the Company's residential mortgage lending business.
 
     The Mortgage Banking Group principally engages in three activities: Retail
Mortgage Operations, Wholesale Mortgage Operations, and Mortgage Servicing
Operations.
 
     Retail Mortgage Operations
 
     The Mortgage Banking Group offers a variety of fixed-rate and
adjustable-rate mortgage products for consumers through a nationwide network of
retail mortgage origination offices. For the 12 months ended March 31, 1996, the
Mortgage Banking Group originated $2.2 billion in retail mortgage loans. Loans
are originated through direct contact with individual borrowers by the Group's
commissioned retail loan officers.
 
     Wholesale Mortgage Operations
 
     The Mortgage Banking Group provides qualified mortgage brokers nationwide
with a variety of fixed-rate and adjustable-rate mortgage products through its
network of wholesale mortgage origination offices. For the 12 months ended March
31, 1996, the Mortgage Banking Group originated $1.7 billion in mortgage loans
through its wholesale operations. Loans are originated through contact with one
of the Company's 3,255 mortgage brokers, serviced by the Group's wholesale
account executives. All loans originated through wholesale mortgage operations
are underwritten by the Company's staff according to secondary market
requirements and internal guidelines. The loans are originated and closed in
either the name of the Bank or, under certain circumstances, the mortgage
broker's name with immediate assignment to the Bank.
 
     Mortgage Servicing Operations
 
     The Mortgage Banking Group services residential mortgage loans owned by the
Bank and by others, including the GNMA, the FNMA, the FHLMC and private mortgage
investors. Mortgage loan servicing consists of collecting and accounting for
principal and interest payments from borrowers, remitting principal and interest
payments to investors, making cash advances when required, collecting funds for
and paying mortgage-related expenses such as taxes and insurance, inspecting
mortgaged properties when required, collecting delinquent mortgages, conducting
foreclosures and property dispositions in the event of unremedied defaults, and
generally administering the loans. At March 31, 1996, the Mortgage Banking Group
serviced over $11.6 billion in mortgage loans, including $4.0 billion for the
Company's portfolio and $7.6 billion for others. Mortgage servicing operations
are technology and process management intensive. The Company views itself as
being competitively positioned to service loans in an efficient and cost
effective manner relative to its peers. The Company has been ranked by ICM
Consultants, Inc. as one of the nation's top 10 servicing organizations in terms
of efficiency and productivity for the past five years.
 
                                       57
<PAGE>   60
 
LOAN PORTFOLIO
 
     The Company has focused in recent years on originating and servicing
commercial banking assets. However, the Company's loan portfolio still reflects
the Company's origins as a thrift institution, with single family mortgage
originations constituting a majority of loans made by the Company. The following
tables set out the Company's loan origination levels, as well as the product and
geographic distribution of its loan portfolio.
 
                               LOAN ORIGINATIONS
 
<TABLE>
<CAPTION>
                                         FOR THE SIX MONTHS
                                           ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                       -----------------------   ------------------------------------
                                          1996         1995         1995         1994         1993
                                       ----------   ----------   ----------   ----------   ----------
                                                               (IN THOUSANDS)
<S>                                    <C>          <C>          <C>          <C>          <C>
Single family(1).....................  $1,945,434   $1,453,267   $3,226,324   $5,424,550   $6,645,096
Single family residential
  construction.......................     208,847      100,328      239,481      133,609      129,254
Consumer.............................      53,570       41,734       99,249       94,153       64,742
Multi-family, commercial real estate,
  and business credit................     146,309      162,897      307,636      230,995       60,489
                                       ----------   ----------   ----------   ----------   ----------
          Total......................  $2,354,160   $1,758,226   $3,872,690   $5,883,307   $6,899,581
                                       ==========   ==========   ==========   ==========   ==========
</TABLE>
 
- ---------------
(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
    $529 million of loans originated for the Company's portfolio during the six
    months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
    1993.
 
                                 LOAN PORTFOLIO
 
<TABLE>
<CAPTION>
                                                                          AT SEPTEMBER 30,
                                                 AT MARCH 31,   ------------------------------------
                                                     1996          1995         1994         1993
                                                 ------------   ----------   ----------   ----------
                                                                   (IN THOUSANDS)
<S>                                              <C>            <C>          <C>          <C>
Single family..................................   $6,651,723    $7,061,088   $4,203,614   $3,376,181
Single family residential construction.........      179,505       115,436       57,786       35,904
Consumer.......................................      130,356       123,096      108,179       57,902
Multi-family...................................      393,604       479,798      289,334      112,055
Commercial real estate and business credit.....       64,113        38,326       61,919       49,510
Mortgage banker finance line of credit.........      141,781       109,339      147,754      385,548
Single family mortgage warehouse...............      379,720       411,287      252,153      899,602
                                                  ----------    ----------   ----------   ----------
                                                   7,940,802     8,338,370    5,120,739    4,916,702
Allowance for credit losses....................      (36,489)      (36,801)     (23,454)     (29,864)
Accretable unearned discount...................      (24,452)      (38,460)     (50,650)     (27,923)
Net deferred loan origination fees.............       (1,525)       (1,727)        (461)       3,464
Unrealized losses..............................         (256)       (1,142)      --           --
                                                  ----------    ----------   ----------   ----------
          Total                                   $7,878,080    $8,260,240   $5,046,174   $4,862,379
                                                  ==========    ==========   ==========   ==========
</TABLE>
 
                                       58
<PAGE>   61
 
             GEOGRAPHIC DISTRIBUTION OF REAL ESTATE LOAN PORTFOLIO
 
<TABLE>
<CAPTION>
                                                                           AT SEPTEMBER 30,
                                           AT MARCH 31,     ----------------------------------------------
                  STATE                        1996             1995             1994             1993
- -----------------------------------------  ------------     ------------     ------------     ------------
                                                                   (IN THOUSANDS)
<S>                                        <C>              <C>              <C>              <C>
California...............................   $3,793,094       $ 3,958,293      $ 1,764,531      $ 1,375,506
Texas....................................    1,238,727         1,259,306        1,131,225          891,459
Florida..................................      450,849           479,379          456,812          485,977
Illinois.................................      168,905           190,801          138,072           72,749
Arizona..................................      130,703           115,260           30,142           20,932
Pennsylvania.............................      120,853           128,693           68,728           33,489
New Jersey...............................      107,080           118,825           80,727           53,452
Virginia.................................      100,700           107,420           92,704           92,846
Washington...............................       85,425            81,005           32,899            7,682
Georgia..................................       83,871            94,413           56,442           63,098
Other states.............................    1,039,559         1,202,943          827,480          532,740
Other -- single family mortgage
  warehouse..............................      379,720           411,287          252,153          899,602
                                            ----------        ----------       ----------       ----------
          Total real estate..............    7,699,486         8,147,625        4,931,915        4,529,532
Mortgage Banker Finance lines of
  credit.................................      141,781           109,339          147,754          385,548
Business credit..........................       19,015             7,320               --               --
Non real estate consumer.................       91,730            89,509           72,987           44,597
                                            ----------        ----------       ----------       ----------
          Subtotal.......................    7,952,012         8,353,793        5,152,656        4,959,677
Non-accretable unearned discounts........      (11,210)          (15,423)         (31,917)         (42,975)
                                            ----------        ----------       ----------       ----------
          Total..........................   $7,940,802       $ 8,338,370      $ 5,120,739      $ 4,916,702
                                            ==========        ==========       ==========       ==========
</TABLE>
 
             GEOGRAPHIC AND PRODUCT DISTRIBUTION OF LOAN PORTFOLIO
                               AT MARCH 31, 1996
 
<TABLE>
<CAPTION>
                     SINGLE                                   SINGLE
                     FAMILY                     COMMERCIAL    FAMILY                     NON REAL
       SINGLE     RESIDENTIAL       MULTI-         REAL      MORTGAGE       TOTAL         ESTATE                         % OF
STATE   FAMILY    CONSTRUCTION      FAMILY        ESTATE     WAREHOUSE   REAL ESTATE      LOANS          TOTAL          TOTAL
- ---- ----------   ------------   ------------   ----------   ---------   -----------   ------------   ------------      ------
                                                        (DOLLARS IN THOUSANDS)
<S>  <C>          <C>            <C>            <C>          <C>         <C>           <C>            <C>            <C>
California... $3,771,710   $     --   $   21,384  $     --   $     --    $3,793,094      $     --      $ 3,793,094          47.70%
Texas...         881,324    107,412      220,878      29,113       --     1,238,727            --        1,238,727          15.58
Florida...       421,850     27,013         --         1,986       --       450,849            --          450,849           5.67
Illinois...      157,986     10,919         --         --          --       168,905            --          168,905           2.12
Arizona...        97,372     14,323       19,008       --          --       130,703            --          130,703           1.64
Pennsylvania...  111,273      7,083        2,497       --          --       120,853            --          120,853           1.52
New
Jersey...        107,080       --           --         --          --       107,080            --          107,080           1.35
Virginia...      100,700       --           --         --          --       100,700            --          100,700           1.27
Washington...     65,974       --         19,451       --          --        85,425            --           85,425           1.07
Georgia...        56,331      6,957       20,583       --          --        83,871            --           83,871           1.06
Other
states...        926,785      5,798       91,211      15,765       --     1,039,559            --        1,039,559          13.07
Other(1)...         --         --           --         --     379,720       379,720       252,526          632,246           7.95
              ----------   --------   ----------    -------- --------    ----------      --------      -----------         ------
    Total...  $6,698,385   $179,505   $  395,012    $ 46,864 $379,720    $7,699,486      $252,526      $ 7,952,012         100.00%
              ==========   ========   ==========    ======== ========    ==========      ========      ===========         ======
% of
Total...          84.23%       2.26%        4.97%       0.59%    4.77 %       96.82 %        3.18%          100.00%
              =========    ========   ==========    ======== ========    ==========      ========      ===========
</TABLE>
 
- ---------------
(1) Loans that cannot be classified by state.
 
                                       59
<PAGE>   62
 
LOAN SERVICING PORTFOLIO
 
     At March 31, 1996, the Mortgage Banking Group was servicing $4.0 billion in
residential mortgage loans owned by the Company and $7.6 billion in mortgages
owned by others. Mortgage loan servicing consists of collecting and accounting
for principal and interest payments from borrowers, remitting principal and
interest payments to investors, making cash advances when required, collecting
funds for and paying mortgage-related expenses such as taxes and insurance,
inspecting mortgaged properties when required, collecting delinquent mortgages,
conducting foreclosures and property dispositions in the event of unremedied
defaults, and generally administering the loans.
 
     In return for performing the servicing functions listed above, the Mortgage
Banking Group receives servicing fees under loan administration contracts. These
fees are withheld from the monthly payments made to investors, are usually based
on the principal balance of the loan being serviced, generally range from 0.25%
to 0.50% annually of the outstanding principal amount of the loan, and are
collected only as payments are received. Minimum servicing fees for
substantially all loans serviced under MBS are set from time to time by the
sponsoring agencies. As a servicer of loans securitized by the GNMA, the FNMA
and the FHLMC, the Bank may be obligated to make timely payment of principal and
interest to security holders, whether or not such payments have been made by
borrowers on the underlying mortgage loans. With respect to mortgage loans
securitized under GNMA programs, the Company is insured by the FHA against
foreclosure loss on FHA loans, and by the VA through guarantees on VA loans.
Although the GNMA, the FNMA and the FHLMC are obligated to reimburse the Company
for principal and interest payments advanced by the Company as a servicer, the
funding of delinquent payments or the exercise of foreclosure rights involves
costs to the Company that may not be fully reimbursed or recovered.
 
                                       60
<PAGE>   63
 
     The following table sets forth information on the Mortgage Banking Group's
Single Family Servicing Portfolio.
 
                       SINGLE FAMILY SERVICING PORTFOLIO
 
<TABLE>
<CAPTION>
                                              FOR THE SIX MONTHS      FOR THE YEAR ENDED SEPTEMBER
                                                ENDED MARCH 31,                    30,
                                              -------------------     -----------------------------
                                               1996        1995        1995        1994       1993
                                              -------     -------     -------     ------     ------
                                                                  (IN MILLIONS)
<S>                                           <C>         <C>         <C>         <C>        <C>
Beginning servicing portfolio................ $12,532     $ 8,921     $ 8,921     $8,073     $7,187
                                              -------     -------     -------     ------     ------
Add: Servicing acquisitions(1)...............      78       3,406       3,730        567         --
      Servicing on loans purchased by the
        Bank.................................       1         440         440         98      1,098
      Servicing originated...................   1,980       1,497       3,339      5,407      6,690
      Subservicing acquired..................      23         135         255         --         --
                                              -------     -------     -------     ------     ------
          Total additions....................   2,082       5,478       7,764      6,072      7,788
                                              -------     -------     -------     ------     ------
Less: Prepayments............................     823         329         938      1,051      1,169
      Foreclosures...........................      52          37          80         41         39
      Servicing released/transferred(1)......   1,986       1,861       2,840      3,913      5,492
      Amortization...........................     159         140         295        219        202
                                              -------     -------     -------     ------     ------
          Total reductions...................   3,020       2,367       4,153      5,224      6,902
                                              -------     -------     -------     ------     ------
Ending servicing portfolio................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
COMPOSITION OF ENDING SERVICING PORTFOLIO BY
  TYPE
  Government................................. $ 2,391     $ 3,008     $ 3,090     $2,777     $1,874
  Conventional...............................   9,203       9,024       9,442      6,144      6,199
                                              -------     -------     -------     ------     ------
Total servicing portfolio.................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
COMPOSITION OF ENDING SERVICING PORTFOLIO BY
  OWNER
  Company.................................... $ 3,956     $ 3,657     $ 4,010     $2,714     $3,634
  Others(2)..................................   7,638       8,375       8,522      6,207      4,439
                                              -------     -------     -------     ------     ------
Total servicing portfolio.................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
</TABLE>
 
- ---------------
(1) The actual release or transfer of servicing does not necessarily take place
    during the same period as the related sale or purchase of MSRs.
 
(2) Includes servicing related to loans securitized by the Financial Markets
    Group into MBS, a portion of which have been retained by the Company.
 
     During the six months ended March 31, 1996 and 1995 and in fiscal 1995 and
1994, the Mortgage Banking Group purchased MSRs associated with loan principal
amounts of $78.2 million, $526.0 million, $594.7 million and $3.9 billion at
premiums of $949,000, $8.9 million, $10.3 million and $50.9 million,
respectively. In addition to the MSRs acquired during fiscal 1994 associated
with $567 million of single family loans included above, MSRs associated with
$3.4 billion of single family loans were purchased in fiscal 1994. Because this
transaction was consummated at or near year-end, these loans were subserviced by
the seller until they were transferred to the Company in fiscal 1995.
Accordingly, this $3.4 billion purchase is not reflected in the table above
until fiscal 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Discussion of Results of
Operations -- Non-Interest Income" and Note 6 to the Consolidated Financial
Statements.
 
     Gains on the sale of MSRs are affected by changes in interest rates as well
as the amount of MSRs capitalized at the time of loan origination or MSR
acquisition. Purchasers of MSRs analyze a variety of factors, including
prepayment sensitivity, to assess the purchase price they are willing to pay.
Lower market
 
                                       61
<PAGE>   64
 
interest rates prompt an increase in prepayments as consumers refinance their
mortgages at lower rates of interest. As prepayments increase, the life of the
servicing portfolio is reduced, decreasing the servicing fee revenue that will
be earned over the life of that portfolio and the price third-party purchasers
are willing to pay. The fair value of servicing is also influenced by the supply
and demand of servicing available for purchase at any point in time. Conversely,
as interest rates rise, prepayments generally decrease, resulting in an increase
in the value of the servicing portfolio as well as the gains on sales of MSRs.
 
     Historically, the Company has sold substantially all of the originated MSRs
related to non-portfolio loans. The Company may retain servicing in order to
maintain the servicing portfolio at an acceptable level, particularly during
periods of unusually high levels of prepayments or low levels of new
originations.
 
     In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement requires that, among other things, the book value of
mortgage loans be allocated at the time of origination between the MSRs and the
related loans, provided there is a plan to sell or securitize such loans. With
the implementation of SFAS No. 122, the original cost basis of the loan is
allocated between the loan and the MSRs, thus increasing the gains on sales of
loans and reducing the gains on sales of MSRs.
 
     The following table presents the percentage of loans in the single family
servicing portfolio in each interest rate category.
 
<TABLE>
<CAPTION>
                                                          AT MARCH 31, 1996
                                ---------------------------------------------------------------------
                                LESS
                                THAN     7.00-     8.01-     9.01-      10.01-     11.01-     12.01%
                                7.00%    8.00%     9.00%     10.00%     11.00%     12.00%     & ABOVE
                                ----     -----     -----     ------     ------     ------     -------
    <S>                         <C>      <C>       <C>       <C>        <C>        <C>        <C>
    Government................   5.1%     7.5 %     5.3 %      2.1%       0.4%       0.2%       0.1%
    Conventional..............   9.1     29.6      28.9        8.4        2.0        0.7        0.6
                                                                                      --         --
                                ----     ----      ----       ----        ---
              Total...........  14.2%    37.1 %    34.2 %     10.5%       2.4%       0.9%       0.7%
                                ====     ====      ====       ====        ===         ==         ==
</TABLE>
 
     The weighted average interest rate in the single family servicing portfolio
has decreased from 9.57% at September 30, 1991 to 8.14% at March 31, 1996,
principally as a result of the origination of mortgage loans with increasingly
lower rates during fiscal 1991 to 1995, the prepayment and refinance of higher
rate mortgages, and purchases of MSRs on loans originated by others at lower
rates. At March 31, 1996, the weighted average contractual maturity (remaining
years to maturity) of the loans in the residential mortgage loan servicing
portfolio was 23 years.
 
     The following table sets forth as of March 31, 1996 the percentage of
loans, by principal amount, in the Company's single family servicing portfolio
secured on properties located in each state listed:
 
<TABLE>
<CAPTION>
                                        STATE                              PERCENT
            -------------------------------------------------------------  -------
            <S>                                                            <C>
            California...................................................    30.8%
            Texas........................................................    18.3
            Florida......................................................     6.2
            Illinois.....................................................     5.1
            New Jersey...................................................     4.8
            Georgia......................................................     3.0
            Other(1).....................................................    31.8
                                                                            -----
                      Total..............................................   100.0%
                                                                            =====
</TABLE>
 
- ---------------
(1) No other state constitutes more than 3%.
 
                                       62
<PAGE>   65
 
     Of the approximately 159,000 loans serviced by the Mortgage Banking Group,
at March 31, 1996, 3.84% were delinquent and an additional 0.60% were in
foreclosure. The following table presents certain information regarding the
number of the delinquent single family loans serviced by the Mortgage Banking
Group as of the dates indicated. Completed foreclosures and loans less than 30
days delinquent have been excluded from the table below.
 
<TABLE>
<CAPTION>
                                                                            AT SEPTEMBER 30,
                                                        AT MARCH 31,     ----------------------
                                                            1996         1995     1994     1993
                                                        ------------     ----     ----     ----
    <S>                                                 <C>              <C>      <C>      <C>
    30-59 Days Past Due...............................       2.3%         2.7%     2.3%     2.4%
    60-89 Days Past Due...............................       0.5          0.6      0.5      0.6
    90+ Days Past Due.................................       1.0          0.9      0.8      0.8
    Loans in foreclosure..............................       0.6          0.6      0.7      0.6
                                                            ----         ----     ----     ----
              Total...................................       4.4%         4.8%     4.3%     4.4%
                                                            ====         ====     ====     ====
</TABLE>
 
     Loan administration contracts with the FNMA, and typically with private
investors, provide for continuation of servicing over the term of the loan, but
permit termination for cause or termination without cause upon payment of a
cancellation fee. Loan administration contracts with the GNMA and the FHLMC are
terminable only for cause. Management believes that the Mortgage Banking Group
is currently in substantial compliance with all material rules, regulations, and
contractual obligations related to mortgage loan servicing.
 
INVESTMENT PORTFOLIO
 
     The Company maintains an investment portfolio for investment and liquidity
purposes.
 
                              INVESTMENT PORTFOLIO
 
<TABLE>
<CAPTION>
                                                                        AT SEPTEMBER 30,
                                           AT MARCH 31,     ----------------------------------------
                                               1996            1995           1994           1993
                                           ------------     ----------     ----------     ----------
                                                                (IN THOUSANDS)
<S>                                        <C>              <C>            <C>            <C>
Securities purchased under agreements to
  resell and federal funds sold..........   $  659,279      $  471,052     $  358,710     $  547,988
Trading account assets...................        1,267           1,081          1,011          1,006
Securities...............................       58,351         116,013        114,115         43,430
MBS......................................    1,954,070       2,398,263      2,828,903      2,175,925
                                            ----------      ----------     ----------     ----------
          Total..........................   $2,672,967      $2,986,409     $3,302,739     $2,768,349
                                            ==========      ==========     ==========     ==========
</TABLE>
 
     The investment portfolio consists primarily of MBS. MBS were acquired as a
means of investing in housing-related mortgage instruments while incurring less
credit risk than that which arises in holding a portfolio of non-securitized
loans. Additionally, MBS include securities created through the securitization
of the Company's single family loans.
 
                                       63
<PAGE>   66
 
     The MBS in the investment portfolio include FNMA, FHLMC, and GNMA
certificates, privately issued and credit enhanced MBS ("non-agency
securities"), and certain types of collateralized mortgage obligations ("CMOs").
 
                           MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>
                                                          AT MARCH 31, 1996
                                   ---------------------------------------------------------------
<S>                                <C>          <C>           <C>           <C>          <C>
 
<CAPTION>
                                                   GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
<S>                                <C>          <C>           <C>           <C>          <C>
                                                     (IN THOUSANDS)
Held to maturity
  Agency CMOs -- fixed-rate....... $    3,061     $    61      $      --    $   3,122
  Non-agency
     Fixed-rate...................      7,529       1,837             93        9,273
     Adjustable-rate..............    559,365         635         12,526      547,474
     CMOs -- fixed-rate...........    104,286           7          6,893       97,400
  Other...........................        303          --             --          303
                                     --------    --------       --------     --------
                                      674,544     $ 2,540      $  19,512      657,572
                                                 ========       ========
  Allowance for losses............        (56)                                     --
                                     --------                                --------
          Held to maturity........    674,488                                 657,572    $ 674,488
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     Adjustable-rate..............    386,876     $ 3,335      $       5      390,206
     CMOs -- fixed-rate...........      4,032           6             --        4,038
     CMOs -- adjustable-rate......    245,565       1,219            121      246,663
  Non-agency
     Fixed-rate...................     72,760       2,390              1       75,149
     Adjustable-rate..............    440,638         687          2,723      438,602
     CMOs -- fixed-rate...........     79,944          --          1,460       78,484
     CMOs -- adjustable-rate......     37,851          12          1,017       36,846
  Other...........................      8,360       1,234             --        9,594
                                     --------    --------       --------     --------
          Available for sale......  1,276,026     $ 8,883      $   5,327    1,279,582    $1,279,582
                                                 ========       ========                  ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $1,950,514                               $1,937,154
                                     ========                                ========
</TABLE>
 
     The FNMA, FHLMC and GNMA certificates are modified pass-through MBS that
represent undivided interests in underlying pools of fixed-rate or certain types
of adjustable-rate, single family loans issued by the GNMA, a governmental
agency, and by the FNMA and the FHLMC, government-sponsored enterprises. The
non-agency securities acquired by the Company have been pooled and sold by
private issuers and were generally underwritten by large investment banking
firms. These securities provide for the timely payments of principal and
interest either through insurance issued by a reputable insurer, or by
subordinating certain payments under other securities secured by the same
mortgage pool in a manner that is sufficient to have the senior MBS earn one of
the two highest credit ratings from one or more of the nationally recognized
statistical rating agencies. As of March 31, 1996, 99% of the non-agency MBS had
a credit rating of AA/Aa or higher as defined by the Standard & Poor's
Corporation or Moody's Investor Services, Inc., respectively.
 
     The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and MBS. The loans and MBS underlying the repurchase agreements are
held by the counterparty in safekeeping for the account of the Company or by a
third-party custodian for the benefit of the Company. All of the investments in
repurchase agreements and
 
                                       64
<PAGE>   67
 
federal funds sold at March 31, 1996 matured on or before April 24, 1996 and
those outstanding at September 30, 1995 matured on or before October 5, 1995.
The repurchase agreements provide for the same loans and MBS to be resold at
maturity.
 
     See Notes 1 through 4 to the Consolidated Financial Statements for
additional information related to the assets in the investment portfolio.
 
DEPOSITS AND BORROWINGS
 
  Deposits
 
     The Company attracts deposits through the Bank's 67 community banking
branches located primarily in the Houston and Dallas/Ft. Worth areas. Currently,
the principal methods used by the Company to attract and retain deposit accounts
include offering generally competitive interest rates, having branch locations
in these major Texas markets, and offering a variety of services for the
Company's customers. The Company uses traditional marketing methods to attract
new customers and savings deposits, including newspaper, radio, and television
advertising. The Company offers a traditional line of deposit products that
currently includes checking, commercial checking, money market and savings
accounts and certificates of deposit. These deposit products are specifically
tailored to meet the needs of the Company's retail and small business banking
customers.
 
     The following table illustrates the levels of deposits gathered by the
Company's branch network at March 31, 1996.
 
                           COMMUNITY BANKING NETWORK
 
<TABLE>
<CAPTION>
                                                                       AT MARCH 31, 1996
                                                             --------------------------------------
                                                                                           AVERAGE
                                                                                           DEPOSITS
                                                             NUMBER OF      DEPOSITS         PER
                         LOCATION                            BRANCHES      OUTSTANDING      BRANCH
- -----------------------------------------------------------  ---------     -----------     --------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                          <C>           <C>             <C>
Houston Area...............................................      34        $ 2,392,261     $ 70,361
Dallas/Ft. Worth Area......................................      29          1,322,686       45,610
Other......................................................       4            212,889       53,222
                                                                 --
                                                                            ----------
          Total deposits...................................      67        $ 3,927,836       58,624
                                                                 ==         ==========
</TABLE>
 
     The Company also offers cash management services to its MBF customers.
These services are commercial deposit accounts comprised of operating accounts
of MBF customers, escrow deposits, and principal and interest payments on the
loans serviced by MBF customers. At March 31, 1996, these deposits totaled
$797.3 million. While the Company does not generally solicit brokered deposits,
the Company from time to time accepts brokered deposits when permitted by
regulation and available at favorable rates. Wholesale deposits are raised from
time to time through the Company's money desk from institutional investors.
 
                                       65
<PAGE>   68
 
     The following table sets forth by account types the aggregate amount and
weighted average rate of the Company's deposits.
 
                                    DEPOSITS
 
<TABLE>
<CAPTION>
                                                                                  AT SEPTEMBER 30,
                                                        ---------------------------------------------------------------------
                                    AT MARCH 31,
                                        1996                    1995                    1994                    1993
                                ---------------------   ---------------------   ---------------------   ---------------------
                                             WEIGHTED                WEIGHTED                WEIGHTED                WEIGHTED
                                             AVERAGE                 AVERAGE                 AVERAGE                 AVERAGE
                                  AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE
                                ----------   --------   ----------   --------   ----------   --------   ----------   --------
                                                                   (DOLLARS IN THOUSANDS)
<S>                             <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>
Non-interest bearing
  deposits....................  $  242,560       --%    $  181,196       --%    $   76,498       --%    $   44,149       --%
Interest-bearing deposits
  Transaction accounts........     222,148     1.00        219,307     1.50        233,666     1.49        229,972     2.07
  Insured money fund accounts
    Consumer..................     493,000     4.11        397,473     3.73        407,029     3.12        397,511     2.69
    Commercial................     717,308     5.32        857,669     5.82        416,571     4.84         51,938     2.60
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Subtotal................   1,210,308     4.83      1,255,142     5.16        823,600     3.99        449,449     2.68
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
  Savings accounts............     139,343     2.50        144,301     2.73        222,769     2.60        312,778     2.68
  Certificates of deposit
    Consumer..................   2,912,263     5.72      3,063,631     5.84      2,949,715     4.88      3,251,391     4.77
    Commercial................       3,348     5.02          2,273     5.36             --       --             --       --
    Wholesale.................     233,351     9.70        316,370     9.06        457,956     7.92        551,649     7.13
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Subtotal................   3,148,962     6.01      3,382,274     6.14      3,407,671     5.29      3,803,040     5.11
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Total interest-bearing
        deposits..............   4,720,761     5.37      5,001,024     5.59      4,687,706     4.74      4,795,239     4.58
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Total deposits..........  $4,963,321     5.11%    $5,182,220     5.40%    $4,764,204     4.67%    $4,839,388     4.53%
                                ==========     ====     ==========     ====     ==========     ====     ==========     ====
Consumer......................  $3,843,134              $3,868,498              $3,834,238              $4,207,739
Commercial....................     886,836                 997,352                 472,009                  80,000
Wholesale.....................     233,351                 316,370                 457,957                 551,649
                                ----------              ----------              ----------              ----------
      Total deposits..........  $4,963,321              $5,182,220              $4,764,204              $4,839,388
                                ==========              ==========              ==========              ==========
</TABLE>
 
     The following table sets forth, by various interest rate categories, the
dollar amounts and the periods to maturity of the Company's time deposits at
March 31, 1996.
 
                               DEPOSIT MATURITIES
 
<TABLE>
<CAPTION>
                                               CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
                                 ------------------------------------------------------------------------------
          STATED RATE               1997           1998          1999         2000        2001       THEREAFTER       TOTAL
- -------------------------------  ----------     ----------     --------     --------     -------     ----------     ----------
                                                                        (IN THOUSANDS)
<S>                              <C>            <C>            <C>          <C>          <C>         <C>            <C>
2.99% & below..................  $    1,824     $       --     $     --     $     --     $    --      $     --      $    1,824
3.00% to 3.99%.................      21,033          3,827          649            8          --             3          25,520
4.00% to 4.99%.................     291,351        237,112       16,495       32,615       1,051         3,099         581,723
5.00% to 5.99%.................     524,650        564,293      144,050       47,412       5,496        15,581       1,301,482
6.00% to 6.99%.................     131,259        436,705       82,683       57,147      60,189        19,592         787,575
7.00% to 7.99%.................     127,964         80,121        7,690        5,723      21,599        12,888         255,985
8.00% to 8.99%.................      11,580          1,273        2,581        3,010       1,700           379          20,523
9.00% to 9.99%.................         265            741        6,249        2,925          12           446          10,638
10.00% to 10.99%...............      31,200          7,444       23,974          728         591           325          64,262
Over 10.99%....................      69,648         29,517           --          265          --            --          99,430
                                 ----------     ----------     --------     --------     -------       -------      ----------
                                 $1,210,774     $1,361,033     $284,371     $149,833     $90,638      $ 52,313      $3,148,962
                                 ==========     ==========     ========     ========     =======       =======      ==========
</TABLE>
 
                                       66
<PAGE>   69
 
     The following table sets forth the amount of the Company's certificates of
deposit that are $100,000 or greater by time remaining until maturity.
 
                      TIME DEPOSITS GREATER THAN $100,000
 
<TABLE>
<CAPTION>
                                                                        AT MARCH 31, 1996
                                                              -------------------------------------
                                                              NUMBER OF ACCOUNTS     DEPOSIT AMOUNT
                                                              ------------------     --------------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                           <C>                    <C>
Three months or less........................................           648              $ 68,289
Over three through six months...............................           895                94,458
Over six through twelve months..............................         1,455               151,881
Over twelve months..........................................         1,352               143,660
                                                                     -----               -------
                                                                     4,350              $458,288
                                                                     =====               =======
</TABLE>
 
Borrowings
 
     The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. These sources of funds were the primary source of funds for the recent
asset growth and accounted for 46% of the funding of average assets for the six
months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994 and 23%
for fiscal 1993. Fixed and variable rate advances are obtained from the FHLB
Dallas under a security and pledge agreement that restricts the amount of
borrowings to the greater of (i) a percentage of fully disbursed single family
loans, unless assets are physically pledged to the FHLB Dallas, and (ii) a
percentage of total assets. At March 31, 1996, these limitations were 65% of the
outstanding principal of single family loans and 45% of total assets. See Notes
9 and 10 to the Consolidated Financial Statements.
 
                                       67
<PAGE>   70
 
     The following table sets forth certain information regarding the borrowings
of the Company as of or for the period indicated.
 
                                   BORROWINGS
 
<TABLE>
<CAPTION>
                                        AT OR FOR THE         AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                       SIX MONTHS ENDED      ----------------------------------------
                                        MARCH 31, 1996          1995           1994           1993
                                      ------------------     ----------     ----------     ----------
                                                          (DOLLARS IN THOUSANDS)
<S>                                   <C>                    <C>            <C>            <C>
Reverse Repurchase Agreements
  Balance outstanding at
     period-end.....................      $  949,936         $1,172,533     $  553,000     $  300,000
  Fair value of collateral at
     period-end.....................         987,478          1,239,527        673,000        321,200
  Maximum outstanding at any month-
     end............................       1,096,508          1,355,540        553,000        659,000
  Daily average balance.............         982,115            887,932        273,899        345,269
  Average interest rate.............            5.82%              5.99%          3.85%          3.23%
Federal Funds Purchased
  Balance outstanding at
     period-end.....................      $       --         $       --     $       --     $   10,000
  Maximum outstanding at any month-
     end............................              --                 --         15,000         10,000
  Daily average balance.............              54                521            767            740
  Average interest rate.............            5.94%              5.95%          3.73%          2.84%
FHLB Advances
  Balance outstanding period-end....      $4,139,023         $4,383,895     $2,620,329     $2,185,445
  Maximum outstanding at any month-
     end............................       4,384,798          4,386,605      2,697,829      2,217,745
  Daily average balance.............       4,346,960          3,560,844      2,285,630      1,344,129
  Average interest rate.............            6.18%              6.31%          3.98%          3.62%
</TABLE>
 
     See Note 8 to the Consolidated Financial Statements for additional
information.
 
ASSET AND LIABILITY MANAGEMENT
 
     The Company's asset and liability management process is utilized to manage
the Company's interest rate risk through structuring the balance sheet and
off-balance sheet portfolios to maximize net interest income while maintaining
acceptable levels of risk to changes in market interest rates. The achievement
of this goal requires a balance between profitability, liquidity and interest
rate risk.
 
     Interest rate risk is managed by the ALCO, which is composed of senior
officers of the Bank, in accordance with policies approved by the Board of
Directors of the Bank. The ALCO formulates strategies based on appropriate
levels of interest rate risk. In determining the appropriate level of interest
rate risk, the ALCO considers the impact on earnings and capital of the current
outlook on interest rates, potential changes in interest rates, regional
economies, liquidity, business strategies and other factors. The ALCO meets
regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market values of assets and
liabilities, unrealized gains and losses, purchase and sale activity, the
mortgage pipeline, and the maturities of investments and borrowings.
Additionally, the ALCO reviews liquidity, cashflow flexibility, maturities of
deposits, consumer and commercial deposit activity, current market conditions,
and interest rates on both a local and national level.
 
     The "interest rate sensitivity gap" is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to affect net interest income
adversely, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest
 
                                       68
<PAGE>   71
 
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest income adversely.
Different types of assets and liabilities with the same or similar maturities
may react differently to changes in overall market rates or conditions, thus
changes in interest rates may affect net interest income positively or
negatively even if an institution were perfectly matched in each maturity
category. While the interest rate sensitivity gap is a useful measurement and
contributes toward effective asset and liability management, it is difficult to
predict the effect of changing interest rates solely on that measure, without
accounting for alterations in the maturity or repricing characteristics of the
balance sheet that occur during changes in market interest rates.
 
     To effectively measure and manage interest rate risk, the Company uses
simulation analysis to determine the impact on net interest income under various
interest rate scenarios, balance sheet trends and strategies. From these
simulations, interest rate risk is quantified and appropriate strategies are
developed and implemented. Additionally, duration and market value sensitivity
measures are utilized when they provide added value to the overall interest rate
risk management process. The overall interest rate risk position and strategies
are reviewed by executive management and the Bank's Board of Directors on an
ongoing basis.
 
                                       69
<PAGE>   72
 
     The following table sets forth the expected repricing characteristics of
the Company's consolidated assets and liabilities at March 31, 1996, utilizing
assumptions noted below:
 
                           ASSET/LIABILITY REPRICING
 
<TABLE>
<CAPTION>
                                                      AMOUNTS MATURING OR REPRICING IN
                                        ------------------------------------------------------------
                                                       AFTER
                                                       THREE        AFTER        AFTER
                                        LESS THAN      MONTHS     SIX MONTHS    ONE YEAR     AFTER
                                          THREE      BUT WITHIN   BUT WITHIN   BUT WITHIN     FIVE       NON-
                                          MONTHS     SIX MONTHS    ONE YEAR    FIVE YEARS    YEARS     REPRICING      TOTAL
                                        ----------   ----------   ----------   ----------   --------   ---------   -----------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                     <C>          <C>          <C>          <C>          <C>        <C>         <C>
ASSETS(1)(2)
  Residential construction and
    commercial real estate loans......  $  599,923   $    6,275   $   12,837   $  154,403   $  6,254   $      --   $   779,692
  Single family mortgage warehouse....     379,719           --           --           --         --          --       379,719
  Adjustable-rate loans and mortgage-
    backed securities.................   3,025,481    2,101,348    1,487,350    1,007,120     26,395          --     7,647,694
  Fixed-rate loans and mortgage-backed
    securities........................      47,260       46,311       89,921      555,531    248,791          --       987,814
  Cash and investment securities......     994,980           --       52,600           --     40,009          --     1,087,589
  Other assets........................      76,470           --           --           --         --     307,658       384,128
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total assets....................  $5,123,833   $2,153,934   $1,642,708   $1,717,054   $321,449   $ 307,658   $11,266,636
                                         =========    =========    =========    =========   ========   =========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Certificates of deposit.............  $  465,343   $  644,399   $1,107,134   $  902,043   $ 30,043   $      --   $ 3,148,962
  Checking and savings(3).............   1,108,572       91,606      183,213      430,968         --          --     1,814,359
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total deposits..................   1,573,915      736,005    1,290,347    1,333,011     30,043          --     4,963,321
  Senior Notes........................          --           --           --      115,000         --          --       115,000
  FHLB advances and other
    borrowings........................   3,516,307      653,564      843,202       71,200      5,045          --     5,089,318
  Other liabilities...................     287,056           --           --           --         --     100,000       387,056
  Minority interest...................          --           --           --           --         --     185,500       185,500
  Stockholders' equity................          --           --           --           --         --     526,441       526,441
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total liabilities, minority
        interest, and stockholders'
        equity........................  $5,377,278   $1,389,569   $2,133,549   $1,519,211   $ 35,088   $ 811,941   $11,266,636
                                         =========    =========    =========    =========   ========   =========    ==========
Gap before off-balance-sheet financial
  instruments.........................  $ (253,445)  $  764,365   $ (490,841)  $  197,843   $286,361   $(504,283)
OFF-BALANCE-SHEET(5)
  Interest rate swap agreements -- pay
    floating..........................     (50,000)          --       50,000           --         --          --
  Interest rate swap agreements -- pay
    fixed.............................          --           --           --           --         --          --
                                         ---------    ---------    ---------    ---------   --------   ---------
Gap...................................  $ (303,445)  $  764,365   $ (440,841)  $  197,843   $286,361   $(504,283)
                                         =========    =========    =========    =========   ========   =========
Cumulative gap........................  $ (303,445)  $  460,920   $   20,079
                                                                   =========
Weighted average gap(4)...............                            $  (54,367)
                                                                   =========
Cumulative gap as a percentage of
  total assets........................      (2.69%)       4.09%        0.18%
</TABLE>
 
- ---------------
(1) Fixed-rate loans and MBS are distributed based on their contractual maturity
    adjusted for prepayments, and adjustable-rate loans and MBS are distributed
    based on the interest rate reset date and contractual maturity adjusted for
    prepayments. Loans and MBS runoff and repricing assumes a constant
    prepayment rate based on coupon rate and maturity. The weighted average
    annual projected prepayment rate was 20%.
 
(2) Assets repricing to lagging rate indices are adjusted to reflect the delay
    in the repricing of the index to market interest rates. The lagging indices
    are based on a blended cost of funds, primarily the FHLB 11th District Cost
    of Funds Index. These indices are assumed to take 18 months to reprice fully
    to a change in the general level of interest rates.
 
                                       70
<PAGE>   73
 
(3) Checking and savings deposits are distributed based on their assumed pricing
    relationship to general market interest rates. Savings accounts are assumed
    to reprice over a twelve month period, and checking accounts are assumed to
    reprice to interest rate changes after one year but before five years.
 
(4) The weighted average gap weighs each maturity or repricing amount by the
    number of months remaining in the year at the time of occurrence. It
    provides a measure of net interest income sensitivity over the next twelve
    months given a change in the general level of market interest rates without
    altering the maturity or repricing characteristics of the balance sheet.
 
(5) The above table includes only those off-balance-sheet financial instruments
    which impact the gap in all interest rate environments. The Company also has
    certain off-balance-sheet financial instruments which hedge specific
    interest rate risks.
 
COMPETITION
 
     The Company competes with numerous other providers of financial products
and services in all aspects of its operations. Competitors for deposits include
thrift institutions, commercial banks, credit unions, full service and discount
broker dealers, and other investment alternatives, such as mutual funds, money
market funds, and savings bonds or other government securities. Primary
competitive factors include convenience of locations, variety of deposit or
investment options, quality of customer service and rates and/or terms offered.
 
     The Company competes for mortgage originations with thrift institutions,
banks, insurance companies, and mortgage companies, many of which operate
nationwide mortgage origination networks similar to that of the Company. Primary
competitive factors include service quality, relationships with builders and
real estate brokers, and rates and fees. Many of the Company's competitors are,
or are affiliated with, organizations with substantially larger asset and
capital bases (including regional and multi-national banks and bank holding
companies) and with lower funding costs.
 
SUBSIDIARIES
 
     The Company has no direct subsidiaries other than the Bank. The Bank is
permitted to invest in the capital stock, obligations, and other securities of
its service corporations in an aggregate amount not to exceed 2% of the Bank's
assets, plus an additional 1% of assets if such investment is used for community
development or inner-city development purposes. In addition, if the Bank meets
minimum regulatory capital requirements, it may make certain conforming loans in
an amount not exceeding 50% of the Bank's regulatory capital to service
corporations of which the Bank owns more than 10% of the stock. At March 31,
1996, the Bank was authorized to have a maximum investment of approximately
$338.1 million in its subsidiaries.
 
  Commonwealth United Mortgage Company
 
     The Bank is the sole shareholder of Commonwealth United Mortgage Company, a
Texas corporation formed in 1992 to function as a licensed mortgage banker in
the state of Vermont.
 
  United Agency Corporation
 
     United Agency Corporation is a wholly-owned subsidiary of the Bank whose
primary purpose is holding the stock of Commonwealth General Services Agency,
Inc., an Arkansas corporation incorporated in 1951 ("CGSA"). CGSA is a managing
general insurance agency that contracts with insurance companies and agencies
that offer insurance products to the Bank's mortgage loan customers. CGSA earns
a commission on each insurance policy sold by the insurance companies or
agencies with which CGSA contracts.
 
  United Capital Management Corporation
 
     The Bank is the sole shareholder of United Capital Management Corporation,
a Texas corporation formed in 1985 to function in the deposit referral business
and is currently inactive.
 
                                       71
<PAGE>   74
 
  United Financial Markets, Inc.
 
     The Bank is the sole shareholder of United Financial Markets, Inc. ("UFM"),
a Texas corporation, which acts as a full-service broker-dealer. UFM, through
its institutional division, sells various securities products and whole loans
and engages in the deposit referral business with institutional and
sophisticated retail customers. Through its retail division, UFM markets
annuities and securities, including mutual funds, stocks and bonds, to the
Bank's retail customers. UFM is a broker-dealer registered with the Commission
and a member of the National Association of Securities Dealers, Inc. ("NASD").
This subsidiary commenced operations in late 1992, and its activities have been
expressly approved by the OTS.
 
  United Greenway Securities Services, Inc.
 
     The Bank is the sole shareholder of United Greenway Securities Services,
Inc., a Texas corporation formed in 1989 to make mutual funds and other
non-deposit products available to retail customers through referrals to a
registered broker-dealer. This subsidiary is currently inactive.
 
  United Mortgage Securities Corporation
 
     The Bank is the sole shareholder of United Mortgage Securities Corporation,
a Delaware corporation formed in 1993 to issue MBS securitized with mortgage
loans purchased from the Bank.
 
  USAT Mortgage Securities, Inc.
 
     The Bank is the sole shareholder of USAT Mortgage Securities, Inc., a Texas
corporation formed in 1985 to function as an issuer of three series of CMOs.
This subsidiary is currently inactive.
 
PERSONNEL
 
     As of March 31, 1996, the Company employed 2,568 full-time employees and
129 part-time employees. The employees are not represented by a collective
bargaining agreement, and the Company believes that it has good relations with
its employees. See Note 14 to the Consolidated Financial Statements for
information relating to certain benefits generally available to all employees.
 
THE ASSISTANCE AGREEMENT
 
     In connection with the Acquisition, the Bank, the Company and certain of
their direct and indirect parent entities entered into an overall agreement with
certain agencies of the federal government that was evidenced by several written
agreements. The principal contract relating to the Acquisition was the
Assistance Agreement, dated December 30, 1988, among the FSLIC, the Company, the
Bank, and certain of the Bank's other direct and indirect parent entities (the
"Assistance Agreement"). The Assistance Agreement set forth certain mutual,
interdependent commitments of the parties with respect to the Acquisition. Among
other provisions, the FSLIC agreed to provide the Bank with certain forms of
financial assistance.
 
     The Company also succeeded to substantial NOLs as a result of the
Acquisition and has recorded substantial additional NOLs for tax purposes due to
the exclusion of assistance payments received from the FRF under the Assistance
Agreement from taxable income and the deduction of losses and writedowns on
certain assets (the "Covered Assets") for which tax-free assistance payments
were received. See "Regulation -- Taxation -- FSLIC Assistance".
 
     In connection with the Acquisition, the Bank issued the Warrants, which
enable the FDIC, as administrator of the FRF, to acquire a specified number of
shares of the outstanding Bank outstanding Common Stock for a nominal price, and
agreed to make payments in lieu of dividends on the Warrants upon the payment of
dividends on the Bank Common Stock. See "-- Warrant Agreement".
 
     The Assistance Agreement was terminated on December 23, 1993, when the
Company, the Bank, certain of their direct and indirect parent entities, and the
FDIC entered an agreement settling certain disputes with respect to various
matters relating to the Acquisition and the Assistance Agreement (the
"Settlement
 
                                       72
<PAGE>   75
 
Agreement"). Pursuant to the Settlement Agreement, the Assistance Agreement was
terminated, the Bank no longer managed or owned the Covered Assets (except for
certain of the Covered Assets that were "uncovered" and retained), and, as of
December 28, 1993, the Bank no longer received any significant financial
assistance from the FRF. The Settlement Agreement also provided for the
continuation of certain of the Company's and the Bank's claims against the
United States in the United States Court of Federal Claims. See
"-- Forbearance".
 
  Impact of Assistance Payments
 
     The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement prior to its termination. Payments received during fiscal
1994 and 1993 are summarized below.
 
<TABLE>
<CAPTION>
                                                                       FOR THE YEAR ENDED
                                                                         SEPTEMBER 30,
                                                                      --------------------
                                                                        1994        1993
                                                                      --------     -------
                                                                         (IN THOUSANDS)
    <S>                                                               <C>          <C>
    Payments affecting the results of operations....................  $ 23,143     $ 9,289
    Other Payments
      Settlement payment............................................   195,300          --
      Other.........................................................       468      61,578
                                                                      --------     -------
              Total FRF payments....................................  $218,911     $70,867
                                                                      ========     =======
</TABLE>
 
  Warrant Agreement
 
     Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into a warrant agreement (the "Warrant Agreement"), pursuant to
which the FSLIC was granted the Warrants to purchase up to 158,823 shares of the
Bank Common Stock (5.56% of the Bank Common Stock as of December 28, 1993,
assuming exercise in full of the Warrants) at an exercise price of $0.01 per
share. Pursuant to the Settlement Agreement, the Bank and the FDIC (as
administrator of the FRF, the successor to FSLIC) entered into the First
Amendment to the Warrant Agreement on December 28, 1993 (the "First Amendment to
Warrant Agreement"). References to the Warrant Agreement below are to the
Warrant Agreement as amended by the First Amendment to Warrant Agreement.
 
     The Warrant Agreement provides that the holder may exercise the Warrants,
in whole or in part, at any time, and from time to time until December 29, 2004.
The Warrant Agreement provides that the holder may sell, transfer, assign, or
otherwise dispose of the Warrant and its rights and obligations under the
Warrant Agreement at any time, subject to a right of first refusal by the Bank.
 
     The Warrant Agreement provides that the holder of the Warrants shall have
the right to, among other things, have an offering circular filed with the OTS
in connection with the sale of the Bank Common Stock to be received upon
exercise thereof. The Warrant Agreement also provides for an adjustment of the
number of shares of the Bank Common Stock that are purchasable upon exercise of
the Warrants upon the occurrence of certain events, including a stock split and
the issuance of Bank Common Stock, at a price below the market price determined
at and immediately prior to the time of issuance. No adjustments had been made
to such number of shares of the Bank Common Stock at September 30, 1995 or March
31, 1996. Within 60 days following the submission by the holders of more than
50% interest of the Warrants or of the Bank Common Stock that has been issued
upon the exercise of the Warrants of a demand for filing of an offering circular
with the OTS, the Bank, the Company or their affiliates have the right to
repurchase all or a portion of both the Warrants and any shares of the Bank
Common Stock that have been issued upon the exercise of the Warrants, for cash,
in an amount equal to their market value (as defined in the Warrant Agreement).
 
     Pursuant to the Settlement Agreement, all disputes with respect to the
Warrants, including the dispute concerning credit to the FRF for dividends paid
prior to December 28, 1993, were resolved, and the parties agreed that the Bank
will make payments to the holder of the Warrants in lieu of dividends upon any
payment of dividends on the Bank Common Stock (other than dividends for which
anti-dilution adjustments are made)
 
                                       73
<PAGE>   76
 
beginning December 28, 1993 until December 30, 1998 or such earlier date as the
Warrants are no longer outstanding. In May 1996, the Bank made a payment to the
FDIC of $5.9 million in lieu of such dividends in connection with the
declaration of a $100 million dividend on the Bank Common Stock.
 
     The Warrant Agreement also provides that the Warrants shall be redeemed
upon a merger or liquidation of the Bank or certain events constituting a change
in control of the Bank's direct or indirect parent entities, at a price
equivalent to the value of the number of shares of the Bank Common Stock for
which the Warrants are exercisable, such value to be derived from the
consideration paid in connection with such merger, liquidation, or change in
control.
 
  Forbearance
 
     In connection with the Acquisition, the FHLB also approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory provisions with
respect to regulatory capital requirements, liquidity requirements, accounting
requirements and other matters. On January 9, 1990, OTS took the position that
the capital standards set forth in the FIRREA apply to all savings institutions,
including those institutions that had been operating under previously granted
capital and accounting forbearances, and that FIRREA eliminated these
forbearances. While the Bank has not had to rely on such forbearances or waivers
in order to remain in compliance with existing capital requirements as
interpreted by the OTS, the position of the OTS has adversely affected the Bank
by curtailing the growth and reducing the leverage contemplated by the terms of
the Forbearance Agreement. The Bank also has been and continues to be in
compliance with all of the other referenced regulatory capital provisions and,
accordingly, has not had to rely on the waivers or forbearances provided in the
Acquisition. Pursuant to the Settlement Agreement, the Company, the Bank and
certain of their then-direct and indirect parent entities have retained all
causes of action and claims relating to the forbearances against the United
States in the United States Court of Federal Claims, and the FDIC and the other
governmental parties to the lawsuit have reserved any and all defenses to such
causes of actions and claims. On July 25, 1995, the Bank, the Company, and
certain of their then-direct and indirect parent entities filed suit against the
United States in the Court of Federal Claims for alleged failures of the United
States to honor certain contractual obligations, including obligations related
to the Forbearance Agreement. The lawsuit is in a preliminary stage. Discovery
has been stayed pending the United States Supreme Court's review of United
States v. Winstar Corp., an action by another thrift raising similar issues. See
"Legal Proceedings".
 
                                   REGULATION
 
REGULATION OF SAVINGS AND LOAN HOLDING COMPANIES
 
     The Company is a savings and loan holding company that is regulated and
subject to examination by the OTS. The activities of savings and loan holding
companies are governed by the provisions of the Home Owners' Loan Act, as
amended (the "HOLA"). Pursuant to the HOLA, a savings and loan holding company
may not (i) acquire control of a savings association or savings and loan holding
company without prior OTS approval; (ii) acquire, except with prior OTS
approval, by process of merger, consolidation, or purchase of assets of another
savings association or savings and loan holding company, all or substantially
all of the assets of any such association or holding company; or (iii) acquire,
by purchase or otherwise, more than 5% of the voting shares of a savings
association that is not a subsidiary, or of a savings and loan holding company
that is not a subsidiary. Other restrictions on activities of a savings and loan
holding company do not apply to the Company because its savings association
subsidiary is a qualified thrift lender, and further because its savings
association subsidiary was initially acquired in connection with assisted
transactions. See "-- Safety and Soundness Regulations -- Capital
Requirements -- Qualified Thrift Lender ("QTL") Test". Every subsidiary savings
association of a savings and loan holding company must give the OTS not less
than 30 days of advance notice of proposed dividend declarations.
 
                                       74
<PAGE>   77
 
SAFETY AND SOUNDNESS REGULATIONS
 
  Charter, Supervision and Examination
 
     Charter.  The Bank is chartered under the HOLA, which imposes certain
obligations and restrictions upon, and grants certain powers to, federally
chartered savings banks such as the Bank. The provisions of the HOLA are
implemented by regulations adopted and administered by the OTS.
 
     OTS.  Federally chartered savings banks, such as the Bank, are subject to
extensive regulation by the OTS and must regularly file financial and other
reports with that agency. The supervision and regulation to which the Bank is
subject is intended primarily for the protection of its depositors. The OTS
performs periodic examinations of the Bank to test compliance by the Bank with
various regulatory requirements. The OTS may revalue assets of an insured
institution based upon appraisals and require establishment of specific reserves
in amounts equal to the difference between such revaluation and the book value
of the assets, as well as require specific charge-offs relating to such assets.
 
     The OTS prescribes regulations for the collection of fees in order to
recover the expenses of the agency, the cost of supervision of savings
associations, the examination of savings associations and their subsidiaries,
and the processing of applications, filings, notices, and certain other requests
of savings associations filed with the OTS. The OTS adopted a two-pronged
sliding scale approach in 1990 by which all institutions pay a general
assessment and troubled institutions pay an additional premium assessment. The
Bank has never been subject to a premium assessment. The Bank's assessments
amounted to approximately $719,600, $1.2 million, and $1.1 million in the
aggregate during the six months ended March 31, 1996 and fiscal 1995 and 1994,
respectively.
 
     FDIC.  The FDIC administers the SAIF, which insures the deposits of savings
associations such as the Bank. The Bank's deposits are insured by the SAIF to a
maximum of $100,000 for each insured depositor. In addition, the FDIC has
certain regulatory and full examination authority over OTS regulated savings
associations. The FDIC may also recommend enforcement actions against savings
associations to the OTS and, if the OTS fails to act on the FDIC's
recommendation, the FDIC may, under certain circumstances, compel the OTS to
take the requested enforcement action.
 
     Insurance Assessments.  The FDIC establishes premium assessment rates for
SAIF deposit insurance. There is no statutory limit on the maximum assessment
and the percent of increase in the assessment that the FDIC may impose in any
one year. Effective January 1, 1993, the FDIC adopted risk-based assessment
regulations.
 
     To arrive at a risk-based assessment for each bank and thrift, the FDIC
places it in one of nine risk categories using a two-step process based first on
capital ratios and then on relevant supervisory information. Each institution is
assigned to one of three groups (well capitalized, adequately capitalized, or
undercapitalized) based on its capital ratios. A "well-capitalized" institution
is one that has at least a 10% "total risk-based capital" ratio (the ratio of
total capital to risk-weighted assets), a 6% "Tier 1 risk-based capital" ratio
(the ratio of Tier 1 (core) capital to risk-weighted assets) and a 5% "leverage
capital" ratio (the ratio of core capital to adjusted total assets). An
"adequately capitalized" institution has at least an 8% total risk-based capital
ratio, a 4% Tier 1 (core) risk-based capital ratio and a 4% leverage capital
ratio. An "undercapitalized" institution is one that does not meet either the
definition of well capitalized or adequately capitalized.
 
                                       75
<PAGE>   78
 
     The FDIC also assigns each institution to one of three supervisory
subgroups based on an evaluation of the risk posed by the institution. These
supervisory evaluations modify premium rates within each of the three capital
groups. The nine risk categories and the corresponding SAIF assessment rates are
as follows:
 
<TABLE>
<CAPTION>
                                                                              SUPERVISORY
                                                                               SUBGROUP
                                                                          -------------------
                                                                           A       B       C
                                                                          ---     ---     ---
    <S>                                                                   <C>     <C>     <C>
    Meets numerical standards for:
      Well capitalized..................................................   23      26      29
      Adequately capitalized............................................   26      29      30
      Undercapitalized..................................................   29      30      31
</TABLE>
 
     For purposes of assessments of FDIC insurance premiums, the Bank is a
"well-capitalized" institution. FDIC regulations prohibit disclosure of the
supervisory subgroup to which an insured institution is assigned. The Bank's
insurance assessments for the six months ended March 31, 1996, fiscal 1995 and
1994 were $6.1 million, $11.4 million, and $11.3 million, respectively.
 
     Both the SAIF and the BIF, the deposit insurance fund that covers most
commercial bank deposits, are statutorily required to achieve and maintain a
reserve ratio equal to 1.25% of estimated insured deposits. As a result of the
BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered the deposit
insurance premium assessment rate for BIF members to between .04% and .31% of
insured deposits, while retaining the existing assessment rate of .23% to .31%
of insured deposits for members of SAIF. On November 14, 1995, the FDIC further
reduced insurance premiums on BIF deposits by $.04 per $100 of insured deposits,
creating an assessment range of 0% to .27% of insured deposits, subject to a
statutory requirement that all institutions pay at least $2,000 annually.
Approximately 92% of BIF members qualify for the lowest assessment rate. As a
result of the significant disparity in the deposit insurance premiums paid by
well-capitalized SAIF members, such as the Bank, and well-capitalized BIF
members, SAIF members are at a competitive disadvantage to BIF members with
respect to the pricing of loans and deposits and the ability to achieve lower
operating costs.
 
     Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. Many of these proposals feature a one-time
assessment (which reports estimate from 0.75% of deposits to 0.90% of deposits)
on SAIF-insured institutions with the aim of fully recapitalizing the SAIF. Such
an assessment could result in an amount payable by the Bank, net of tax, of as
much as $23.7 million to $28.5 million. At this time, no assurance can be given
as to whether any BIF/SAIF legislative alternatives will become law.
 
     Partly in response to the BIF/SAIF premium disparity, the Bank has applied
to the appropriate regulatory authorities to establish a BIF-insured national
bank as a subsidiary of the Bank. As a long-term strategy, if the BIF/SAIF
premium disparity continues, the national bank could attract BIF deposits by
offering interest rates that compare more favorably to that of the Bank.
However, legislation has been introduced in Congress that could make it more
difficult to carry out such a deposit-shifting strategy. At this time, no
assurance can be given when, or if, the Company will be able to carry out its
plan to establish and operate a national bank.
 
     Termination of Insurance.  The FDIC may terminate the deposit insurance of
any insured depository institution, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, or order, or any condition imposed by an agreement
with the FDIC. It also may suspend deposit insurance temporarily during the
hearing process for the permanent termination of insurance if the institution
has no tangible capital. If insurance of an institution's accounts is
terminated, the accounts at the institution at the time of such termination,
less subsequent withdrawals, would continue to be insured for a period of six
months to two years, as determined by the FDIC.
 
     Audit Requirements.  In May 1993, the FDIC adopted rules establishing
annual independent audits and financial reporting requirements for all
depository institutions with assets of more than $500 million, and for their
management, and their independent auditors. The rules also establish
requirements for the composition,
 
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<PAGE>   79
 
duties, and authority of such institutions' audit committees and boards of
directors. Among other things, all depository institutions with assets in excess
of $500 million are required to prepare and make available to the public annual
reports on their financial condition and management, including statements of
management's responsibility for preparing the institution's financial
statements, for establishing and maintaining an internal control structure and
procedures for financial reporting, and for complying with specified laws and
regulations relating to safety and soundness, and an assessment of the
effectiveness of such internal controls and procedures and the institution's
compliance with laws and regulations designated by the FDIC. The institution's
independent auditors are required to attest to these management assessments.
Each such institution also is required to have an audit committee composed of
directors who are independent of management of the institution. Audit committees
of large institutions (institutions with assets exceeding $3.0 billion) must:
(i) include members with banking or related financial management expertise; (ii)
have the ability to engage their own independent legal counsel; and (iii) must
not include any entities designated as "large customers" of the institution. In
some cases, the institution's responsibilities under these rules may be
fulfilled by its holding company.
 
     Federal Reserve Board.  The Federal Reserve Board requires all depository
institutions (including savings associations) to maintain reserves against their
transaction accounts (primarily NOW and Super NOW checking accounts) and
non-personal time deposits. Reserves of 3% must be maintained against total
transaction accounts of $52.0 million or less (subject to adjustment by the
Federal Reserve Board) and an initial reserve of $1,560,000 plus 10% (subject to
adjustment by the Federal Reserve Board to a level between 8% and 14%) must be
maintained when total transaction accounts exceed such amount. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve Board
may be used to satisfy liquidity requirements imposed by the OTS. See
"-- Investment Authority -- Liquidity".
 
     Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require savings
associations to exhaust other reasonable alternative sources of funds, including
FHLB advances, before borrowing from the Federal Reserve Bank.
 
     Federal Home Loan Banks.  The Bank is a member of the FHLB Dallas, which is
one of 12 regional FHLBs, each subject to supervision and regulation by the
Federal Housing Finance Board. The FHLBs provide a central credit facility
primarily for member thrift institutions, as well as for qualified commercial
banks and other entities involved in home mortgage finance. The Bank, as a
member of the FHLB Dallas, is required to purchase and hold shares of the
capital stock in that FHLB in an amount at least equal to the greater of: (i) 1%
of the aggregate principal amount of its unpaid mortgage loans, home purchase
contracts and similar obligations at the beginning of each year; (ii) 0.3% of
its assets; or (iii) 5% (or such greater fraction as established by the FHLB) of
its advances (i.e., borrowings) from the FHLB.
 
     Capital Requirements
 
     Requirements and Standards.  The OTS capital regulations have three
components: a leverage limit, a tangible capital requirement, and a risk-based
capital requirement. See Note 15 to the Consolidated Financial Statements for
compliance with the regulatory capital requirements.
 
     Leverage Limit.  The leverage limit requires that a savings association
maintain "core capital" of at least 3% of its adjusted total assets. For
purposes of this requirement, total assets are adjusted to exclude intangible
assets and investments in certain subsidiaries, and to include the assets of
certain other subsidiaries, certain intangibles arising from prior period
supervisory transactions, and permissible MSRs. "Core capital" includes common
shareholders' equity and retained earnings, noncumulative perpetual preferred
stock and related surplus and minority interests in consolidated subsidiaries,
minus intangibles, plus certain MSRs and certain goodwill arising from prior
regulatory accounting practices.
 
     Although accounted for under Generally Accepted Accounting Principles
("GAAP") as an intangible asset, certain MSRs need not be deducted in computing
core and tangible capital. Generally, the lower of 90% of the fair market value
of readily marketable MSRs, or the current unamortized book value as determined
under GAAP may be included in core and tangible capital up to a maximum of 50%
of core capital computed
 
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<PAGE>   80
 
before the deduction of any disallowed qualifying intangible assets. At March
31, 1996, the Bank's core capital included $82.7 million of MSRs.
 
     In determining core capital, all investments in and loans to subsidiaries
engaged in activities not permissible for national banks, which are generally
more limited than activities permissible for savings associations and their
subsidiaries ("nonconforming subsidiaries"), must be deducted. Certain
exceptions are provided, including exceptions for mortgage banking subsidiaries
and subsidiaries engaged in agency activities for customers (unless determined
otherwise by the FDIC on safety and soundness grounds). Generally, all
subsidiaries engaged in activities permissible for national banks are required
to be consolidated for purposes of calculating capital compliance by the parent
savings association.
 
     Tangible Capital Requirement.  The tangible capital requirement mandates
that a savings association maintain tangible capital of at least 1.5% of
adjusted total assets. For purposes of this requirement, adjusted total assets
are calculated on the same basis as for the leverage limit. "Tangible capital"
is defined in the same manner as core capital, except that all intangible assets
except qualifying MSRs must be deducted. At March 31, 1996, the Bank's tangible
capital ratio was 6.88%.
 
     Risk-based Capital Requirement.  The risk-based requirement promulgated by
the OTS is required by the HOLA to track the standard applicable to national
banks, except that the OTS may determine to reflect interest rate and other
risks not specifically included in the national bank standard. However, such
deviations from the national bank standard may not result in a materially lower
risk-based requirement for savings associations than for national banks. The
risk-based standard adopted by the OTS is similar to the OCC standard for
national banks.
 
     The risk-based standards of the OTS require maintenance of core capital
equal to at least 4% of risk-weighted assets and total capital equal to at least
8% of risk-weighted assets. "Total capital" includes core capital plus
supplementary capital (except that includable supplementary capital may not
exceed core capital). Supplementary capital includes: cumulative perpetual
preferred stock; mutual capital certificates, income capital certificates and
net worth certificates; nonwithdrawable accounts and pledged deposits to the
extent not included in core capital; perpetual and mandatory convertible
subordinated debt and maturing capital instruments meeting specified
requirements; and general loan and lease loss allowances, up to a maximum of
1.25% of risk-weighted assets. At March 31, 1996, the Bank's core capital and
total capital ratios were 6.96% and 14.20%, respectively.
 
     In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet assets, are multiplied by a risk factor ranging from
0% to 100%, as assigned by the OTS based on the risks it believes inherent in
the type of asset. Comparable weights are assigned to off-balance sheet
activities.
 
     Interest Rate Risk ("IRR") Component.  OTS regulations add an IRR component
to the 8% risk-based capital requirement discussed above. Only savings
associations with more than a "normal" level of IRR are subject to IRR
requirements. The IRR component is calculated as one-half of the difference
between the institution's measured IRR and 2%, multiplied by the market value of
the institution's assets.
 
     On October 13, 1994, the OTS waived the IRR capital deduction until
guidelines under which institutions may appeal such a deduction were published.
The OTS extended the waiver on March 20, 1995 until further notice. On August
21, 1995, the OTS adopted and approved an appeal process, but again delayed the
IRR capital deduction indefinitely.
 
     Failure to Meet Requirements.  Any savings association that fails to meet
its regulatory capital requirements is subject to enforcement actions by the OTS
or the FDIC. The OTS must limit the asset growth of any undercapitalized
association and issue a capital directive against the association. See
"-- Enforcement -- Prompt Corrective Action".
 
     Capital Distributions.  Limitations are imposed upon all "capital
distributions" by savings associations, including cash dividends, payments by an
institution in a cash-out merger and other distributions charged against
capital. The capital distribution regulation establishes a three-tiered system,
with the greatest flexibility afforded to well-capitalized institutions.
 
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<PAGE>   81
 
     Under the capital distribution regulation, an association that immediately
prior to a proposed capital distribution, and on a pro forma basis after giving
effect to a proposed capital distribution, has capital that is equal to or
greater than the amount of its fully phased-in capital requirement is a "Tier 1
association". To qualify, an association must maintain the following capital
ratios: (i) tangible capital to adjusted total assets ratio of 1.50%, (ii) core
capital to adjusted total assets ratio of 3.00%, and (iii) total risk-based
capital to risk-weighted assets ratio of 8.00%, of which at least 4.00% must be
core capital. An association that immediately prior to a proposed capital
distribution, and on a pro forma basis after giving effect to a proposed capital
distribution, has capital that is equal to or in excess of its minimum capital
requirements is a "Tier 2 association". An association that immediately prior to
a proposed capital distribution, and on a pro forma basis after giving effect to
a proposed capital distribution, has capital that is less than its minimum
regulatory capital requirement is a "Tier 3 association". The Bank currently
qualifies as a Tier 1 association. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital Resources and
Liquidity -- Capital".
 
     Upon 30 days' notice to the OTS, a Tier 1 association may make capital
distributions during a calendar year up to the higher of 100% of its net income
to date during the calendar year, plus the amount that would reduce by one-half
its surplus capital ratio at the beginning of the calendar year or 75% of its
net income over the most recent four quarter period. A Tier 1 association may
not make capital distributions in excess of the foregoing limitations except
upon notice to the OTS and an opportunity for the OTS to object to such capital
distribution. The OTS may prohibit an otherwise permissible capital distribution
upon a determination that making such a distribution would be an unsafe or
unsound practice. The OTS may notify an institution that qualifies as a Tier 1
association that it is subject to more than normal supervision and thereafter,
treat it as a Tier 2 or Tier 3 association.
 
     Under the prompt corrective action provisions discussed below, no insured
depository institution may make a capital distribution if after such
distribution it would be undercapitalized. See "-- Enforcement -- Prompt
Corrective Action". The OTS has proposed to amend its capital distribution
regulation to conform to the prompt corrective action system and to provide
additional flexibility. Under the proposal, savings associations that were
adequately or well capitalized under prompt corrective action and that would
remain at least adequately capitalized after a capital distribution would be
permitted to make a distribution after providing notice to the OTS. "Troubled"
and undercapitalized institutions could make capital distributions only by
filing an application and receiving OTS approval, which would be granted only
under certain limited conditions. The proposal defines "troubled condition" as a
function of an institution's examination rating, its capital condition, or on
the basis of supervisory directives issued or designation made by the OTS.
 
  Investment Authority
 
     Permissible Loans and Investments.  Federally chartered savings banks, such
as the Bank, are authorized to originate, invest in, sell, purchase, service,
participate, and otherwise deal in: (i) loans made on the security of
residential and nonresidential real estate, (ii) commercial loans, and (iii)
consumer loans, including credit card loans. The lending authority of federally
chartered associations is subject to numerous OTS requirements, including, as
applicable, requirements governing amortization, term, loan-to-value ratio,
percentage-of-assets limits, and loans-to-one-borrower limits. In January of
1996, the OTS proposed substantial revisions to its investment and lending
regulations intended to simplify the regulations and to eliminate many of their
specific requirements in favor of a more general standard of "safety and
soundness".
 
     A federally chartered savings association may invest, without limitation,
in the following assets: (i) obligations of the United States government or
certain agencies or instrumentalities thereof; (ii) stock issued or loans made
by the FHLBs or the FNMA; (iii) obligations issued or guaranteed by the FNMA,
the Student Loan Marketing Association, the GNMA or any agency of the United
States government; (iv) certain mortgages, obligations, or other securities that
have been sold by the FHLMC, (v) stock issued by a national housing partnership
corporation; (vi) demand, time or savings deposits, shares, or accounts of any
insured depository institution; (vii) certain "liquidity" investments approved
by the OTS to meet liquidity requirements; (viii) shares of registered
investment companies the portfolios of which are limited to investments that a
federal association is otherwise authorized to make; (ix) certain MBS; (x)
general
 
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<PAGE>   82
 
obligations of any state of the United States or any political subdivision or
municipality thereof, provided that not more than 10% of a savings association's
capital may be invested in the general obligations of any one issuer; and (xi)
loans on the security of liens upon residential real property. Federally
chartered savings associations are authorized by the HOLA to make investments in
business development credit corporations, certain commercial paper and corporate
debt securities, service corporations, and small business investment companies,
all of which investments are subject to percentage-of-assets and various other
limitations.
 
     Lending Limits.  Generally, savings associations, such as the Bank, are
subject to the same loans to one borrower limits that apply to national banks.
Generally, a savings association may lend to a single or related group of
borrowers, on an unsecured basis, in an amount not greater than 15% of its
unimpaired capital and unimpaired surplus (as defined). An additional amount,
not greater than 10% of the savings association's unimpaired capital and
unimpaired surplus (as defined), may be loaned if the loan is secured by readily
marketable collateral, which is defined to include certain securities and
bullion, but generally does not include real estate. Notwithstanding the general
lending limits, a savings association may make loans to one borrower of up to
$500,000, or to develop domestic residential housing units, up to the lesser of
$30 million or 30% of the savings association's unimpaired capital and
unimpaired surplus, if certain conditions are satisfied.
 
     In addition to limits on loans to one borrower, the HOLA also limits a
federal savings association's aggregate nonresidential real property loans to
400% of the savings association's capital as determined pursuant to the OTS's
capital requirements. See "-- Capital Requirements". The OTS may allow a savings
association to exceed the aggregate limitation if the OTS determines that
exceeding the limitation would pose no significant risk to the safe and sound
operations of the association and would be consistent with prudent operating
practices.
 
     Subsidiaries -- Service Corporations.  The HOLA authorizes federally
chartered savings associations, such as the Bank, to invest in the capital
stock, obligations or other securities of service corporations. The HOLA
authorizes a savings association to invest up to a total of 3% of its assets in
service corporations. The last 1% of the 3% statutory investment limit
applicable to service corporations must be primarily invested in community
development investments drawn from a broad list of permissible investments that
include, among others: government guaranteed loans; loans for investment in
small businesses; investments in revitalization and rehabilitation projects; and
investments in low- and moderate-income housing developments.
 
     Service corporations are authorized to engage in a variety of preapproved
activities, some of which (e.g., securities brokerage and real estate
development) are ineligible activities for the parent savings association. The
OTS regulations implementing the service corporation authority contained in the
HOLA also provide that activities reasonably related to the activities of a
federally chartered savings association may be approved on a case-by-case basis
by the Director of the OTS.
 
     Operating Subsidiaries.  All federal savings associations are authorized to
establish or acquire one or more operating subsidiaries. Operating subsidiaries
are subject to examination and supervision by the OTS to the same extent as the
parent thrift. An "operating subsidiary" is a corporation that meets all of the
following requirements: (i) it engages only in activities that a federal savings
association is permitted to engage in directly; (ii) the parent savings
association owns, directly or indirectly, more than 50% of the subsidiary's
voting stock; and (iii) no person or entity other than the parent thrift may
exercise "effective operating control" over the subsidiary. While a savings
association's investment in its service corporations is generally limited to an
amount that does not exceed 3% of the parent savings association's total assets,
OTS regulations do not limit the amount that a parent savings association may
invest in its operating subsidiaries. Operating subsidiaries may be incorporated
and operated in any geographical location where its parent may operate. An
operating subsidiary that is a depository institution may accept deposits in any
location, provided that the subsidiary has federal deposit insurance.
 
     Finance Subsidiaries.  In accordance with OTS regulations, federal savings
associations may establish one or more finance subsidiaries. The sole purpose of
a finance subsidiary is to issue securities that a federal savings association
may issue directly and to remit the net proceeds of the issuance to the parent
savings association.
 
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<PAGE>   83
 
     QTL Test.  All savings associations are required to meet a QTL test for,
among other things, future eligibility for FHLB advances. An association must
have invested at least 65% of its portfolio assets in qualified thrift
investments and must maintain this level of qualified thrift investments on a
monthly average basis in nine of every 12 months.
 
     "Portfolio assets" is defined as total assets less intangibles, properties
used to conduct business and liquid assets (up to 20% of total assets). The
following assets may be included as qualified thrift investments without limit:
domestic residential housing or manufactured housing loans; home equity loans
and MBS backed by residential housing or manufactured housing loans; FHLB stock
as well as certain obligations of the FDIC and certain other related entities.
Other qualifying assets, which may be included up to an aggregate of 20% of
portfolio assets, are: (i) 50% of originated residential mortgage loans sold
within 90 days of origination; (ii) investments in debt or equity of service
corporations that derive 80% of their gross revenues from housing-related
activities; (iii) 200% of certain loans to, and investment in, low cost one- to
four-family housing; (iv) 200% of loans for residential real property, churches,
nursing homes, schools and small businesses in areas where the credit needs of
low- and moderate-income families are not met; (v) other loans for churches,
schools, nursing homes and hospitals; and (vi) personal, family, household, or
education loans (up to 10% of total portfolio assets).
 
     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies. A savings association may
requalify the next time it meets the requirement in nine of the preceding 12
months, but it may requalify only one time. If a savings association converts to
a bank charter, it must remain SAIF-insured until the expiration of the
moratorium (the moratorium, enacted in 1989, effectively prohibits most
conversions from the SAIF to the BIF insurance fund), which will not occur until
the date on which the SAIF fund meets its designated reserve ratio. If an
institution that fails the QTL test has not yet requalified and has not
converted to a national bank, its new investments and activities are limited to
those permissible for a national bank, it is immediately ineligible to receive
any new FHLB advances, is subject to national bank limits for payment of
dividends, and may not establish a branch office at any location at which a
national bank located in the savings association's home state could not
establish a branch.
 
     Liquidity.  The Bank is required to maintain an average daily balance of
"liquid assets" (cash, certain time deposits, bankers' acceptances, highly rated
corporate debt securities, and commercial paper, securities of certain mutual
funds, reserves maintained pursuant to Federal Reserve Board requirements, and
specified government, state or federal agency obligations) equal to a certain
percentage of net withdrawable deposit accounts and borrowings payable in one
year or less. The liquidity requirement may vary from time to time (between 4%
and 10%) depending upon economic conditions and savings flows of all savings
associations. Currently, OTS regulations require a savings association, such as
the Bank, to maintain liquid assets equal to not less than 5% of its net
withdrawable deposit accounts and borrowings payable in one year or less and
short-term liquid assets of not less than 1%. Penalties may be imposed for
failure to meet the liquidity requirements.
 
  Mergers and Acquisitions
 
     Restrictions on Acquisitions.  As previously described, the Bank is
controlled by the Company. The Company must obtain approval from the OTS before
acquiring control of any other savings association. Such acquisitions are
generally prohibited if they result in a savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in supervisory acquisitions of failing savings associations. The Company may
acquire up to 5%, in the aggregate, of the voting stock of any non-subsidiary
savings association or savings and loan holding company without being deemed to
acquire control of the association or holding company. In addition, a savings
and loan holding company may hold shares of a savings association or a savings
and loan holding company for certain purposes, including as a bona fide
fiduciary, as an underwriter or in an account solely for trading purposes. Under
certain conditions, a savings and loan holding company may acquire up to 15% of
the shares of a savings association or savings and loan holding company in a
"qualified stock issuance".
 
     The Change in Bank Control Act and the savings and loan holding company
provisions of the HOLA, together with the regulations of the OTS under such
Acts, require that the consent of the OTS be obtained
 
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<PAGE>   84
 
prior to any person or company acquiring control of a savings association or a
savings and loan holding company. Under OTS regulations, "control" is
conclusively presumed to exist if an individual or company acquires more than
25% of any class of voting stock of a savings association or holding company.
Control is rebuttably presumed to exist if a person acquires more than 10% of
any class of voting stock (or more than 25% of any class of non-voting stock)
and is subject to any of several "control factors". The control factors relate,
among other matters, to the relative ownership position of a person, the
percentage of debt and/or equity of the association or holding company
controlled by the person, agreements giving the person influence over a material
aspect of the operations of the association or holding company, and the number
of seats on the board of directors thereof held by the person or his designees.
The regulations provide a procedure for challenge of the rebuttable control
presumption. Certain restrictions applicable to the operations of savings and
loan holding companies and certain conditions imposed by the OTS in connection
with its approval of companies to become savings and loan holding companies may
deter companies from seeking to obtain control of the Bank.
 
     Insured depository institutions are authorized to merge or engage in
purchase and assumption transactions with other insured depository institutions
with the prior approval of the federal banking regulator of the resulting
entity.
 
     Branching.  Subject to certain statutory restrictions in the HOLA and the
Federal Deposit Insurance Act (the "FDIA"), the Bank is authorized to branch on
a nationwide basis. Branching by savings associations is also subject to other
regulatory requirements, including compliance with the Community Reinvestment
Act (the "CRA") and its implementing regulations.
 
  Officers, Directors, and Controlling Shareholders
 
     Insider Loans.  Loans to an executive officer, director, or to any person
who directly or indirectly, or acting through or in concert with one or more
persons, owns, controls, or has the power to vote more than 10% of any class of
voting securities of such institution ("Principal Shareholder") and their
related interests (i.e., any company controlled by such executive officer,
director, or Principal Shareholder), or to any political or campaign committee,
the funds or services of which will benefit such executive officer, director or
Principal Shareholder, or which is controlled by such executive officer,
director or Principal Shareholder, are subject to Sections 22(g) and 22(h) of
the Federal Reserve Act (the "FRA") and the regulations promulgated thereunder.
Among other things, such loans must be made on terms substantially the same as
those prevailing on transactions made to unaffiliated individuals, and certain
extensions of credit to such persons must first be approved in advance by a
disinterested majority of a savings association's entire board of directors.
Section 22(h) of the FRA prohibits loans to any such individuals where the
aggregate amount exceeds an amount equal to 15% of an insured institution's
unimpaired capital and surplus, plus an additional 10% of unimpaired capital and
surplus (as defined) in the case of loans that are fully secured by readily
marketable collateral, or when the aggregate amount on all such extensions of
credit outstanding to all such persons would exceed the Bank's unimpaired
capital and unimpaired surplus. Section 22(g) identifies limited circumstances
in which the Bank is permitted to extend credit to executive officers.
 
     Changes in Directors and Senior Executive Officers.  Section 32 of the FDIA
requires a depository institution or holding company thereof to give 30 days'
prior written notice to its primary federal regulator of any proposed
appointment of a director or senior executive officer if the institution: (i)
has been chartered less than two years; (ii) has undergone a change in control
within the preceding two years; or (iii) is not in compliance with the minimum
capital requirements or otherwise is in a troubled condition. The regulator then
has the opportunity to disapprove any such appointment.
 
  Transactions With Affiliates
 
     Pursuant to Section 11 of the HOLA, savings associations are subject to
restrictions regarding transactions with affiliates ("Covered Transactions")
substantially similar to those imposed upon member banks under Sections 23A and
23B of the FRA. Savings associations are also prohibited from extending credit
to any affiliate engaged in an activity not permissible for a bank holding
company.
 
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<PAGE>   85
 
     The term "affiliate" includes any company that controls or is controlled by
a company that controls the Bank, or a bank or savings association subsidiary of
the Bank. The term "affiliate" also includes any company controlled by
controlling stockholders of the Bank or the Company and any company sponsored
and advised on a contractual basis by the Bank or any subsidiary or affiliate of
the Bank. The Company is an affiliate of the Bank.
 
     Section 23A of the FRA limits Covered Transactions with any one affiliate
to 10% of an association's capital stock and surplus (as defined therein) and
limits aggregate affiliate transactions to 20% of the Bank's capital stock and
surplus. A Covered Transaction is defined generally as a loan to an affiliate,
the purchase of securities issued by an affiliate, the purchase of assets from
an affiliate, the acceptance of securities issued by an affiliate as collateral
for a loan, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate. In addition, the Bank generally may not purchase
securities issued or underwritten by an affiliate. Sections 23A and 23B of the
FRA provide that a loan transaction with an affiliate generally must be
collateralized (but may not be collateralized by a low quality asset or
securities issued by an affiliate) and that all Covered Transactions, as well as
the sale of assets, the payment of money or the provision of services by the
Bank to an affiliate, must be on terms and conditions that are substantially the
same, or at least as favorable to the Bank, as those prevailing for comparable
nonaffiliate transactions.
 
     The OTS generally requires savings associations, such as the Bank, to
attribute to an affiliate the amounts of all transactions conducted with
subsidiaries of that affiliate and grants the Director of the OTS the authority
to deem certain non-bank or non-thrift subsidiaries of a savings association as
affiliates.
 
  Enforcement
 
     Prompt Corrective Action.  The OTS is required by statute to take certain
actions against savings associations that fail to meet certain capital-based
requirements. Each of the federal banking agencies, including the OTS, is
required to establish five levels of insured depository institutions based on
leverage limit and risk-based capital requirements established for institutions
subject to their jurisdiction plus, in each agency's discretion, individual
additional capital requirements for such institutions.
 
     Under the final rules that have been adopted by each of the federal banking
agencies, an institution will be designated well capitalized if the institution
has a total risk-based capital ratio of 10% or greater, a core risk-based
capital ratio of 6% or greater, and a leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a specific capital level
for any capital measure.
 
     An institution will be designated adequately capitalized if the institution
has a total risk-based capital ratio of 8% or greater, a core risk-based capital
ratio of 4% or greater, and a leverage ratio of 4% or greater (or a leverage
ratio of 3% or greater if the institution is rated a composite 1 in its most
recent report of examination). An institution will be designated
undercapitalized if the institution has a total risk-based capital ratio of less
than 8%, a core risk-based capital ratio of less than 4%, or a leverage ratio of
less than 4% (or a leverage ratio of less than 3% if the institution is rated
composite 1 in its most recent report of examination). An institution will be
designated significantly undercapitalized if the institution has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3%. An institution will be
designated critically undercapitalized if the institution has a ratio of
tangible equity to total assets equal to or less than 2%.
 
     Undercapitalized institutions are required to submit capital restoration
plans to the appropriate federal banking agency and are subject to certain
operational restrictions. Moreover, companies controlling an undercapitalized
institution are required to guarantee the subsidiary institution's compliance
with the capital restoration plan subject to an aggregate limitation of the
lesser of 5% of the institution's assets, or the amount of the capital
deficiency when the institution first failed to meet the plan.
 
     Significantly or critically undercapitalized institutions and
undercapitalized institutions that have not submitted or complied with
acceptable capital restoration plans are subject to regulatory sanctions. A
forced sale of shares or merger, restrictions on affiliate transactions, and
restrictions on rates paid on deposits are
 
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required to be imposed unless the supervisory agency has determined that such
restrictions would not further capital improvement. The agency may impose other
specified regulatory sanctions at its option. Generally, the appropriate federal
banking agency is required to authorize the appointment of a conservator or
receiver within 90 days after an institution becomes critically
undercapitalized.
 
     The federal banking agencies have adopted uniform procedures for the
issuance of directives by the appropriate federal banking agency. Under these
procedures, an institution will generally be provided advance notice when the
appropriate federal banking agency proposes to impose one or more of the
sanctions set forth above. These procedures provide an opportunity for the
institution to respond to the proposed agency action or, where circumstances
warrant immediate agency action, an opportunity for administrative review of the
agency's action.
 
     Administrative Enforcement Authority.  The OTS exercises extensive
enforcement authority over all savings associations and their
"institution-affiliated parties" (i.e., officers, directors, controlling
shareholders, employees, as well as attorneys, appraisers or accountants) who
knowingly or recklessly participate in a wrongful action likely to have adverse
effect on an insured institution. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue
cease-and-desist or removal and prohibition orders, and to initiate injunctive
actions. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. The OTS may use written
agreements to correct compliance deficiencies with respect to applicable laws
and regulations and to ensure safe and sound practices. Except under certain
narrow circumstances, public disclosure of final enforcement actions by the
federal banking agencies, including the OTS, is required.
 
     The OTS has the authority, when statutorily prescribed grounds exist, to
appoint a conservator or receiver for a savings association. Grounds for such
appointment include: insolvency; substantial dissipation of assets or earnings;
existence of an unsafe or unsound condition to transact business; likelihood
that the association will be unable to pay its obligations in the normal course
of business; undercapitalization where the association (i) has no reasonable
prospect of becoming adequately capitalized, (ii) fails to become adequately
capitalized when required to do so, (iii) fails timely to submit an acceptable
capital restoration plan, or (iv) materially fails to implement a capital
restoration plan; or where the association is "critically undercapitalized" or
"otherwise has substantially insufficient capital".
 
CONSUMER PROTECTION REGULATIONS
 
     The Bank is subject to many federal consumer protection statutes and
regulations including, but not limited to, the following:
 
  Mortgage and Consumer Lending
 
     The Truth in Lending Act.  The TILA, enacted into law in 1968, is designed
to ensure that credit terms are disclosed in a meaningful way so that consumers
may compare credit terms more readily and knowledgeably. As a result of the
TILA, all creditors must use the same credit terminology and expressions of
rates, the annual percentage rate, the finance charge, the amount financed, the
total of payments, and the payment schedule.
 
     The TILA is implemented by the FRB's Regulation Z. Regulation Z contains
disclosure and advertising rules, rules related to the calculation of annual
percentage rates, document retention rules, and error resolution procedures. The
appendices to the regulation set forth model forms and clauses that creditors
may use when providing open-end and closed-end disclosures. The appendices also
contain detailed rules for calculating the annual percentage rate. Official
staff interpretations of the regulation are published in the FRB's Commentary.
Good faith compliance with the Commentary protects creditors from civil
liability under the TILA.
 
     Under certain circumstances involving extensions of credit secured by the
borrower's principal dwelling, the TILA and Regulation Z thereunder provide a
right of rescission. The period within which the consumer may exercise the right
to rescind runs for three business days from the last of three events: (i) the
occurrence that gives rise to the right of rescission; (ii) delivery of all
required material disclosures, i.e., the annual percentage rate, the finance
charge, the amount financed, the total of payments, and the payment schedule; or
 
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(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 recission as a defense in a foreclosure action
under certain circumstances. Under the TILA, the consumer cannot be required to
pay any amount in the form of money or property either to the creditor or to a
third party as a part of the transaction in which a consumer exercises the right
of rescission. Any amounts of this nature already paid by the consumer must be
refunded. "Any amount" includes finance charges already accrued, as well as
other charges such as application and commitment fees or fees for a title search
or appraisal. Once the creditor has fulfilled its rescission obligation under
the TILA, the consumer must tender to the creditor any property or money the
creditor has already delivered to the consumer.
 
     The regulatory agencies are authorized to order creditors to make monetary
and other adjustments to the accounts of consumers in cases where an annual
percentage rate or finance charge is inaccurately disclosed. Generally, the
agencies order restitution when such disclosure errors resulted from a clear and
consistent pattern or practice of violation or gross negligence or a willful
violation that was intended to mislead the person to whom the credit was
extended. However, the agencies are not precluded from ordering restitution for
isolated disclosure errors. The TILA also provides for statutory damages of
twice the finance charge, with a minimum of $200 and a maximum of $2,000 for
closed end loans secured by real property or a dwelling. If successful, the
borrower is entitled to reasonable attorneys' fees and the costs of bringing the
action. The TILA also provides for class actions for actual damages and for
statutory damages of the lesser of $500,000 or 1% of the creditor's net worth,
plus court costs and attorneys' fees.
 
     On September 30, 1995, President Clinton signed into law the Truth In
Lending Amendments of 1995 (the "1995 Amendments"). The 1995 Amendments increase
finance charge tolerances, limit the liability of assignees and loan servicers,
and provide protection from civil liability for claims based on certain
disclosure rules covered by the 1995 Amendments, including prohibiting the
maintenance of certain class action cases not certified as class actions prior
to January 1, 1995. The 1995 Amendments also clarify that third party fees not
required or retained by a lender, taxes levied on a security interest, and fees
to prepare all loan-related documents for real estate loans, as well as pest and
flood inspections, are excluded from the finance charge.
 
     The Bank attempts in good faith to comply with the TILA and Regulation Z
thereunder. The requirements are complex, however, and even inadvertent
non-compliance could result in civil liability or the extension of the
rescission period for a mortgage loan for up to three years from the date the
loan was made. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, seeking civil statutory and actual damages and rescission under
the TILA, as well as remedies for alleged violations of various state unfair
trade practices acts and restitution or unjust enrichment in connection with
certain mortgage loan transactions.
 
     The Fair Housing Act.  The FH Act, enacted into law in 1968, regulates many
practices, including making it unlawful for any lender to discriminate in its
housing-related lending activities against any person because of race, color,
religion, national origin, sex, handicap, or familial status.
 
     Section 805 of the FH Act, which applies to the financing of housing, makes
it unlawful for a bank to deny a loan or any other financial assistance for the
purpose of purchasing, constructing, improving, repairing, or maintaining a
dwelling because of the race, color, religion, national origin, sex, handicap,
or familial status of the loan applicant, any person associated with the loan
applicant, any present or prospective owner of the dwelling, any lessees, or any
tenants or occupants. It is also unlawful to discriminate in fixing the amount,
interest rates, duration, or other terms of the credit.
 
     Section 813 of the FH Act provides that aggrieved persons may sue anyone
who they believe has discriminated against them. Section 814 of the FH Act
provides that the Attorney General of the United States may sue for an
injunction against any pattern or practice that denies civil rights granted by
the FH Act. Section 810 of the FH Act allows a person to file a discrimination
complaint with the Department of Housing
 
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<PAGE>   88
 
and Urban Development ("HUD"). HUD will investigate the complaint and may
attempt to resolve the grievance through conciliation or persuasion. Penalties
for violation of the FH Act include actual damages suffered by the aggrieved
person and injunctive or other equitable relief. The court's order may also
assess civil penalties.
 
     The Equal Credit Opportunity Act.  The ECOA, enacted into law in 1974,
prohibits discrimination in any credit transaction, whether for consumer or
business purposes, on the basis of race, color, religion, national origin, sex,
marital status, age (except in limited circumstances), receipt of income from
public assistance programs, or good faith exercise of any rights under the
Consumer Credit Protection Act. Regulation B, which implements the ECOA, covers
all individuals and institutions that regularly participate in decisions to
extend credit. In addition to prohibiting outright discrimination on any of the
impermissible bases listed above, an effects test has been applied to the
analysis of discrimination under Regulation B. This means that if a creditor's
actions have had the effect of discriminating, the creditor may be held
liable -- even when there is no intent to discriminate.
 
     In addition to actual damages, the ECOA provides for punitive damages of up
to $10,000 in individual lawsuits and up to the lesser of $500,000 or 1% of the
creditor's net worth in class action suits. Successful complainants may also be
entitled to an award of court costs and attorneys' fees.
 
     The Real Estate Settlement Procedures Act.  The RESPA, enacted into law in
1974, requires lenders to provide borrowers with disclosures regarding the
nature and cost of real estate settlements. Also, the RESPA prohibits certain
abusive practices, such as kickbacks, and places limitations on the amount of
money that a lender may require a borrower to place in an escrow account.
Regulation X, which implements RESPA, also establishes escrow accounting
procedures and mandates the use of aggregate accounting for determining the
maximum dollar amount that may be collected in connection with escrow accounts.
 
     RESPA is applicable to all federally related mortgage loans. A "federally
related mortgage loan" includes any loan secured by a first or subordinate lien
on residential real property designed for occupancy by one to four families,
including a refinancing of an existing loan secured by the same property, if:
(i) the loan is made by any lender, the deposits of which are federally insured
or any lender that is regulated by a federal agency; or (ii) the loan is
insured, guaranteed or supplemented by a federal agency; or (iii) the loan is
intended to be sold to the FNMA, the GNMA, or the FHLMC; or (iv) the loan is
made by any creditor who makes or invests in residential real estate loans
aggregating more than $1 million per year.
 
     Section 8 of the RESPA prohibits any person from giving or receiving a fee
or a thing of value (payments, commissions, fees, gifts or special privileges)
for a referral of settlement business. Such "kickbacks" include payments in
excess of the reasonable value of goods provided or services rendered.
Violations of Section 8 of the RESPA may result in imposition of the following
penalties: (i) civil liability equal to three times the amount of any charge
paid for the settlement services; (ii) the possibility that court costs and
attorneys' fees can be recovered; and (iii) a fine of not more than $10,000 or
imprisonment for not more than one year, or both.
 
     The Bank attempts in good faith to comply with the requirements of the
RESPA and its implementing regulations. The requirements are complex, however,
and even inadvertent non-compliance could result in civil or criminal liability.
During the past several years, numerous individual claims and purported consumer
class action claims were commenced against a number of financial institutions,
their subsidiaries, and other mortgage lending institutions alleging violations
of the RESPA's escrow account rules and seeking civil damages, court costs, and
attorneys' fees.
 
     The Home Mortgage Disclosure Act (the "HMDA").  The HMDA, enacted into law
in 1975, is intended to provide public information that can be used to help
determine whether financial institutions are serving the housing credit needs of
the neighborhoods and communities in which they are located and to assist in
identifying possible discriminatory lending patterns.
 
     The HMDA requires institutions to report data regarding applications for
one- to four-family loans, home improvement loans, and multi-family loans, as
well as information concerning originations and purchases of such types of
loans. The HMDA also requires most lenders to report the race, sex, and income
of mortgage
 
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<PAGE>   89
 
applicants and borrowers. Generally, insured institutions, like the Bank, are
also required to indicate the reasons for decisions not to grant credit.
 
     Compliance with the HMDA implementing regulations is enforced by the
appropriate federal banking agency, or, in some cases, by HUD. Administrative
sanctions, including civil money penalties, may be imposed by supervisory
agencies for violations.
 
     The Community Reinvestment Act.  The CRA, enacted into law in 1977, is
intended to encourage insured depository institutions, while operating safely
and soundly, to help meet the credit needs of their communities. The CRA
specifically directs the federal regulatory agencies, in examining insured
depository institutions, to assess their record of helping to meet the credit
needs of their entire community, including low-and moderate-income
neighborhoods, consistent with safe and sound banking practices. The CRA further
requires the agencies to take a financial institution's record of meeting its
community credit needs into account when evaluating applications for, among
other things, domestic branches, consummating mergers or acquisitions, or
holding company formations. Under the CRA, which is implemented by uniform
regulations adopted by each of the bank regulatory agencies, including the OTS,
financial institutions are required to describe their local community by
outlining the community on a map. If the financial institution has more than one
local community, it must describe each one. A financial institution's local
community consists of the areas surrounding each deposit-taking office or
cluster of offices, including any low- or moderate-income neighborhoods within
that area.
 
     The regulations require the banking agencies to assess each financial
institution's record of performance in helping to meet the credit needs of its
community by reviewing 12 assessment factors. These assessment factors include:
(i) activities conducted by a financial institution to ascertain the credit
needs of its community; (ii) the extent of marketing and special credit related
programs to make members of the community aware of credit services; (iii) the
extent of participation of the financial institution's board of directors in
formulating policy and reviewing performance; (iv) the presence or absence of
practices intended to discourage applications for types of credit set forth in
the institution's CRA statement; (v) the geographic distribution for the
financial institution's credit extensions, credit applications, and denials;
(vi) the presence or absence of evidence of prohibited discriminatory or other
illegal credit practices; (vii) the financial institution's record of opening
and closing offices and providing services at offices; (viii) the financial
institution's participation, including investments, in local community
development projects; (ix) the financial institution's origination or purchase
of residential mortgage loans, housing rehabilitation loans, home improvement
loans, and small business and farm loans within its community; (x) the financial
institution's participation in governmentally insured, guaranteed, or subsidized
loan programs for housing and small farms and businesses; (xi) the financial
institution's ability to meet various community credit needs based on its
financial condition, size, and other factors; and (xii) any other factors, that
in the agencies' judgment, reasonably bear on the extent to which a financial
institution has helped to meet the credit needs of its community.
 
     The agencies use the CRA assessment factors in order to provide a rating to
the financial institution. The ratings range from a high of "outstanding" to a
low of "substantial noncompliance".
 
     On April 19, 1995, the agencies jointly adopted revised CRA regulations.
Under the new system, the 12 assessment factors used to evaluate the CRA
performance of most large retail institutions, such as the Bank, will be
replaced with three tests, the lending, investment, and service tests, with the
lending test carrying the primary importance. To receive a satisfactory or
better rating, an institution must achieve at least a satisfactory lending
performance.
 
     The lending test evaluates an institution's record of helping to meet the
credit needs of its assessment area(s) through its lending activities by
considering, among other things, the number, amount, geographic distribution,
and certain borrower characteristics of the institution's home mortgage, small
business, small farm, and community development lending. The investment test
evaluates an institution's record of helping to meet the credit needs of its
assessment area or areas through "qualified investments" (lawful investments,
deposits, membership shares, or grants that have community development as their
primary purpose). The service test evaluates an institution's record of helping
to meet the credit needs of its assessment area or areas
 
                                       87
<PAGE>   90
 
by analyzing the availability and effectiveness of an institution's systems for
delivering retail banking services and an institution's community development
services. An institution may elect to be evaluated on the basis of a strategic
plan approved by its primary regulator rather than the three tests.
 
     Although the regulations became effective on July 1, 1995, the primary
provisions are subject to a two-year phase-in period. Most large retail
institutions will become subject to the new examination criteria beginning July
1, 1997, although institutions may elect to be examined with the new tests
beginning January 1, 1996. Finally, new data collection requirements that became
effective on January 1, 1996 are included in the new regulations.
 
     While the Bank is strongly committed to serving all of its CRA communities,
including its low- and moderate-income neighborhoods, the OTS might determine
the Bank's CRA-related programs to be insufficient. The Bank was last examined
for CRA compliance by its primary regulator, the OTS, on October 14, 1995 and
received a CRA assessment rating of "outstanding". The Bank's previous CRA
assessment rating, as of March 8, 1993, was also "outstanding".
 
  Savings and Checking Accounts and Public Accommodations
 
     The Bank Secrecy Act ("BSA") and Money Laundering Laws.  The BSA, enacted
into law in 1970, requires every financial institution within the United States
to file a Currency Transaction Report with the IRS for each transaction in
currency of more than $10,000 not exempted by the Treasury Department. The
reports must be filed within 15 days of the transaction. A "transaction in
currency" is defined by the regulations to include any transaction "involving
the physical transfer of currency from one person to another". The Treasury
Department deems multiple transactions by the same person on the same day
exceeding $10,000 in the aggregate to be reportable. Financial institutions are
also required to file a Suspicious Activity Report with respect to any known or
suspected criminal conduct or suspicious activities, including transactions
valued at more than $5,000 that the institution knows or suspects involve funds
derived from illegal activities, are designed to evade the requirements of the
BSA, have no business or apparent lawful purpose, or are not the sort in which
the particular customer would normally be expected to engage.
 
     In 1988, Congress enacted the Money Laundering Prosecution Improvements Act
(the "1988 Act"). The 1988 Act expanded the BSA's definition of "financial
institution" and broadened the BSA's reporting requirements to require financial
institutions, typically banks, to verify and record the identity of the
purchaser upon the issuance or sale of bank checks or drafts, cashier's checks,
traveler's checks, or money orders involving $3,000 or more in cash.
Institutions must also verify and record the identity of the originator and
beneficiary of certain funds transfers.
 
     Under the FDIA, a receiver or conservator may be appointed for an insured
depository institution on the receipt of written notice from the Attorney
General that an insured depository institution has been found guilty of a
criminal money laundering offense or criminal offense under the BSA. The FDIC
may also take action to terminate the deposit insurance of an institution
convicted of criminal violations of the BSA and money laundering offenses. Any
person who willfully causes a violation of the BSA's record-keeping requirements
for insured institutions is subject to the imposition of up to a $50,000 civil
money penalty, in addition to any other applicable penalties.
 
     The Bank has instituted a policy against money laundering that is
communicated by top management to the Bank's employees. The policy includes
safeguards to prevent money laundering, including, but not limited to, regular
education programs to teach employees the requirements of the federal money
laundering laws and to make them aware of the innovative and ever-changing
techniques employed by money launderers.
 
     Electronic Fund Transfer Act (the "EFTA").  The EFTA, enacted into law in
1978, provides a basic framework establishing the rights, liabilities, and
responsibilities of participants in "electronic fund transfer systems", defined
to include automated teller machine transfers, telephone bill-payment services,
point-of-sale terminal transfers, and preauthorized transfers from or to a
consumer's account (e.g., direct deposit of Social Security payments). Its
primary objective is to protect the rights of individuals using these systems.
The
 
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EFTA limits a consumer's liability for certain unauthorized electronic fund
transfers and requires certain error resolution procedures.
 
     Unless an error is resolved in accordance with the error-resolution
procedures specified in the EFTA, the institution may be liable for civil
damages. The statutory damages the institution would have to pay in a successful
individual action are actual damages and statutory damages between $100 and
$1,000, as determined by the court, plus court costs and attorneys' fees. In a
successful class action, the institution would have to pay actual damages and
statutory damages up to the lesser of $500,000 or 1% of the institution's net
worth, plus court costs and reasonable attorneys' fees. The EFTA also sets forth
provisions for criminal liability for certain EFTA violations. Penalties under
these provisions run from a $5,000 fine and one year's imprisonment for
knowingly and willfully failing to comply with the EFTA, to a $10,000 fine and
10 years' imprisonment for fraudulent use of a debit card.
 
     The Expedited Funds Availability Act ("Expedited Funds Act").  The
Expedited Funds Act, enacted into law in 1987, seeks to insure prompt
availability of funds deposited into a customer's account and to expedite the
return of checks. The Expedited Funds Act is implemented by the Federal Reserve
Board's Regulation CC. The Act and Regulation CC include specific detailed
provisions requiring a financial institution to: (i) make funds available to its
customers within specified time frames; (ii) ensure that interest accrues on
funds in interest-bearing transaction accounts not later than the day the
financial institution receives credit; and (iii) disclose the financial
institution's funds-availability policies to its customers.
 
     In addition to administrative enforcement, there is civil liability for
violations of the Expedited Funds Act. Any depository institution that fails to
comply with any requirement of the Expedited Funds Act or regulation with
respect to any person other than another depository institution is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.
 
     The Truth in Savings Act (the "TISA").  The TISA, enacted into law in 1991,
is principally a disclosure law, the purpose of which is to encourage
comparative shopping for deposit products. The common denominator used by the
TISA to facilitate comparison shopping of interest payable on deposit accounts
is the Annual Percentage Yield (the "APY"). TISA is implemented by Regulation
DD. The TISA and Regulation DD thereunder require depository institutions to pay
interest on the full amount of the principal in the account for each day, under
either the "daily balance method" or the "average daily balance method". No
other balance calculation methods are permitted by the TISA.
 
     In addition to administrative enforcement, TISA violations carry civil
liability. Any depository institution that fails to comply with any requirement
of the TISA with respect to any person who is an account holder is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.
 
     The Americans with Disabilities Act (the "ADA").  The ADA, enacted into law
in 1990, prohibits private employers, state and local governments, employment
agencies, and labor unions from discriminating against qualified individuals
with disabilities in connection with job application procedures, hiring, firing,
advancement, compensation, job training, and other terms, conditions, and
privileges of employment. An individual with a disability is a person who: (i)
has a physical or mental impairment that substantially limits one or more major
life activities; (ii) has a record of such an impairment; or (iii) is regarded
as having such an impairment.
 
     Title 3 of the ADA covers banks, thrifts, credit unions, and finance
companies -- all of which are considered to be "public accommodations". Section
302(a) of the ADA provides that "no individual shall be discriminated against on
the basis of disability in the full and equal enjoyment of the goods, services,
or facilities, privileges, advantages, or accommodations of any place of public
accommodation". Section 302(b) of the ADA sets forth specific requirements and
prohibitions for public accommodations; for example, a place
 
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of public accommodation, such as the Bank's retail branch offices, may not
impose eligibility criteria that screen out persons with disabilities.
Discrimination also includes the failure to provide the auxiliary aids and
services necessary to enable individuals with disabilities to take advantage of
a financial institution's services, unless the financial institution can
demonstrate that providing the aids and services would "fundamentally" alter the
nature of the service or would result in an "undue burden". Another significant
provision of Section 302 of the ADA is the requirement to remove from public
accommodations all architectural barriers and communication barriers that are
structural in nature if the removal is "readily achievable". "Readily
achievable" is defined as "easily accomplishable and able to be carried out
without much difficulty or expense". In deciding whether a particular action is
readily achievable, the size of the institution and the nature and the cost of
the action will be considered. The last substantive provision of Title 3 of the
ADA that applies to financial institutions is Section 303, dealing with new
construction. It provides that any building opening to the public after January
26, 1993 must be "readily accessible to and useable by individuals with
disabilities" unless doing so is structurally impracticable.
 
     Anyone who has been discriminated against on the basis of a disability in
relation to employment may file an action with the United States Equal
Employment Opportunity Commission and may be entitled to remedies that include
rehiring, promotion, reinstatement, back pay or remuneration, or reasonable
accommodation including reassignment. Such individuals may also be entitled to
damages intended to compensate for future pecuniary losses, mental anguish, and
inconvenience. The ADA authorizes the Attorney General to sue institutions that
are engaged in a pattern or practice of discrimination. At the Attorney
General's request, the court may impose civil penalties of $50,000 for a first
violation and $100,000 for any subsequent violation or certain other remedies.
 
     The Bank attempts in good faith to assure compliance with the requirements
of the consumer protection statutes to which it is subject, as well as the
regulations that implement the statutory provisions. The requirements are
complex, however, and even inadvertent non-compliance could result in civil and,
in some cases, criminal liability. Based on the Bank's history of claims under
the consumer protection statutes and regulations to which it is subject,
management does not believe that claims are likely to be asserted that will have
a material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.
 
LEGISLATION
 
     Federal legislation and regulation have significantly affected the
operations of federally insured savings associations, such as the Bank, and
other federally regulated financial institutions in the past several years and
have increased competition among savings associations, commercial banks, and
other financial institutions. The operations of regulated depository
institutions will continue to be subject to changes in applicable statutes and
regulations from time to time, which changes could adversely affect the Bank and
its affiliates. See "Risk Factors -- Recapitalization of the SAIF and Its Impact
on SAIF Premiums; Other Legislative Proposals" and "-- Taxation -- Proposed
Legislation".
 
TAXATION
 
  Federal Taxation
 
     The Company is a savings and loan holding company and the Bank is a federal
savings bank. Both are subject to provisions of the Code, in the same manner,
with certain exceptions, as other corporations. The Company and the Bank
participate in the filing of a consolidated federal income tax return with their
"affiliated group", as defined by the Code. For financial reporting purposes,
however, the Company and the Bank compute their tax on a separate company basis.
The accompanying Consolidated Financial Statements include provisions for income
taxes as a result of the Company's and the Bank's taxable income for the six
months ended March 31, 1996 and 1995, and fiscal 1995. For fiscal 1994 and 1993,
the provision for income taxes includes a deferred tax benefit as a result of
the Bank's expected utilization of its NOLs against future taxable income in
accordance with SFAS 109, "Accounting for Income Taxes". No tax benefit for
income taxes was recognized as a result of the Company's stand alone losses. See
"-- Residual Interest", "--
 
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<PAGE>   93
 
Alternative Minimum Tax", and "-- Accounting for Income Taxes". The Company and
the Bank have generated losses creating NOLs. See "-- Net Operating Losses". In
addition to federal income taxes, the Bank is required to make payments in lieu
of federal income taxes pursuant to the Assistance Agreement with the FSLIC. The
tax benefit sharing provisions contained in the Assistance Agreement were
replaced by similar provisions contained in the tax benefits agreement ("Tax
Benefits Agreement") entered into in connection with the Settlement Agreement;
these provisions, relating to the obligation to share tax benefit utilization,
will continue through the taxable year ending nearest to September 30, 2003. See
"-- FSLIC Assistance", and Note 13 to the Consolidated Financial Statements. See
"-- Proposed Legislation" for changes which would affect the bad debt deduction
and the bad debt reserve.
 
  Residual Interest
 
     The Bank is a holder of residual interests in Real Estate Mortgage
Investment Conduits ("REMICs") as defined by the Code. The Code limits the
amount of NOLs that may be used to offset the taxable income derived by holders
of residual interests in a REMIC. However, the Code states that this limitation
does not apply to certain financial institutions that are holders of residual
interests that meet a significant value test prescribed by applicable Treasury
regulations. The Bank incurs taxable income from residual interests that meet
such test and, therefore, may be offset by NOLs without respect to this
limitation. Also, the Bank incurs taxable income from residual interests that
does not meet such test and, therefore, may not be offset by NOLs. This income
caused the Bank to incur a regular tax liability for the six months ended March
31, 1995, and fiscal 1994.
 
  Domestic Building and Loan ("DBL") Test
 
     Savings institutions such as the Bank that meet the definitional DBL test
prescribed by the Code may benefit from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. The DBL test consists of a supervisory test, a business operations
test, and an asset test. If the Bank fails to meet these tests, the transition
from the reserve method to the direct charge-off method of tax accounting for
bad debts would result in a recapture of this reserve into taxable income. At
September 30, 1995, the Bank was in excess of the minimum thresholds. There can
be no assurance that the Bank will meet these tests for subsequent tax years.
 
  Bad Debt Deduction
 
     For purposes of the bad debt reserve deduction, loans are separated into
"qualifying real property loans", which generally are loans secured by certain
interests in real property, and "non-qualifying loans", which are all other
loans. The deduction with respect to non-qualifying loans must be computed under
the experience method, which generally allows a deduction based on a savings
association's actual bad debt loss experience, consisting of the current year
and the prior five years. The bad debt reserve deduction with respect to
qualifying real property loans, however, may be the larger of the amounts
computed under (i) the experience method, or (ii) the percentage of taxable
income method. The percentage of taxable income method generally permits a
qualifying savings association to deduct 8% of its taxable income prior to such
deduction, as adjusted for certain items.
 
     Savings associations, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income, for purposes of computing the
percentage of taxable income deduction, for losses attributable to activities of
the non-savings association members of the consolidated group that are
functionally related to the activities of the savings association member.
Currently, the Bank is computing its bad debt deduction pursuant to the
experience method. All or a portion of the Bank's tax reserve for bad debts may
be required to be includible in taxable income in a subsequent taxable year
under certain circumstances, including the Bank's failure to meet the definition
of a savings institution for federal income tax purposes, dividend distributions
in excess of the Bank's then current or accumulated earnings and profits, or as
a result of distributions in liquidation or redemption of the Bank Common Stock
or the Bank Preferred Stock.
 
                                       91
<PAGE>   94
 
  Proposed Legislation
 
     For a discussion of proposed legislation which could, if enacted, have a
material effect on the financial condition and results of operations of the
Company and the Bank, see "Risk Factors -- Recapitalization of the SAIF and Its
Impact on SAIF Premiums; Other Legislative Proposals".
 
  Alternative Minimum Tax ("AMT")
 
     In addition to regular income taxes, corporations including saving and loan
holding companies and savings associations are subject to an AMT, which is
generally equal to 20% of alternative minimum taxable income ("AMTI") (taxable
income increased by tax preference items and adjusted for other items). The
preference item principally affecting the Bank relates to the adjusted current
earnings ("ACE") adjustment, which includes FRF assistance. See "Business -- The
Assistance Agreement". Although the amounts received by the Bank pursuant to the
Assistance Agreement are not taxable for federal income tax purposes, a portion
of such amounts are considered to be an ACE adjustment. For the six months ended
March 31, 1996, and for fiscal 1995 and 1993, the Bank incurred AMTI that was
offset by the utilization of AMT NOLs. However, corporations may offset only 90%
of their AMTI with the related NOLs. For the six months ended March 31, 1995,
and for fiscal 1994, 1992, and 1991, the Bank did not incur an AMT liability.
 
  Environmental Tax
 
     The Code imposes an additional tax at the rate of .12% on the modified AMTI
of a corporation. Because the tax was enacted to provide funds for various
environmental programs, it is denominated as an environmental tax. Modified AMTI
is essentially AMTI without regard to any utilization of available AMT NOLs less
$2 million.
 
  FSLIC Assistance
 
     Pursuant to the Assistance Agreement, the FRF, as successor to the FSLIC,
was obligated to provide the Bank with financial assistance in connection with
various matters that arose under the Assistance Agreement. See "Business -- The
Assistance Agreement". The tax treatment of the assistance payments to savings
associations that acquire assets from institutions in receivership (such as the
predecessor to the Company) has been amended several times in recent years.
Payments to the Bank pursuant to the Assistance Agreement were subject to the
applicable provisions of the Code that were in effect in 1988, the year of the
Acquisition. Payments from the FRF to the Bank pursuant to the Assistance
Agreement were not included in the Bank's taxable income, and the Bank was not
required to reduce its basis in the Covered Assets by the amount of such
financial assistance; however, certain writedowns and losses are limited as
discussed below. Accordingly, there was no requirement to pay federal income
taxes with respect to any amount of the assistance payments received pursuant to
the Assistance Agreement. The Bank also succeeded to substantial NOLs as a
result of the Acquisition.
 
     The Assistance Agreement did, however, require the Bank, in effect, to pay
to the FRF an amount equal to one-third of the sum of federal and state net tax
benefits ("Net Tax Benefits") (as defined by the Assistance Agreement). The Net
Tax Benefits shall be equal to the excess of any of the federal income tax
liability which would have been incurred if the tax benefit item had not been
deducted or excluded from income over the federal income tax liability actually
incurred. The Net Tax Benefits items are the tax savings resulting from (i) the
utilization of the deduction by the Bank of any amount of NOLs, capital loss
carryforwards, and certain other carryforwards on the books and records of Old
USAT, (ii) the exclusion from gross income of the amount of certain interest or
assistance payments made to the Bank by the FRF, and (iii) the deduction of
certain costs, expenses, or losses incurred by the Bank for which the FRF has
made tax-free assistance payments. These provisions were replaced by similar
provisions in the Tax Benefits Agreement entered into in connection with the
termination of the Assistance Agreement. Pursuant to the Tax Benefits Agreement,
these provisions relating to the obligation to share tax benefit utilization
will continue through the taxable year ending nearest to September 30, 2003.
 
                                       92
<PAGE>   95
 
     Under the Assistance Agreement, the Bank received assistance payments from
the FRF for writedowns and losses from the sales of Covered Assets. For federal
income tax purposes, the Bank included the writedowns and losses from the sale
of Covered Assets in its calculation of the bad debt deduction, using the
experience method. However, the Revenue Reconciliation Act of 1993 denied the
inclusion of writedowns and losses from the sale of Covered Assets in the
calculation of bad debt deductions for assistance payments credited on or after
March 4, 1991. Amendment of federal tax returns for fiscal 1991 and 1992 did not
cause any additional federal tax liabilities to be incurred. However, the new
tax law reduced the Bank's federal NOLs in the amount of approximately $259
million.
 
     The aforementioned tax relief provided savings (costs) on the amount of
taxes required to be paid. The estimated tax savings (costs), by year, were as
follows (in millions):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
  SEPTEMBER 30,                                               SAVINGS (COSTS)
- ------------------                                            ---------------
<S>                 <C>                                       <C>
      1991..................................................       $(1.7)
      1992..................................................        (2.8)
      1993..................................................        10.5
      1994..................................................         3.6
      1995..................................................        31.8
</TABLE>
 
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
 ENDED MARCH 31,
- ------------------
<S>                 <C>                                       <C>
      1996..................................................        17.2
</TABLE>
 
     The remaining NOLs associated with this tax relief aggregated approximately
$745 million at March 31, 1996.
 
  Net Operating Losses
 
     There are federal income tax NOLs of approximately $808 million as of March
31, 1996. Included in the $808 million is $24 million of Old USAT's NOLs that
will expire in fiscal 2003 if not utilized. Because Old USAT's NOLs are
"separate return limitation year" losses within the meaning of the consolidated
return Treasury regulations, their utilization is limited to future taxable
income of the Bank. The remaining $784 million of NOLs are attributable to
operations for fiscal 1989 to 1994, and will begin expiring in fiscal 2004 if
not utilized. See Note 13 to the Consolidated Financial Statements. These NOLs
may be utilized against the taxable income of the other companies within the
consolidated group of which the Company and the Bank are members.
 
  Net Operating Loss Limitations
 
     In the event of an Ownership Change, Section 382 of the Code imposes an
annual limitation on the amount of taxable income a corporation may offset with
NOLs and certain recognized built-in losses. The limitation imposed by Section
382 of the Code for any post-change year would be determined by multiplying the
value of the Company's stock (including both Common Stock and Preferred Stock)
at the time of the Ownership Change by the applicable long-term tax exempt rate
(which was 5.78% for June 1996). Any unused annual limitation may be carried
over to later years, and the limitation may under certain circumstances be
increased by the built-in gains in assets held by the Company at the time of the
change that are recognized in the five-year period after the change. Under
current conditions, if an Ownership Change were to occur, the Company's annual
NOL utilization would be limited to a minimum of approximately $31.8 million.
 
     The Company would undergo an Ownership Change if, among other things, 5%
Stockholders increase their aggregate percentage ownership of such stock by more
than 50 percentage points over the lowest percentage of such stock owned by such
stockholders at any time during the Testing Period (generally the preceding
three years). In applying Section 382 of the Code, at least a portion of the
stock sold pursuant to the Offering would be considered to be acquired by a new
5% stockholder even if no person acquiring the stock in
 
                                       93
<PAGE>   96
 
fact owns as much as 5% of the issuer's stock. While the application of Section
382 of the Code is highly complex and uncertain in some respects, the sale of
shares of Class A Common Stock as contemplated by this Prospectus is not
expected to cause an Ownership Change. In addition, events could occur prior to
or after the Offering that are beyond the control of the Company which could
result in an Ownership Change.
 
     In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Offering
of shares of Common Stock that would either cause a person or entity to become a
5% Stockholder or increase a 5% Stockholder's percentage ownership interest.
While such Transfers are deemed prohibited by the Certificate and the Company is
authorized not to recognize any transferee of such a Transfer as a stockholder
to the extent of such Transfer, these restrictions are incomplete since the
Company cannot, consistent with NASDAQ requirements, prevent the settlement of
transactions through NASDAQ, and because the prohibition on Transfers by 5%
Stockholders does not limit transactions in the securities of such 5%
Stockholders that could give rise to ownership shifts within the meaning of the
applicable Section 382 rules. Moreover, the Company Board retains the discretion
to waive these limitations or to take certain other actions that could trigger
an Ownership Change, including through the issuance of additional shares of
Common Stock in subsequent public or private offerings or through subsequent
merger or acquisition transactions.
 
     Because the Company will have utilized a substantial portion of its
available ownership limitation in connection with the Offering, the Company may
not be able to engage in significant transactions that would create a further
shift in ownership within the meaning of Section 382 of the Code within the
following three-year period without triggering an Ownership Change. There can be
no assurance that future actions on the part of the Company's stockholders or
the Company itself will not result in the occurrence of an Ownership Change.
 
     See "Risk Factors -- Limitations on Use of Tax Losses, Restrictions on
Transfer of Stock", "Selling Stockholders -- Selling Stockholder Letter
Agreements" and "Description of Capital Stock -- Common Stock -- Restrictions on
Transfer of Stock".
 
     Preferred stock that meets the requirements of section 1504(a)(4) of the
Code is not considered stock when calculating an Ownership Change. Preferred
stock meets the definition under section 1504(a)(4) of the Code if such stock:
(i) is not entitled to vote; (ii) is limited and preferred as to dividends and
does not participate in corporate growth to any significant extent; (iii) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium); and (iv) is
not convertible into another class of stock.
 
     In fiscal 1995, the Bank publicly issued 4,000,000 shares, $25 liquidation
preference per share, of 9.60% Preferred Stock, Series B (par value $0.01). In
fiscal 1993, the Bank publicly issued 3,420,000 shares, $25 liquidation
preference per share, of 10.12% noncumulative Preferred Stock, Series A (par
value $0.01). Management believes that the Bank's issuance of the Bank Preferred
Stock met the requirements of Section 1504(a)(4) of the Code and, therefore, did
not result in an Ownership Change.
 
     The tax laws in effect in 1988 that applied to the Acquisition provided
that generally applicable limitations on the ability of an acquiring corporation
to utilize the NOLs, and built-in losses, of acquired savings associations did
not apply in the case of the acquisition of assets from insolvent savings and
loan associations. Pursuant to this exception to the generally applicable law,
which existed in 1988, the Bank is allowed to use the NOLs and built-in losses
of Old USAT without limitation.
 
     If an Ownership Change should occur, the Company's ability to utilize its
NOLs will be limited as described above, and the Company's ability to deduct its
built-in losses, if any, as they are realized will be subject to the same
limitation. Limitation of the utilization of these tax benefits could have a
material impact on the Company's financial condition.
 
                                       94
<PAGE>   97
 
  Consolidated Group
 
     The Company and the Bank were and are members of an "affiliated group" of
corporations, as defined in the Code and, accordingly, participate in the filing
of a consolidated tax return. One of the requirements of being a member of an
affiliated group is that 80% of the total voting power and 80% of the total
value of stock be owned, directly or indirectly, by other members of the
affiliated group. Stock for this purpose does not include preferred stock that
meets certain definitional requirements prescribed by the Code. Therefore, the
Bank did not cease to be a member of an affiliated group as a result of the
prior issuance of the Bank Preferred Stock. However, if subsequent events occur
that cause the Bank Preferred Stock to no longer meet these requirements (as
could occur if a default in dividends permitted the holders of such stock to
vote in the election of Bank directors), the Bank may cease to be a member of
the affiliated group. If the Bank ceases to be a member of the affiliated group,
other members of the affiliated group will lose their ability to utilize the
Bank's nonseparate return year limitation NOLs in the amount of $736 million.
See "-- Net Operating Losses".
 
  Accounting for Income Taxes
 
     Effective October 1, 1992, the Company and the Bank adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 changes the method of computing
income taxes for financial statement purposes by adopting the liability method
under which the net deferred tax asset or liability is determined based on the
tax effects of tax benefits attributable to tax carryforwards such as NOLs,
investment tax credits and capital losses, and the differences between the book
and tax bases of the various assets and liabilities. The deferred tax asset must
be reduced by a valuation allowance if, based on available evidence, it is more
likely than not that some portion of the tax benefit will not be realized.
Accounting guidance under Accounting Principles Board No. 11, "Accounting for
Income Taxes", did not require these amounts to be recognized previously. During
the fourth quarter of fiscal 1993, the Bank recognized $59 million as a tax
benefit for the expected utilization of $252 million in NOLs against future
taxable income. SFAS No. 109 requires that tax benefits arising from an
acquisition should be used first to reduce to zero any goodwill related to that
acquisition, second to decrease other non-current intangible assets resulting
from that acquisition, and finally to reduce income tax expense. As a result of
the recognition of $59 million in tax benefits, income tax expense was reduced
$44 million, and goodwill associated with the Acquisition was reduced $15
million during the fourth quarter of fiscal 1993. During fiscal 1994, the
Company recognized an additional $58 million as a tax benefit for the expected
utilization of $249 million in NOLs against future taxable income. For fiscal
1994 and 1993, the Company recognized no tax benefit for income taxes for its
NOLs because the criteria to recognize a tax benefit under SFAS No. 109 was not
met. For the six months ended March 31, 1996 and 1995 and fiscal 1995, there
have been no tax benefits recognized by the Company or the Bank for the expected
utilization of NOLs against future taxable income. See "-- Net Operating Loss
Limitations". During the third quarter of 1996, the Company recognized a tax
benefit of $101.7 million for the expected utilization of NOLs against future
taxable income. See Note 21 to the Consolidated Financial Statements.
 
  State Taxation
 
     The Company and the Bank file unitary and combined state returns with
certain subsidiaries and also file separate state returns. The location of
mortgage bank branches, loan solicitations, or real property securing loans
creates jurisdiction for taxation in certain states, which results in the filing
of state income tax returns. Amounts for state tax liabilities are included in
the statements of operations for the six months ended March 31, 1996 and 1995,
and fiscal 1995, 1994, and 1993. See Note 13 to the Consolidated Financial
Statements.
 
                                       95
<PAGE>   98
 
                           DESCRIPTION OF PROPERTIES
 
     The Company's offices are located at 50 Charles Lindbergh Boulevard, Suite
500, Uniondale, New York 11553, in space provided by an affiliate of the
Company. The headquarters of the Bank is located in leased premises in Houston,
Texas. The leases for the Bank's headquarters have terms expiring from one to
five years, with annual rental expenses of $4.3 million, subject to increases
under certain circumstances. The following table sets forth the number and
location of the community banking, commercial banking, and mortgage banking
offices of the Company as of March 31, 1996:
 
<TABLE>
<CAPTION>
                                                            NUMBER OF OFFICES
                                    ------------------------------------------------------------------
                                       COMMUNITY
                                    BANKING BRANCHES       COMMERCIAL
                                    ----------------        BANKING         MORTGAGE BANKING
               LOCATION             OWNED     LEASED     OFFICES LEASED      OFFICES LEASED      TOTAL
    ------------------------------  -----     ------     --------------     ----------------     -----
    <S>                             <C>       <C>        <C>                <C>                  <C>
    Houston Area..................    14        20              1                    5             40
    Dallas/Ft. Worth Area.........    12        17              1                    3             33
    Other Texas...................    --         4             --                    3              7
    California....................    --        --              1                   25             26
    Florida.......................    --        --              1                    6              7
    Other U.S.....................    --        --              5                   70             75
                                      --        --              -
                                                                                   ---            ---
              Total...............    26        41              9                  112            188
                                      ==        ==              =                  ===            ===
</TABLE>
 
     A majority of leases outstanding at March 31, 1996 expire within five years
or less. See Note 17 to the Consolidated Financial Statements.
 
     Net investment in premises and equipment totaled $36.2 million at March 31,
1996.
 
                               LEGAL PROCEEDINGS
 
     On December 7, 1995, Maxxam filed a Petition for Review in the United
States Court of Appeals for the Fifth Circuit seeking to modify, terminate, and
set aside the order, dated December 30, 1988 (the "Order"), of the FSLIC
approving the Acquisition, which was consummated on December 31, 1988 and
involved substantially all the Bank's initial assets and liabilities. See "The
Company -- History". On December 8, 1995, Maxxam filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the U.S. District Court for
the Southern District of Texas, entitled Federal Deposit Insurance Corporation
v. Charles E. Hurwitz, also seeking to set aside the Order. Maxxam contends, in
both cases, that it submitted the most favorable bid to acquire the assets and
liabilities of Old USAT and that it should have been selected as the winning
bidder.
 
     The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of Maxxam are barred by applicable time
limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.
 
     The Bank's operations are subject to various consumer protection statutes
and regulations, including, for example, the TILA, the FH Act, the CRA, the
ECOA, the HMDA, the RESPA, the EFTA, the Expedited Funds Act, the TISA, and the
ADA. See "Regulation -- Consumer Protection Regulations". During the past
several years, numerous individual claims and purported consumer class action
claims were commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking civil statutory
and actual damages and rescission under the TILA, as well as remedies for
alleged violations of various state unfair trade practices laws and restitution
or unjust enrichment in connection with certain mortgage loan transactions.
Also, there have been numerous individual claims and purported consumer class
action claims commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the
RESPA and breach the lenders' contracts with borrowers. Such claims also
generally seek actual damages and attorneys' fees.
 
     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
 
                                       96
<PAGE>   99
 
disclosure, breach of contract, breach of fiduciary duty, or violation of
federal or state laws. Claims have involved, among other things, interest rates
and fees charged in connection with loans, interest rate adjustments on
adjustable-rate mortgage loans, timely release of liens upon loan payoffs, the
disclosure and imposition of various fees and charges, and the placing of
collateral protection insurance. While the Bank has had various claims asserted
against it similar to those discussed above, management does not expect these
claims to have a material adverse effect on the Bank's or the Company's
financial condition, results of operations or liquidity.
 
     On July 25, 1995, the Bank, the Company and Hyperion Partners filed suit in
the United States Court of Federal Claims against the United States of America
for breach of contract and taking of property without compensation in
contravention of the Fifth Amendment of the United States Constitution. The
action arose because the passage of FIRREA and the regulations adopted by the
OTS pursuant to FIRREA deprived the Company of its contractual rights against
the United States.
 
     In December 1988, the United States, through its agencies, entered into
certain agreements with the Company that resulted in contractual obligations
owed to the Company. The Company contends that the obligations were undertaken
to induce, and did induce, the Company's acquisition of substantially all of the
assets and the secured, deposit, and certain tax liabilities of Old USAT, an
insolvent savings and loan association, thereby relieving the FSLIC of the
immense costs and burdens of taking over and managing or liquidating the
institution. The FSLIC, an agency of the United States government, actively
solicited buyers for Old USAT, and in the weeks preceding the acquisition the
Company and the FSLIC negotiated the terms of a complex transaction involving
some six contractual documents. To accomplish this transaction, the FSLIC and
its regulating agency, the Federal Home Loan Bank Board (the "FHLBB"), which was
also an agency of the United States government, were required to undertake to
pay certain other amounts of money over time and to count for regulatory
purposes certain monies and book entries of the Bank in ways that allowed the
Company greater leverage to increase the size of the Bank prudently and
profitably. The United States obtained the right to share in this leveraged
growth through warrants for stock and through so-called "tax benefit payments"
to the United States from the Company.
 
     The lawsuit involves the United States' contractual obligations (i) to
abide by a capital forbearance, which allowed the Bank to operate for ten years
under negotiated capital levels lower than the levels required by the then
existing regulations or successor regulations, (ii) to abide by its commitment
to allow the Bank to count subordinated debt as regulatory capital for all
purposes and (iii) to abide by an accounting forbearance, which allowed the Bank
to count as capital for regulatory purposes, and to amortize over a period of
twenty-five years, the difference between certain FSLIC payment obligations to
the Bank, denominated "Reimbursable Goodwill," and the discounted present value
of those future FSLIC payments. The lawsuit seeks monetary relief for the
breaches by the United States of its contractual obligations to plaintiffs and,
in the alternative, seeks just compensation for a taking of property and for a
denial of due process under the Fifth Amendment to the United States
Constitution.
 
     There are over 100 similar cases pending in the United States Court of
Federal Claims, which has entered summary judgment for the plaintiffs as to
liability, but not damages, in three of the cases. These three cases (the
"Winstar cases") were appealed to the United States Court of Appeals for the
Federal Circuit, which affirmed the judgment for the plaintiffs following a
hearing en banc after a three-judge panel had found for the United States. The
United States Supreme Court has agreed to review the decision in the Winstar
cases, oral argument occurred on April 24, 1996, and the Supreme Court is
expected to issue a decision during 1996. The Company's claim has been stayed,
pending the decisions of the Supreme Court in the Winstar cases. There have been
no decisions determining damages in any of the similar cases. The Company is
unable to predict the outcome of its claim against the United States and the
amount of any damages that may be awarded to the Bank or the Company, if any, in
the event that judgment is made in favor of the Bank or the Company.
Consequently, no assurances can be given as to the results of this claim or the
timing of any proceeding in relation thereto.
 
     The Bank is involved in other legal proceedings occurring in the ordinary
course of business that management believes, after consultation with legal
counsel, are not, in the aggregate, material to the financial condition, results
of operations, or liquidity of the Bank or the Company.
 
                                       97
<PAGE>   100
 
                                   MANAGEMENT
 
DIRECTORS
 
     The Company Board consists of three members and is divided into three
classes. The members of each class are elected for a term of three years with
one class being elected annually. Each director of the Company is also a
director of the Bank. The following table sets forth certain information with
respect to the directors of the Company, including information regarding their
ages and when they became directors.
 
<TABLE>
<CAPTION>
                                                      DIRECTOR OF       DIRECTOR OF
                                                      THE COMPANY        THE BANK        TERM
                       NAME                  AGE         SINCE             SINCE        EXPIRES
        -----------------------------------  ---     --------------     -----------     -------
        <S>                                  <C>     <C>                <C>             <C>
        Lewis S. Ranieri...................  49           1988              1988
        Salvatore A. Ranieri...............  47           1988              1988
        Scott A. Shay......................  38           1988              1988
</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 of the Company and Chairman of the Bank from 1988 until
               1996. Mr. Ranieri is the Chairman and CEO of Ranieri & Co.,
positions he has held since founding Ranieri & Co. in 1988. Mr. Ranieri is a
founder of Hyperion Partners and of Hyperion Partners II. He is also Chairman of
Hyperion Capital Management, Inc., a registered investment advisor and an
affiliate of the Bank ("Hyperion Capital") and The Hyperion Total Return Fund,
Inc. He is director of the Hyperion 1999 Term Trust, Inc., the Hyperion 1997
Term Trust, Inc., the Hyperion 2002 Term Trust, Inc. and Hyperion 2005
Investment Grade Opportunity Trust, Inc. Mr. Ranieri is also Chairman and
President of various other indirect subsidiaries of Hyperion Partners. Along
with his brother, Salvatore A. Ranieri, and Scott A. Shay, Mr. Ranieri controls
the general partner of Hyperion Partners. Along with Mr. Shay, Mr. Ranieri
controls the general partner of Hyperion Partners II, a recently formed
investment partnership which plans to make investments primarily in the
financial and real estate sectors of the economy. He is also Chairman of the
Board and a director of American Marine Holdings, Inc. ("American Marine"). Mr.
Ranieri is also a director of Delphi Financial Group, Inc.
 
     Mr. Ranieri is a former Vice Chairman of Salomon Brothers Inc ("Salomon")
where he was employed from 1968 to 1987, and was one of the principal developers
of the secondary mortgage market. While at Salomon, Mr. Ranieri helped to
develop the capital markets as a source of funds for housing and commercial real
estate and to establish Salomon's then leading position in the MBS area. He is a
member of the National Association of Home Builders Mortgage Roundtable.
 
     Mr. Ranieri is a Trustee for the Parish of Our Lady of the Rosary/Shrine of
St. Elizabeth Ann Seton and the Environmental Defense Fund. Mr. Ranieri is also
a director of the Peninsula Hospital Center in Queens, New York. Mr. Ranieri
received his Bachelor of Arts degree from St. John's University.
 
     SALVATORE A. RANIERI.  Mr. Ranieri is the General Counsel and a Managing
Director of Ranieri & Co. He was also the Vice President, Secretary and General
Counsel of the Company from 1988 until                1996. He is a director of
Hyperion Capital, as well as of various other direct and indirect subsidiaries
of Hyperion Partners. Along with his brother, Lewis S. Ranieri, and Scott A.
Shay, Mr. Ranieri controls the general partner of Hyperion Partners. He is also
a director of American Marine. Mr. Ranieri was one of the original founders of
Ranieri & Co. and of Hyperion Partners. Prior to joining Ranieri & Co., he had
been President of Livia Enterprises, Inc., a private venture capital and real
estate investment company that oversaw investments in the real estate,
construction, and manufacturing sectors. In addition to his business experience,
Mr. Ranieri is also a lawyer. During his career, his practice has included the
areas of corporate, litigation, real estate and regulatory matters. Until 1984,
he had been a member of a law firm in New York City. He is admitted to practice
law in New York and various federal courts. He received his Bachelor of Arts
degree from New York University and his Juris Doctor degree from Columbia
University School of Law.
 
     SCOTT A. SHAY.  Mr. Shay has been a Managing Director of Ranieri & Co.
since its formation in 1988. He was also a Vice President of the Company from
1988 until                1996. Mr. Shay is a founder of
 
                                       98
<PAGE>   101
 
Hyperion Partners and Hyperion Partners II. Mr. Shay is currently a director of
Hyperion Capital and Transworld Home Healthcare, Inc., as well as an officer or
director of other direct and indirect subsidiaries of Hyperion Partners and
Hyperion Partners II. Along with Lewis S. Ranieri and Salvatore A. Ranieri, Mr.
Shay controls the general partner of Hyperion Partners. Along with Mr. Lewis S.
Ranieri, Mr. Shay controls the general partner of Hyperion Partners II. Prior to
joining Ranieri & Co., Mr. Shay was a director of Salomon where he was employed
from 1980 to 1988. Mr. Shay was involved with Salomon's thrift mergers and
acquisitions practice and with mortgage banking financing and mergers and
acquisitions. Mr. Shay also worked on acquisitions of real estate investment
trusts while at Salomon. Mr. Shay graduated Phi Beta Kappa from Northwestern
University with a B.A. degree in economics and received a Master of Management
degree with distinction from Northwestern's Kellogg Graduate School of
Management. Mr. Shay has lectured at the School of Mortgage Banking and has
written articles on the strategic environment for mortgage banking and on merger
and acquisition theory. Mr. Shay currently serves as a member of the board and
was President of Hillel of New York from 1990 until June 30, 1992. He is also on
the board of UJA-Federation of New York.
 
     The principal occupation of each director of the Bank is set forth below.
 
     BARRY C. BURKHOLDER.  Mr. Burkholder has been the President and CEO of the
Company since                1996, and has held similar positions with the Bank
since joining it on April 10, 1991. Since      , 1996, Mr. Burkholder has also
been Chairman of the Bank. In May 1994, Mr. Burkholder assumed the additional
responsibilities of managing the Bank's retail banking operations. Prior to
joining the Bank, Mr. Burkholder was employed at Citicorp/Citibank for 15 years.
Mr. Burkholder became associated with Citicorp through its then newly formed
Consumer Services Group in 1976, and then became a member of its International
Staff. Mr. Burkholder moved to Citibank Savings in London where he was named
Chairman and Managing Director in 1977. Mr. Burkholder returned to the United
States in 1981 to become President of Citicorp Person-to-Person, now part of
Citicorp Mortgage, Inc., a nationwide mortgage lending business with related
mortgage banking, servicing, and insurance activities. In 1984, he was named
Chairman and CEO of Citibank Illinois, and two years later became Central
Division Executive for the U.S. Consumer Bank. As Central Division Executive,
Mr. Burkholder was responsible for Citicorp's consumer banking activities in the
Midwest and Southeast. Mr. Burkholder began his career at Ford Motor Company in
the financial planning area and moved to Certain-teed Corporation where his last
position prior to joining Citicorp was as President of its real estate
development subsidiary. Mr. Burkholder received a B.S. and an M.B.A. from Drexel
University. Mr. Burkholder is President elect of the Houston Symphony, and
serves on the Board of Trustees of the Texas Gulf Coast United Way.
 
     LAWRENCE CHIMERINE, PH.D.  Dr. Chimerine has served as President of his own
economic consulting firm, Radnor Consulting Services, since 1990, and as a
Senior Economic Counselor for Data Resources Inc. since 1990. He is currently
also the Managing Director and Chief Economist of the Economic Strategy
Institute in Washington, D.C. Dr. Chimerine served as Chairman and Chief
Executive Officer of the WEFA Group from 1987 to 1990 and of Chase Econometrics
from 1979 to 1987, both of which provide economic consulting. Dr. Chimerine
received a B.S. from Brooklyn College and a Ph.D. from Brown University.
 
     DAVID M. GOLUSH.  Mr. Golush is a Managing Director of Ranieri & Co. with
which he has been associated since the firm's founding in 1988. He is an officer
of direct and indirect subsidiaries of Hyperion Partners and Hyperion Partners
II, and has an economic interest in Hyperion Partners and Hyperion Partners II.
Mr. Golush was at Salomon from 1972 to 1987 and was a Vice President from 1975.
From 1984 to 1987, he was Chief Administrative Officer of Salomon's Mortgage and
Real Estate Department at Salomon. From 1966 to 1972, he held positions in
public accounting and private industry. He has been a certified public
accountant in New York since 1972. Mr. Golush received a B.B.A. from the
University of Cincinnati. He is Treasurer of the New York Police & Fire Widows'
and Children's Fund, Inc. and a member of the board of the Jewish Federation of
Central New Jersey.
 
     PAUL M. HORVITZ, PH.D.  Dr. Horvitz has been on the faculty of the
University of Houston since 1977, and holds the University's Judge James Elkins
Chair of Banking and Finance. From 1967 to 1977, Dr. Horvitz held positions as
Assistant Director of Research, Director of Research and Deputy to the Chairman
at the FDIC. Prior to joining the FDIC he was an economist at the Federal
Reserve Bank of Boston and the Office of
 
                                       99
<PAGE>   102
 
Comptroller of the Currency. From 1983 to 1990, Dr. Horvitz was a member of the
Board of Directors of the FHLB Dallas, and in 1986 and 1987 he was a member of
the Federal Savings and Loan Advisory Council. He is currently a director of the
Pulse EFT Association, and a member of the Shadow Financial Regulatory
Committee. Dr. Horvitz received a B.A. from the University of Chicago, an M.B.A.
from Boston University, and a Ph.D. from MIT.
 
     ALAN E. MASTER.  Mr. Master began his career with Chemical Bank in 1961 as
a commercial lending officer, became a Branch Office Head, and worked on
start-ups or clean-ups of banks in Miami, Florida. In 1973, he joined Barnett
Banks of Florida ("Barnett") and led a unit of Barnett formed from the
reorganization and merger of five subsidiaries of Barnett. In 1977, he became
President, CEO, and Chief Financial Officer, and in 1978 was elected Vice
Chairman of United Americas Bank of New York. Mr. Master joined The Merchants
Bank of New York in 1979 as Executive Vice President and was elected a director
in 1980. In 1983, Mr. Master joined Ensign Bank FSB in New York City as
President and CEO. In 1991, Mr. Master established a consulting practice
specializing in the financial services and banking sectors. Mr. Master has
served on the Board of Trustees of the Hyperion Government Mortgage Trust II,
has participated in meetings of the Advisory Board of Hyperion Partners, is a
member of the Advisory Board of the Johnson Graduate School of Management of
Cornell University and joined PaineWebber Incorporated in April 1996. Mr. Master
received a B.A. from Cornell University and has completed course work in finance
and accounting at the New York University Graduate School of Business
Administration.
 
     ANTHONY J. NOCELLA.  Mr. Nocella has been the Executive Vice President and
Chief Financial Officer of the Company since                1996, and has held
those same positions with the Bank since joining it in July 1990. He manages the
Financial Markets and Commercial Banking Groups of the Bank. From 1988 to 1990,
Mr. Nocella provided consulting services to the Bank as President of Nocella
Management Company, a firm that specialized in asset and liability management
consulting for financial institutions. From 1981 to 1987, Mr. Nocella served as
Executive Vice President and Chief Financial Officer of Meritor Financial Group,
as well as President of the Company's Commercial banking/financial markets arm,
Meritor Financial Markets ("Meritor"). During his 13 years at Meritor
(1974-1987), he also served as President of PSFS Management Company, Inc., the
holding company of The Philadelphia Saving Fund Society, the nation's largest
savings institution at the time. Other career positions include Controller and
Director of Financial Services for American Medicorp (now Humana), Managing
Auditor and Consultant for Peat Marwick and adjunct professor of finance at St.
Joseph's University and Drexel University. Mr. Nocella, a Certified Public
Accountant, received an undergraduate degree in accounting from LaSalle
University, and an M.B.A. in computer science and finance from Temple
University. He also completed the graduate Bank Financial Management Program of
the Wharton School at the University of Pennsylvania. Mr. Nocella is the
President and a director of the Community Bankers Association of Southeast
Texas, a delegate and member of the Mortgage Finance and Accounting Committees
of the America's Community Bankers, a director of the Texas Community Bankers
Association, and delegate and past President of the Financial Executives
Institute.
 
     PATRICIA A. SLOAN.  Ms. Sloan is a Managing Director of Ranieri & Co. and
has an economic interest in Hyperion Partners and Hyperion Partners II. She is
also a director of certain funds managed by Hyperion Capital Management,
including Hyperion 1999 Term Trust, Inc., Hyperion 1997 Term Trust, Inc.,
Hyperion 2002 Term Trust, Inc., Hyperion Investment Grade Opportunity Term
Trust., Inc., and the Hyperion Total Return Fund, Inc. Prior to joining Ranieri
& Co. in 1988, Ms. Sloan was employed at Salomon from 1972 to 1988, where she
served as Director of the Company's Financial Institutions Group. Prior to
joining Salomon, Ms. Sloan was employed at Bache & Co., Inc. from 1965 to 1972.
Ms. Sloan received a B.A. from Radcliffe College and an M.B.A. from Northwestern
University.
 
     KENDRICK R. WILSON III.  Mr. Wilson currently is a Managing Director and
head of investment banking of Lazard Freres & Co. LLC, a New York-based
investment banking firm. Prior to his joining Lazard Freres & Co. LLC in 1990,
Mr. Wilson served as President of Ranieri & Co. from March 1988 to December
1989, and Senior Executive Vice President for E.F. Hutton from April 1987 to
February 1988. Mr. Wilson was also employed at Salomon from June 1978 to April
1987 where he became a Managing Director. Mr. Wilson has an economic interest in
Hyperion Partners. He is a director of ITT Corporation, Black Rock Asset
Investors,
 
                                       100
<PAGE>   103
 
American Marine Holdings, American Buildings Company, Inc., and Meigher
Communications, Inc. Mr. Wilson received a B.A. from Dartmouth College and an
M.B.A. from Harvard Business School.
 
     Mr. Lewis Ranieri and Mr. Salvatore Ranieri are brothers. No other director
or executive officer is related to any other director or executive officer by
blood, marriage, or adoption. Mr. Lewis Ranieri, Mr. Salvatore Ranieri and Mr.
Shay served since 1990 as directors of the Company pursuant to an agreement
entered into in 1990 between the owners of certain non-voting stock of the
Company and Hyperion Partners, which was terminated in     1996. There are no
existing arrangements or understandings between a director and any other person
pursuant to which such person was elected a director.
 
ANNUAL MEETING
 
     The By-Laws provide that annual meetings of stockholders will be held at
the Company's principal office or at such other place and on such date as may be
fixed from time to time by resolution of the Company Board. The first annual
meeting for which proxies will be solicited from stockholders will be held on
              , 1996.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Company Board has established      committees:
 
COMPENSATION OF DIRECTORS
 
     Non-employee directors currently receive an annual retainer of $          .
The chair of each committee will receive an additional annual retainer of
$          . Directors will not receive separate meeting fees.
 
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
 
     The following table sets forth information concerning executive officers of
the Company and principal executive officers of the Bank who do not serve on the
Company Board. All executive officers of the Company and the Bank are elected by
the Company Board and the Board of Directors of the Bank, respectively, and
serve until their successors are elected and qualified. There are no
arrangements or understandings between any director and any other person
pursuant to which such individual was elected an executive officer.
 
                                       101
<PAGE>   104
 
                  PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
 
<TABLE>
<CAPTION>
             NAME               AGE                   POSITION AND OCCUPATION
- ------------------------------  ---   --------------------------------------------------------
<S>                             <C>   <C>
George R. Bender..............  56    Executive Vice President -- Mortgage Banking of the
                                      Company since     1996 and of the Bank since July 1990.
                                      Prior to joining the Bank, Mr. Bender was employed by
                                      CenTrust Mortgage Corporation as President and CEO from
                                      June 1985 to February 1990. As President and CEO, Mr.
                                      Bender was responsible for the overall management of
                                      this mortgage banking subsidiary of CenTrust Savings.
                                      Mr. Bender's career also includes positions as Chairman
                                      and CEO of WestAmerica Mortgage Company in Denver,
                                      President and CEO of Unity Mortgage Corporation in
                                      Chicago; Senior Vice President of United First Mortgage
                                      Corporation of San Diego; and Senior Vice President of
                                      Production and Marketing at Advance Mortgage
                                      Corporation. Mr. Bender attended the University of
                                      Michigan in Ann Arbor.
Jonathon K. Heffron...........  43    Executive Vice President and General Counsel of the
                                      Company since     1996 and of the Bank since May 1990,
                                      named Chief Operating Officer of the Bank in May, 1994.
                                      Prior to joining the Bank, Mr. Heffron served for two
                                      years as President and CEO of First Northern Bank,
                                      Keene, New Hampshire. Prior to joining First Northern
                                      Bank, Mr. Heffron served for more than 10 years in
                                      several capacities at the FHLB Board, Washington, D.C.
                                      and at the FHLB Dallas, including Attorney Advisor,
                                      Trial Attorney, General Counsel, Chief Administrative
                                      Officer, and Chief Operating Officer. Mr. Heffron
                                      received a B.A. Magna Cum Laude from the University of
                                      Minnesota, a J.D. from Southwestern University School of
                                      Law, and an LL.M. from the National Law Center of George
                                      Washington University. Mr. Heffron serves on the Boards
                                      of Directors of the FHLB Dallas, the Credit Coalition of
                                      Greater Houston and the Texas Conference for Homeowners'
                                      Rights.
Leslie H. Green...............  57    Senior Vice President -- Operations and Technology of
                                      the Company since             1996 and of the Bank since
                                      June 1991. Prior to joining the Bank, Mr. Green was
                                      employed by Equimark since 1988 as Executive Vice
                                      President -- Systems and Operations. Prior to joining
                                      Equimark, Mr. Green served in several capacities at
                                      Keystone Computer Association, Fidelity Bank, National
                                      Information Systems and RCA Computer Systems. Mr. Green
                                      received a degree in Business Management from Rutgers
                                      University.
Karen J. Hartnett.............  48    Senior Vice President -- Human Resources of the Company
                                      since     1996 and of the Bank since January 1991. Prior
                                      to joining the Bank, Ms. Hartnett was employed by
                                      Equimark as Senior Vice President Human Resources since
                                      1989. From 1988 to 1989, Ms. Hartnett was Senior Vice
                                      President and Chief Personnel Officer for NCNB Texas.
                                      Ms. Hartnett served NCNB Texas, and predecessor
                                      organizations, as Vice President and as Director of
                                      Human Resources. Ms. Hartnett's human resources
                                      experiences include positions at Zale Corporation,
                                      Mobile 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.
</TABLE>
 
                                       102
<PAGE>   105
 
<TABLE>
<CAPTION>
             NAME               AGE             POSITION AND OCCUPATION
- ------------------------------  --- ------------------------------------------
<S>                             <C> <C> 
Sonny H. Lyles................  50  Senior Vice President and Chief Credit
                                    Officer of the Company since  
                                    1996 and of the Bank since February 1991.
                                    Prior to joining the Bank, Mr. Lyles 
                                    was employed by First Union National Bank
                                    as Senior Credit Officer beginning in 1983.
                                    Prior to joining First Union National Bank,
                                    Mr. Lyles was employed at First Tulsa 
                                    Bank, Florida National Bank and South
                                    Carolina National Bank. Mr. Lyles
                                    received a B.A. from Wofford College. Mr.
                                    Lyles is a member of the Board, First Vice
                                    President of the Texas Chapter, and a
                                    national member, of the Credit and Risk
                                    Management Council of Robert Morris
                                    Associates, a trade association of bank 
                                    lending and credit officers. Mr. Lyles
                                    is the Wofford College alumni
                                    representative from Houston.
</TABLE>
 
EXECUTIVE COMPENSATION
 
  Summary of Cash and Certain Compensation
 
     The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the CEO of the Company
and the other four most highly compensated executive officers of the Company and
the Bank:
 
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>                                                                           
                                          ANNUAL COMPENSATION                     LONG-TERM COMPENSATION
                                    -------------------------------------    ---------------------------------
                                                                                      AWARDS
                                                                             -----------------------
                                                                  OTHER                   SECURITIES   PAYOUTS       ALL
                                                                  ANNUAL                  UNDERLYING   -------      OTHER         
                                                                 COMPEN-      RESTRICTED   OPTIONS/      LTIP      COMPEN-
                                             SALARY  BONUS(1)  SATION(2)(3)     STOCK        SAR        PAYOUTS   SATION(4)
NAME AND PRINCIPAL POSITION          YEAR     ($)       ($)        ($)           (#)         (#)          ($)        ($)
- ---------------------------          ----    ------  --------  ------------    ---------   ---------     -------   --------
<S>                                   <C>    <C>       <C>           <C>          <C>          <C>       <C>         <C>
Barry C. Burkholder.................  1995   375,000   594,000           --        --           --          --        9,240
  President and                       1994   375,000   607,500           --        --           --          --        9,240
  Chief Executive Officer             1993   375,000   500,000        1,328        --           --          --        8,994
Anthony J. Nocella..................  1995   315,000   235,000           --        --           --          --        9,402
  Executive Vice President and        1994   315,000   200,000           --        --           --          --        8,878
  Chief Financial Officer             1993   315,000   210,000        1,323        --           --          --        9,069
  Financial Markets/Treasury
  Commercial Banking
Jonathon K. Heffron.................  1995   225,000   200,000           --        --           --          --        9,402
  Executive Vice President,           1994   225,000   175,000           --        --           --          --        8,984
  General Counsel, and                1993   225,000   185,000          118        --           --          --        5,386
  Chief Operating Officer
George R. Bender....................  1995   200,000    75,000           --        --           --          --       13,980
  Executive Vice President            1994   200,000   408,900           --        --           --          --        4,500
  Mortgage Banking                    1993   200,000   703,601        1,341        --           --          --        8,994
Leslie H. Green.....................  1995   175,000    75,000           --        --           --          --        4,620
  Senior Vice President               1994   175,000    70,000           --        --           --          --        4,615
  Operations & Technology             1993   167,500    70,000           --        --           --          --        6,320
</TABLE>
 
- ---------------
(1) Mr. Burkholder was hired on April 10, 1991, and was paid a bonus based on
    the financial performance of the Bank, according to the provisions of his
    employment contract, for each of the first five full years of his
    employment. Amounts indicated represent the amount paid in the respective
    fiscal year. For the 12-month period ended April 10, 1996, Mr. Burkholder
    was paid a bonus of $550,000. See "-- Management Employment Arrangements".
    All other management bonuses were paid as determined by the Compensation
    Committee of the Bank's Board of Directors, based on the Bank's financial
    and individual performance for 1995. The Bank's financial performance is
    measured by net income, return on assets, and return on equity as compared
    to the Bank's annual business plan and a specified peer group of other
    thrifts of comparable size.
 
(2) "Other Annual Compensation" for 1993 includes a tax equalization amount paid
    to Messrs. Burkholder, Bender, Nocella, and Heffron to offset a failed
    401(k) discrimination test for calendar year 1992.
 
(3) Messrs. Burkholder, Bender, Nocella, and Heffron are each provided an auto
    allowance and a country club and/or dining club membership. However, in no
    case does the aggregated value of such auto allowance and memberships exceed
    the lesser of $50,000 or 10% of such officer's annual cash
 
                                       103
<PAGE>   106
 
compensation. Therefore, the value of auto allowances and club memberships are
excluded from these numbers.
 
(4) "All Other Compensation" amounts represent contributions by the Bank to each
    executive's account in the Bank's 401(k) Plan.
 
EXECUTIVE MANAGEMENT COMPENSATION PLAN
 
     In June 1996, the Company Board approved an Executive Management
Compensation Plan (the "Compensation Plan") containing the following provisions:
(i) a cash bonus of $   million payable by June 30, 1996; (ii) the award of
       shares of Company common stock with restrictions on its transferability
for a period of three years from its issuance; and (iii) the issuance of
       options for purchase of an equivalent number of shares of common stock:
such options vest ratably over three years from the date of grant. The options'
exercise price approximates the fair market value at the date of the grant and
will expire if not exercised by June 2003.
 
THE 1996 INCENTIVE COMPENSATION PLAN
 
     The Company has adopted the Bank United 1996 Incentive Compensation Plan
(the "1996 Incentive Compensation Plan"). The 1996 Incentive Compensation Plan
is designed to promote the success and enhance the value of the Company by
linking the interests of certain of the full-time employees of the Company
("Participants") to those of the Company's stockholders and by providing
Participants with an incentive for outstanding performance. The 1996 Incentive
Compensation Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract and retain Participants upon whose judgment,
interest and special efforts the Company's successful operation largely is
dependent. As determined by the Compensation and Directors Committee of the
Company Board, or any other designated committee of the Company Board, the
Company employees, including employees who are members of the Company Board, are
eligible to participate in the 1996 Incentive Compensation Plan. Non-employee
directors are not eligible to participate in the 1996 Incentive Compensation
Plan. The Company Board has provided for the 1996 Incentive Compensation Plan to
remain in effect for 10 years, to 2006. The description below is intended as a
summary only and is qualified in its entirety by reference to the 1996 Incentive
Compensation Plan, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
 
  General
 
     The 1996 Incentive Compensation Plan will be administered by the
Compensation and Directors Committee of the Company Board or, at the discretion
of the Company Board, any other committee appointed by the Company for such
purpose (the "Committee"). Four types of awards may be granted to Participants
under the 1996 Incentive Compensation Plan: (i) stock options (both
non-qualified and incentive) ("Options"), (ii) stock appreciation rights
("SARs"), (iii) restricted Common Stock ("Restricted Stock") and (iv)
performance awards ("Performance Awards," and together with the Options, SARs
and Restricted Stock, the "Awards").
 
     The 1996 Incentive Compensation Plan provides that the total number of
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan may not exceed             shares; provided that, if during
the term of the 1996 Incentive Compensation Plan, the Company repurchases shares
of Class A Common Stock additional shares equal to the number of such
repurchased shares, up to             outstanding shares; provided that, if
during the term of the 1996 Incentive Compensation Plan, the Company repurchases
shares of Class A Common Stock additional shares equal to the number of such
repurchased shares, up to             shares, will be available for Options; and
provided, further, that the total number of shares of Class A Common Stock
Available for Restricted Stock awards is not to exceed   . No Participant may be
granted Awards covering in excess of 10% of the shares of Class A Common Stock
available for issuance over the life of the 1996 Incentive Compensation Plan. If
any Award is cancelled or forfeited or terminates, expires, or lapses (other
than a termination of a Tandem SAR (as defined below)), upon exercise of the
related Option or the termination of a related Option upon exercise of the
corresponding Tandem SAR, shares subject to such Award will be available for the
grant of an Award under the 1996 Incentive Compensation Plan.
 
                                       104
<PAGE>   107
 
     In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization or partial or complete liquidation of the
Company, the Committee or the Company Board may make such substitutions or
adjustments in the aggregate number and class of shares reserved for issuance or
subject to outstanding Awards and in the number, kind and price of shares
subject to outstanding Options of SAR's as it may determine to be appropriate.
 
     The 1996 Incentive Compensation Plan is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
is not qualified under Section 401(a) of the Code.
 
  Options
 
     The term of Options granted under the 1996 Incentive Compensation Plan may
not exceed 10 years. The exercise price for each Option granted will be
determined by the Committee; provided that the exercise price may not be less
than 100% of the fair market value (as defined in the 1996 Incentive
Compensation Plan) of a share of Class A Common Stock on the date of grant.
 
     A Participant exercising an Option may pay the exercise price in full in
cash, or, if approved by the Committee, with previously acquired shares of Class
A Common Stock. The Committee, in its discretion, may allow cashless exercise of
Options.
 
     Options are nontransferable other than by will or laws of descent and
distribution (and, in the case of a nonqualified Option, pursuant to a domestic
relations order or by gift to members of the holder's immediate family, whether
directly or indirectly or by means of a trust or partnership), and, during the
Participant's lifetime, may be exercised only by the Participant or his legal
representative.
 
  SARs
 
     SARs may be granted by the Committee in connection with all or part of any
Option grant ("Tandem SARs"), or granted separately and unrelated to any Option
("Freestanding SARs"). A Tandem SAR may be exercised only with respect to the
shares for which its related Option is then exercisable. SARs permit the
Participant to receive in cash or shares of Class A Common Stock (or a
combination of both) an amount equal to the excess of the fair market value of a
share of Class A Common Stock on the date the SAR is exercised over the exercise
price for the SAR times the number of shares of Class A Common Stock with
respect to which such SAR is exercised.
 
     The term of SARs granted under the 1996 Incentive Compensation Plan may not
exceed 10 years. The exercise price of a Freestanding SAR will be determined by
the Committee. The exercise price of a Tandem SAR will equal the exercise price
of the related Option.
 
     SARs are nontransferable other than by will or laws of descent and
distribution, and, during the Participant's lifetime, may be exercised only by
the Participant; provided that, at the discretion of the Committee, an Award
agreement may permit transfer of an SAR by a Participant solely to members of
the Participant's immediate family or trusts or partnerships for the benefit of
such persons.
 
  Restricted Stock
 
     The Committee may grant Restricted Stock to eligible employees in such
amounts as the Committee determines. At the time of each award of Restricted
Stock the Committee will establish a restricted period, which may not, unless
specified conditions described below are satisfied, be less than three years
from the grant date (the "Restricted Period") during which such stock may not be
sold, transferred, pledged, assigned or otherwise alienated; provided that the
Committee may permit transfers of Restricted Stock during such period to members
of the Participant's immediate family or trusts or partnerships for the benefit
of such persons. If a Participant terminates his employment or is involuntarily
terminated for cause during the Restricted Period, all Restricted Stock held by
such Participant will be forfeited. If a Participant is involuntarily terminated
other than for cause, the Committee may waive all or part of any remaining
 
                                       105
<PAGE>   108
 
restrictions on such Participant's Restricted Stock. Up to one-third of the
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan as Restricted Stock awards may be issued without a minimum
Restricted Period. After the Restricted Period has expired, the related
Restricted Stock is freely transferable.
 
     The Committee has discretion to determine whether holders of Restricted
Stock will be entitled to dividends or other distributions thereon. If any such
dividends or distributions are in shares of Class A Common Stock, such shares
will be subject to the same restrictions as the related Restricted Stock. In the
event the holder of Restricted Stock on which dividends or distributions are
made is subject to Section 16 of the Exchange Act, the vesting period for such
dividend or distribution will be the longer of (i) the remaining vesting period
on the related Restricted Stock and (ii) six months.
 
  Performance Awards
 
     The Committee may from time to time grant Performance Awards, which, as
determined by the Committee, may include, without limitation, cash, Common
Stock, performance units, performance shares or any combination thereof. The
Committee will set the performance goals and restrictions applicable to each
Performance Award, including establishing the applicable performance period and
the value of the Performance Award. After the applicable performance period has
ended, the holder of a Performance Award will be entitled to receive the payout
earned to the extent to which the corresponding performance goals were
satisfied.
 
     Performance Awards are nontransferable other than by will or laws of
descent and distribution and during the Participant's lifetime may be exercised
only by the Participants; provided that, at the discretion of the Committee, an
award agreement may permit transfer of a Performance Award by a Participant
solely to members of the Participant's immediate family or trusts or
partnerships for the benefit of such persons.
 
  Change of Control
 
     In the event of a Change of Control (as defined in the 1996 Incentive
Compensation Plan), (i) any Option or SAR that is not then exercisable and
vested will become fully exercisable and vested (provided that in the case of
any holder of an Option or SAR who is subject to Section 16(b) of the Exchange
Act, such Option or SAR has been outstanding for at least six months as of the
date of such Change of Control), (ii) the restrictions on any Restricted Stock
will lapse and (iii) all Performance Awards will be deemed earned.
 
     During the 60-day period following a Change of Control, any Participant
will have the right to surrender all or part of any Option held by such
Participant, in lieu of payment of the exercise price, and to receive cash in an
amount equal to the difference between (i) the higher of the price received for
Common Stock in connection with the Change of Control and the fair market value
of a share of Common Stock in connection with the Change of Control and the fair
market value of a share of Common Stock on the date, if any, that such Option is
cancelled (the "Change of Control Price"), and (ii) the exercise price (the
difference between (i) and (ii) being referred to as the "Spread") multiplied by
the number of shares of Class A Common Stock granted in connection with the
exercise of such Option; provided that such Change of Control transaction would
not thereby be made ineligible for pooling of interests accounting; and
provided, further, that, if the Change of Control is within six months of the
grant date for any such Option, no such election may be made prior to six months
from such grant date; and provided, further, that, if the Option is an
"incentive stock option" under Section 422 of the Code, the Change of Control
Price will equal the fair market value of a share of the Class A Common Stock on
the date, if any, that such Option is cancelled. If such 60-day period ends
within the period six months after the grant date for an Option, any such Option
held by a Participant subject to Section 16 of the Exchange Act will be
cancelled and the holder thereof will receive six months and one day after the
grant of such Option, an amount equal to the Spread multiplied times the number
of shares of Class A Common Stock granted under or comprising such Option.
 
                                       106
<PAGE>   109
 
  Deferrals
 
     The Committee may permit a Participant to elect, or the Committee may
require, at its sole discretion, subject to the proviso set forth below, any one
or more of the following: (i) the deferral of a Participant's receipt of cash,
(ii) a delay in the exercise of an Option or SAR, (iii) a delay in the lapse or
waiver of restrictions with respect to Restricted Stock, or (iv) a delay of the
satisfaction of any requirements or goals with respect to Performance Awards;
provided that the Committee's authority to take such actions exists only to the
extent necessary to reduce or eliminate a limitation on the deductibility of
compensation paid to a Participant pursuant to (and so long as such action in
and of itself does not constitute the exercise of impermissible discretion
under) Section 162(m) of the Code, or any successor provision thereunder. If any
such deferral is required or permitted, the Committee will establish rules and
procedures for such deferrals, including provisions relating to periods of
deferral, the terms of payment following the expiration of the deferral periods,
and the rate of earnings, if any, to be credited to any amounts deferred
thereunder.
 
  Amendments
 
     The Company Board may at any time terminate, amend, or modify the 1996
Incentive Compensation Plan; provided that no amendment, alteration or
discontinuation will be made which will disqualify the 1996 Incentive
Compensation Plan from the exemption provided by Rule 16b-3 promulgated under
the Exchange Act, and, to the extent required by law, no such amendment will be
made without the approval of the Company's stockholders.
 
  Federal Income Tax Considerations
 
     The following brief summary of the United States federal income tax rules
currently applicable to nonqualified stock options, incentive stock options,
SARs, restricted stock and performance awards is not intended to be specific tax
advice to Participants under the 1996 Incentive Compensation Plan.
 
     Two types of stock options may be granted under the 1996 Incentive
Compensation Plan: nonqualified stock Options ("NQOs") and incentive stock
Options ("ISOs"). SARs, Restricted Stock and Performance Awards may also be
granted under the Plan. The grant of an Award generally has no immediate tax
consequences to the Participant or the Company. Generally, Participants will
recognize ordinary income upon: (i) the exercise of NQOs or SARs; (ii) the
vesting of shares of Restricted Stock; and (iii) the actual receipt of cash or
stock pursuant to Performance Awards. In the case of NQOs and SARs, the amount
of income recognized is measured by the difference between the exercise price
and the fair market value of Common Stock on the date of exercise. In the case
of Restricted Stock and Performance awards, the amount of income is equal to the
fair market value of the stock or other property (including cash) received. The
exercise of an ISO for cash generally has no immediate tax consequences to a
Participant or to the Company. Participants may, in certain circumstances,
recognize ordinary income upon the disposition of shares acquired by exercise of
an ISO, depending upon how long such shares were held prior to disposition.
Special rules apply to shares acquired by exercise of ISOs for previously held
shares. In addition, special tax rules may result in the imposition of a 20%
excise tax on any "excess parachute payments" that result from the acceleration
of the vesting or exercisability of Awards upon a Change of Control.
 
     The Company is generally required to withhold applicable income and Social
Security taxes ("employment taxes") from ordinary income which a Participant
recognizes on the exercise or receipt of an Award. The Company thus may either
require Participants to pay to the Company an amount equal to the employment
taxes the Company is required to withhold or retain or sell without notice a
sufficient number of the shares to cover the amount required to be withheld.
 
     The Company generally will be entitled to a deduction for the amount
includible in a Participant's gross income for federal income tax purposes upon
the exercise or actual receipt of an Award. However, such deduction generally is
available only if the Company timely complies with applicable information
reporting requirements under Sections 6041 and 6041A of the Code. Furthermore,
Section 162(m) of the Code and the regulations thereunder may, in some
circumstances, limit deductibility with respect to "covered employees" whose
total annual compensation exceeds one million dollars, and Section 280G of the
Code and the
 
                                       107
<PAGE>   110
 
regulations thereunder may render nondeductible amounts includible in income by
employees that are contingent upon a Change of Control and that are
characterized as "excess parachute payments".
 
  Resale of Shares
 
     The registration requirements of any applicable state securities laws and
the resale restrictions of Rule 144 under the Securities Act may restrict the
sale of shares of Class A Common Stock acquired pursuant to the exercise of
Awards by "affiliates" of the Company within the meaning of the Securities Act.
For purposes of creating short-swing profit liability under Section 16 of the
Exchange Act, sales of such shares by affiliates will be matchable with market
purchases within less than six months before or after such sales.
 
THE DIRECTOR STOCK COMPENSATION PLAN
 
     The Company has adopted the Bank United Director Stock Compensation Plan
(the "Director Stock Plan"). The purposes of the Director Stock Plan are to (i)
promote a greater identity of interest between the Company's non-employee
directors and its stockholders, and (ii) attract and retain individuals to serve
as directors and to provide a more direct link between directors' compensation
and stockholder value.
 
  General
 
     The Director Stock Plan will be administered by the Company Board or a
committee of the Company Board designated for such purpose.
 
     Pursuant to the terms of the Director Stock Plan, non-employee directors of
the Company will be eligible to participant in the Director Stock Plan following
the Distribution (each, an "Eligible Director"). A total of
shares of Class A Common Stock will be reserved for issuance and available for
grants under the Director Stock Plan.
 
     In the event of any change in corporate capitalization (such as a stock
split) or a corporate transaction (such as a merger, consolidation, separation
including a spin-off or other distribution of stock or property of the Company,
any reorganization or any complete liquidation of the Company), the Company
Board or the designated committee may make such substitution or adjustments in
the aggregate number and class of shares reserved for issuance under the
Director Stock Plan, in the number, kind and option price of shares subject to
outstanding Options, in the number and kind of shares subject to other
outstanding awards granted under the Director Stock Plan, and/or such other
equitable substitution or adjustments as it may determine to be appropriate in
its sole discretion; provided, however, that the number of shares subject to any
award must always be a whole number.
 
     Pursuant to the Director Stock Plan, each Eligible Director will receive an
initial award of        shares of Class A Common Stock after serving the first
three months as a member of the Company Board.
 
  Class A Common Stock
 
     With respect to the annual retainer paid to directors (the "Annual
Retainer"), each Eligible Director may make an annual irrevocable election to
receive shares of Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer; provided that the election of cash, Class A
Common Stock and options under the Director Stock Compensation Plan are
alternatives and taken together, may not exceed 100% of such Annual Retainer.
The number of shares of Class A Common Stock granted to an Eligible Director
will be equal to the appropriate percentage of the Annual Retainer payable in
each fiscal quarter divided by the fair market value (as defined in the Director
Stock Compensation Plan) of a share of Class A Common Stock on the last business
day of such fiscal quarter rounded to nearest number of shares of Class A Common
Stock. Fractional shares of Class A Common Stock will not be granted and any
remainder in Annual Retainer which otherwise would have purchased fractional
shares will be paid in cash.
 
                                       108
<PAGE>   111
 
  Options Class A
 
     Each Eligible Director may also make an irrevocable election to receive an
Option for Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer equal to:
 
<TABLE>
<CAPTION>
                                                             PERCENT OF ANNUAL
              NUMBER OF OPTIONS                              RETAINER FORGONE
- ---------------------------------------------------------------------------------------------
<S>                                           <C>
                                                                   100%
                                                                    75%
                                                                    50%
                                                                    25%
</TABLE>
 
The election of cash, Class A Common Stock and options under the Director Stock
Compensation Plan are alternatives and, taken together, may not exceed 100% of
such Annual Retainer. The exercise price for the options will be based on the
fair market value of Class A Common Stock on the date of the grant of such
option adjusted for the percentage of the Annual Retainer forgone, but in no
event will the exercise price be less than 50% of such fair market value. The
date of grant of any option will be the later of (i) the date of the annual
stockholders' meeting following the Eligible Director's election to receive an
Option in lieu of the Annual Retainer and (ii) six months and one day after such
election.
 
     Except in the case of death, disability, retirement or termination, options
granted under the Director Stock Compensation Plan will have a term of ten years
and will vest and become exercisable on the last day of the fiscal year in which
such option is granted, provided that the Eligible Director remains on the
Company Board. An option shall vest immediately in the event of death. In the
event that an Eligible Director terminates his or her membership on the Company
Board due to disability or retirement, the amount of any outstanding options
which are not then vested will be adjusted to reflect that portion of such
Eligible Director's Annual Retainer actually earned in the year. In the event
that an Eligible Director's membership on the Company Board is terminated by the
Company for cause, options which have not become vested will be forfeited. As
used in the Director Stock Compensation Plan, "cause" means (i) the conviction
of a felony, or (ii) dishonesty in the course of performing the duties as a
director.
 
  Transferability
 
     Grants and awards under the Director Stock Plan are not assignable or
transferable nor may they be pledged or hypothecated. Any grant or award that
constitutes a "derivative security" within the meaning of the Exchange Act may
not be transferred other than by will or Laws of descent and distribution or
pursuant to domestic relations order or qualified domestic relations order.
 
  Amendments
 
     The Director Stock Compensation Plan may be amended by the Company Board,
provided that, to the extent required to qualify transactions under the Director
Stock Plan for exemption under Rule 16b-3 promulgated under the Exchange Act, no
amendment to the Director Stock Compensation Plan may be adopted without further
approval by the holders of at least a majority of the shares of Class A Common
Stock present, or represented, and entitled to vote at a meeting held for such
purpose; and provided, further, that, if and to the extent required for the
Director Stock Compensation Plan to comply with Rule 16b-3, no amendment to the
Director Stock Compensation Plan shall be made more than once in any six-month
period that would change the amount, price or timing of the grants of awards or
Options thereunder other than to comply with changes in the Code, ERISA, or the
regulations thereunder.
 
  Termination
 
     The Director Stock Compensation Plan may be terminated at any time by
either the Company Board or by holders of a majority of the shares of Class A
Common Stock present and entitled to vote at a duly convened meeting of
stockholders.
 
                                       109
<PAGE>   112
 
  Change of Control
 
     In the event of a Change of Control (as defined in the Director Stock
Plan), any outstanding options that are not then exercisable and vested will
become fully exercisable and vested. During the 60-day period following a Change
of Control, any Eligible Director will have the right to surrender all or part
of any option or award of Class A Common Stock held by such Eligible Director,
and, in the case of an option, in lieu of payment of the exercise price, to
receive cash in an amount equal to the Spread multiplied by the number of shares
of Class A Common Stock granted in connection with the exercise of such option
so surrendered, or, in the case of an award of Class A Common Stock, to receive
cash in an amount equal to the Change of Control Price multiplied by the number
of shares of Class A Common Stock so surrendered; provided that, if the Change
of control is within six months of the grant date for any such option or award,
no such election may be made prior to six months from such grant date. If such
60-day period ends within the period six months after the grant date for an
option or award, such option or award will be cancelled and the holder thereof
will receive six months and one day after the grant of such option or award, an
amount equal, in the case of an option, to the Spread multiplied times the
number of shares of Class A Common Stock granted under such option and in the
case of an award, the Change of Control Price multiplied by the number of Class
A Common Stock so awarded.
 
  Federal Income Tax Considerations
 
     Eligible Directors electing Class A Common Stock in lieu of cash fees will
be taxed on the value of the Class A Common Stock at the time of receipt.
Eligible Directors making an irrevocable election to receive an option in lieu
of cash fees will be taxed at the time of exercise of the option on the
difference between the exercise price and the fair market value of the Class A
Common Stock covered by the option. In each case, the Company will receive a
corresponding deduction; provided that Section 280G of the Code and the
regulations thereunder may render nondeductible amounts that are contingent upon
a Change of Control and are characterized as "excess parachute payments".
 
     Resale of Shares.  The holders of shares of Class A Common Stock received
upon the exercise of an option must comply with the resale requirements of the
Securities Act and the rules and regulations promulgated thereunder. Securities
registration requirements under the Securities Act may be applicable to resales
by any Eligible Director. The restrictions imposed by Section 16 of the Exchange
Act upon any Eligible Director and the registration requirements of any
applicable state securities laws may restrict the resales of shares acquired
pursuant to the exercise of options by an Eligible Director.
 
MANAGEMENT EMPLOYMENT ARRANGEMENTS
 
     Mr. Burkholder's employment contract, which was recently amended and
extended for one year to April 10, 1997, provides for payment of an annual
salary of $375,000 and a discretionary bonus. In addition, as a result of this
transaction, Mr. Burkholder will receive 38% of the Executive Management
Compensation Plan, which satisfies the terms of his present employment
agreement.
 
     Mr. Bender's employment letter provides for payment of an annual salary and
a bonus up to 2.86% of the added economic value of the mortgage banking segment.
The employment letter provides that added economic value is defined to be the
sum of pre-tax income and the value of new loan servicing reduced by the sum of
excess servicing revenues and revenues from the sale of servicing.
 
     Mr. Nocella's employment letter provides for the payment of an annual
salary, a discretionary bonus, and in the event Mr. Nocella's employment is
terminated without cause, payment of six months' base salary (or $157,500 based
on 1995 base salary).
 
NON-QUALIFIED RETIREMENT SAVINGS PLAN
 
     In June 1995, the Board of Directors of the Bank approved the
implementation of a Supplemental Executive Savings Plan ("SESP"). The SESP was
effective on August 1, 1995. The 1995 SESP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the SESP plan year will coincide
 
                                       110
<PAGE>   113
 
with the calendar year. The SESP is available to a select group of management
and other highly compensated employees. Eligible employees are allowed to make
irrevocable decisions prior to the beginning of the plan year to defer up to 20%
of compensation (as defined in the SESP) and up to 100% of bonus income. The
monies deferred earn interest at a rate approximately equal to the Bank's one
year certificate of deposit rate. The Bank does not contribute to the SESP.
 
     The SESP is funded from the general assets of the Bank and participants are
general unsecured creditors of the Bank. As of March 31, 1996, there were 17
participants in the SESP, and the total amount of deferrals and interest equaled
approximately $380,000. The rate of interest for the SESP was 4.42% as of March
31, 1996.
 
DIRECTORS SUPPLEMENTAL SAVINGS PLAN
 
     In June 1995, the Board of Directors of the Bank approved the
implementation of a Directors Supplemental Savings Plan ("DSSP"). The DSSP was
effective on August 1, 1995. The 1995 DSSP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the plan year will coincide with
the calendar year. The DSSP is available to outside directors. Eligible
Directors are allowed to make irrevocable decisions prior to the beginning of
the plan year to defer up to 100% of retainer and meeting fees. The monies
deferred earn interest at a rate approximately equal to the Bank's one year CD
rate. The Bank does not contribute to the DSSP.
 
     The DSSP is funded from the general assets of the Bank, and participants
are general unsecured creditors of the Bank. As of March 31, 1996, there was one
participant in the DSSP and the total amount of deferrals and interest equaled
approximately $29,000. The rate of interest for the DSSP was 4.42% as of March
31, 1996.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee of the Company Board determines the compensation
of the Company's executive officers. The members of the Compensation Committee
are Lewis S. Ranieri, Salvatore A. Ranieri and Scott A. Shay, none of whom is an
executive officer of the Company. Lewis S. Ranieri, Salvatore A. Ranieri and
Scott A. Shay are also members of the Compensation Committee of the Board of
Directors of the Bank. No other member of the Bank Compensation Committee is an
officer or employee of the Company or the Bank.
 
     The Bank is a party to a written investment advisory services agreement
which provides for payment by the Bank to Hyperion Capital, an affiliate of the
Bank, of $175,000 per year for investment advisory services and for payment by
Hyperion Capital to the Bank of $175,000 for information regarding the Bank's
mortgage pipeline.
 
                                       111
<PAGE>   114
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  Security Ownership of Certain Beneficial Owners
 
     As of June 18, 1996 the outstanding capital stock of the Company consists
of 381,925 shares of Class A Common Stock, which entitles the holder thereof to
one vote per share on each matter on which the stockholders of the Company are
entitled to vote, and 28,481,075 shares of Class B Common Stock, which have no
voting rights. Shares of Class B Common Stock are convertible, at the election
of the holder thereof, into shares of Class A Common Stock, subject to certain
restrictions set forth in the Certificate and the Letter Agreement, and except
to the extent that the holder of the Class B Common Stock is prohibited by any
applicable Federal or state regulation from holding voting securities of the
type or in the amount represented by the shares of Class A Common Stock that
such holder would hold upon such conversion. See "Description of Capital
Stock -- Common Stock -- Conversion." Certain Selling Stockholders hold
significant shares of Class B Common Stock and are expected to continue to hold
such shares after the Offering. See "Selling Stockholders". Conversion of such
shares of Class B Common Stock by a holder thereof to shares of Class A Common
Stock would have the effect of diluting the voting power of the existing holders
of Class A Common Stock and would increase the voting power of such holder
commensurately.
 
     The following table sets forth information concerning the persons who
beneficially own more than 5% of the Company's voting stock assuming no
elective, nonsale conversion of Class B Common Stock.
 
                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 
<TABLE>
<S>                <C>                <C>                <C>                <C>
- -----------------------------------------------------------------------------------------------
        (1)                (2)                (3)                (4)                (5)
                        NAME AND          AMOUNT AND                             ESTIMATED
                         ADDRESS           NATURE OF         PERCENT OF         PERCENT OF
     TITLE OF         OF BENEFICIAL       BENEFICIAL         CLASS AS OF      CLASS FOLLOWING
       CLASS              OWNER            OWNERSHIP        JUNE 18, 1996       OFFERING(4)
- -----------------------------------------------------------------------------------------------
  Class A Common      LSR Hyperion          188,747              49%               2.1%
        Stock           Corp.(1)
- -----------------------------------------------------------------------------------------------
  Class A Common      SAR Hyperion          93,906               25%               1.1%
        Stock           Corp.(2)
- -----------------------------------------------------------------------------------------------
  Class A Common      SAS Hyperion          93,906               25%               1.1%
        Stock           Corp.(3)
- -----------------------------------------------------------------------------------------------
  Class A Common    Hyperion Funding         5,366               1%                  *
        Stock           Corp.(5)
- -----------------------------------------------------------------------------------------------
</TABLE>
 
  * Percentage does not exceed 1% of the issued and outstanding shares.
 
(1) The sole shareholder of LSR Hyperion Corp. is Lewis S. Ranieri, a Director
    of the Company and the Chairman of the Company.
 
(2) The sole shareholder of SAR Hyperion Corp. is Salvatore A. Ranieri, a
Director of the Company.
 
(3) The sole shareholder of SAS Hyperion Corp. is Scott A. Shay, a Director of
the Company.
 
(4) Assumes the sale of 8,480,000 shares of Common Stock in the Offering, that
    each such share is a share of Class B Common Stock immediately prior to such
    sale, and that no elective, nonsale conversion of Class B Common Stock
    occurs.
 
(5) Hyperion Funding Corp. is controlled by Lewis S. Ranieri, Salvatore A.
    Ranieri and Scott A Shay.
 
                                       112
<PAGE>   115
 
     The following table sets forth information about certain persons who would
own 5% or more of the Company's voting stock, assuming that each holder of
shares of Class B Common Stock converts each such share into one share of Class
A Common Stock, and assuming that each Selling Stockholder sells the maximum
number of shares such Selling Stockholder may sell in the Offering pursuant to
the Letter Agreement and this prospectus. Significant restrictions apply to such
conversions. See "Description of Capital Stock -- Common Stock -- Conversion".
 
<TABLE>
<S>                    <C>                    <C>                    <C>
- --------------------------------------------------------------------------------------------
   NAME AND ADDRESS       AMOUNT AND NATURE     PERCENT OF CLASS AS   ESTIMATED PERCENT OF
  OF BENEFICIAL OWNER  OF BENEFICIAL OWNERSHIP    OF JUNE 18, 1996       CLASS FOLLOWING
                                                                            OFFERING
- --------------------------------------------------------------------------------------------
 Prudential Insurance         5,279,895               18.29%                 10.06%
    Co. of America
- --------------------------------------------------------------------------------------------
     American Home            2,790,772                9.67%                  5.32%
     Assurance Co.
- --------------------------------------------------------------------------------------------
   Ameritech Pension          2,817,209                9.76%                  5.37%
         Trust
- --------------------------------------------------------------------------------------------
   LW-SP1, L.P. and           2,146,748                7.44%                  7.44%
    LW-SP2, L.P.(6)
- --------------------------------------------------------------------------------------------
  Lewis S. Ranieri(7)         1,926,879                6.68%                  3.7%
- --------------------------------------------------------------------------------------------
    Equitable Life            1,730,705                6.0%                   3.3%
 Assurance Society of
         the US
and Equitable Variable
  Life Insurance Co.
- --------------------------------------------------------------------------------------------
</TABLE>
 
(6) LW-SP1 and LW-SP2 are each limited partnerships in which an affiliate of
    Lehman Brothers Inc. is general partner and owns a 99% interest. See
    "Underwriting".
 
(7) Includes 752 shares held as custodian for two minors, as to which Mr.
    Ranieri disclaims beneficial ownership.
 
                                       113
<PAGE>   116
 
  Security Ownership of Management
 
     The following table sets forth information, as of June   , 1996, regarding
each class of equity securities of the Company beneficially owned by all
directors and each of the executive officers set forth in the Summary
Compensation Table.
 
                        SECURITY OWNERSHIP OF MANAGEMENT
 
<TABLE>
<S>   <C>               <C>               <C>
- ------------------------------------------------------------
 (1)         (2)               (3)               (4)
                            AMOUNT AND
                            NATURE OF
TITLE                       BENEFICIAL        PERCENT OF
   OF NAME OF BENEFICIAL     OWNERSHIP          CLASS
CLASS       OWNER
- ------------------------------------------------------------
  --       Barry C.             --                --
         Burkholder,
        President and
       Chief Executive
           Officer
- ------------------------------------------------------------
  --      Anthony J.            --                --
      Nocella, Executive
      Vice President and
       Chief Financial
           Officer
- ------------------------------------------------------------
  --     Jonathon K.            --                --
      Heffron, Executive
       Vice President,
       General Counsel,
             and
       Chief Operation
           Officer
- ------------------------------------------------------------
  --  George R. Bender,         --                --
        Executive Vice
          President
- ------------------------------------------------------------
  --   Leslie H. Green,         --                --
            Senior
        Vice President
         Operations &
          Technology
- ------------------------------------------------------------
Class Lewis R. Ranieri,      188,747             49%
   A     Director(1)
Common
 Stock
- ------------------------------------------------------------
Class    Salvatore A.         93,906             25%
   A       Ranieri,
Common    Director(2)
 Stock
- ------------------------------------------------------------
Class   Scott A. Shay,        93,906             25%
   A     Director(3)
Common
 Stock
- ------------------------------------------------------------
Class Lewis R. Ranieri,    1,738,132(4)          6.1%
   B       Director
Common
 Stock
- ------------------------------------------------------------
Class    Salvatore A.       866,310(5)           3.0%
   B  Ranieri, Director
Common
 Stock
- ------------------------------------------------------------
Class   Scott A. Shay,       864,163             3.0%
   B       Director
Common
 Stock
- ------------------------------------------------------------
Directors and Executive     3,845,162            (6)
   Officers as a Group
- ------------------------------------------------------------
</TABLE>
 
(1) See Notes 1 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(2) See Notes 2 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(3) See Notes 3 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(4) Includes 752 shares held as custodian for two minors as to which Mr. Ranieri
    disclaims beneficial ownership.
 
(5) Includes 7,513 shares held as custodian for a minor as to which Mr. Ranieri
    disclaims beneficial ownership.
 
(6) 100% of the outstanding Class A Common Stock and 13.32% of the outstanding
    Common Stock.
 
                                       114
<PAGE>   117
 
  Principal Stockholders, Bank Preferred Stock
 
     The following tables set forth with respect to the Bank Preferred Stock as
of             , 1996: (i) shares beneficially owned by all directors of the
Company; (ii) each of the executive officers named in the Summary Compensation
Table set forth herein; and (iii) shares beneficially owned by all directors of
the Company, and executive officers as a group.
 
  Preferred Stock, Series A
 
<TABLE>
<CAPTION>
                                                                 NUMBER OF SHARES
                                                                  AND NATURE OF
                                                                    BENEFICIAL        PERCENT
                               NAME                                OWNERSHIP(1)       OF CLASS
    -----------------------------------------------------------  ----------------     --------
    <S>                                                          <C>                  <C>
    Lewis S. Ranieri...........................................           --            *
    Salvatore A. Ranieri.......................................           --            *
    Scott A. Shay..............................................           --            *
    Barry C. Burkholder........................................        8,000            *
    George R. Bender...........................................        4,000            *
    Anthony J. Nocella.........................................        1,000            *
    Jonathon K. Heffron........................................        1,400(2)         *
    Leslie H. Green............................................           --            *
    Directors and Executive Officers as a Group................       14,400            *
</TABLE>
 
  Preferred Stock, Series B
 
<TABLE>
<CAPTION>
                                                                 NUMBER OF SHARES
                                                                  AND NATURE OF
                                                                    BENEFICIAL        PERCENT
                               NAME                                OWNERSHIP(1)       OF CLASS
    -----------------------------------------------------------  ----------------     --------
    <S>                                                          <C>                  <C>
    Lewis S. Ranieri...........................................           --            *
    Salvatore A. Ranieri.......................................           --            *
    Scott A. Shay..............................................           --            *
    Barry C. Burkholder........................................           --            *
    George R. Bender...........................................           --            *
    Anthony J. Nocella.........................................        2,000            *
    Jonathon K. Heffron........................................           --            *
    Leslie H. Green............................................           --            *
    Directors and Executive Officers as a Group................        2,000            *
</TABLE>
 
- ---------------
  * Percentages do not exceed 1% of the issued and outstanding shares.
 
(1) Calculated in accordance with Rule 13d-3 under the Exchange Act. Nature of
    beneficial ownership is direct unless indicated otherwise by footnote.
    Beneficial ownership as shown in the table arises from sole investment power
    unless otherwise indicated by footnote.
 
(2) 1,000 shares direct, 400 shares held as custodian for minor children.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  Certain Transactions
 
     The Bank may from time to time make home mortgage or consumer loans to
directors, officers, and employees. Any such loan will be made in the ordinary
course of business, and on the same terms and conditions, including interest
rates and collateral, as those of comparable transactions prevailing at the time
with non-affiliated parties. The Bank had no loans to directors or executive
officers outstanding during the six months ended March 31, 1996, or in fiscal
1995 or 1994.
 
     Historically, expenses paid to related parties were (i) for services
provided in connection with hedging and asset and liability management
strategies, and (ii) for services provided in connection with the
 
                                       115
<PAGE>   118
 
management and marketing of real estate properties. No such expenses were
incurred during the six months ended March 31, 1996, or fiscal 1995 or 1994. At
March 31, 1996 and September 30, 1995 and 1994, the Company and the Bank had no
outstanding receivables from or payables to related parties other than those
related to participation in the filing of the consolidated tax return and there
are no loans outstanding to directors, executive officers, or principal holders
of the Company's equity securities.
 
     As a general benefit to all full-time employees with at least six months of
service (excluding executive officers), the Bank, through its Mortgage Banking
Group, will waive the 1% origination fee for a mortgage loan for the purchase or
refinance of the employee's principal residence. In addition, the Bank offers a
0.50% discount on its posted rates for consumer installment loans made to
employees.
 
     The Company is contemplating entering into a consulting agreement pursuant
to which Lewis S. Ranieri would serve as a consultant to the Company for a
three-year period.
 
                                       116
<PAGE>   119
 
                              SELLING STOCKHOLDERS
 
     The Selling Stockholders consist of the limited and general partners of
Hyperion Partners. LW-SP1 and LW-SP2 are limited partners of Hyperion Partners
but are not Selling Stockholders. See "Underwriting". The partners received
Class A Common Stock and Class B Common Stock in the Restructuring which was
effected in June 18, 1996 and LW-SP1 and LW-SP2 received shares of Class B
Common Stock. See "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, LW-SP1 and LW-SP2 as of
the date of this Prospectus and as adjusted to reflect the sale of the Class A
Common Stock offered hereby (assuming no exercise of the Underwriters'
over-allotment option).
<TABLE>
<CAPTION>
                                SHARES OF                         SHARES OF                                           SHARES OF
                                 CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                                 COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                              STOCK-- OWNED    PERCENT OWNED     STOCK-OWNED     PERCENT OWNED    STOCK OFFERED      STOCK-OWNED
                             BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                             ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
<S>                          <C>              <C>              <C>              <C>              <C>               <C>
LSR Hyperion Corp.(1).......     188,747             49%          1,698,725            6.0%
Hyperion Funding Corp.(2)...       5,366              1%             48,298            0.2%
SAR Hyperion Corp.(3).......      93,906             25%            845,153            3.0%
SAS Hyperion Corp.(4).......      93,906             25%            845,153            3.0%
KRW Hyperion Corp.(5).......          --             --             281,036            1.0%
CJK Hyperion Corp.(6).......          --             --             226,676            0.8%
David M. Golush(7)..........          --             --             423,251            1.5%
Patricia A. Sloan(8)........          --             --             193,979            0.7%
David A. Marcus(9)..........          --             --             176,630            0.6%
Jeffrey P. Cheesman(10).....          --             --             152,709            0.5%
Robert A. Perro(11).........          --             --              98,149            0.3%
Prudential Insurance Co. of
  America...................          --             --           5,279,895           18.6%
 
<CAPTION>
                                                 SHARES OF       CLASS B
                                                  CLASS B        COMMON
                                  CLASS A          COMMON        STOCK--
                               COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                               PERCENT OWNED       AFTER          AFTER
                               AFTER OFFERING     OFFERING      OFFERING
                              ----------------  ------------  -------------
<S>                          <C>                <C>           <C>
LSR Hyperion Corp.(1).......
Hyperion Funding Corp.(2)...
SAR Hyperion Corp.(3).......
SAS Hyperion Corp.(4).......
KRW Hyperion Corp.(5).......
CJK Hyperion Corp.(6).......
David M. Golush(7)..........
Patricia A. Sloan(8)........
David A. Marcus(9)..........
Jeffrey P. Cheesman(10).....
Robert A. Perro(11).........
Prudential Insurance Co. of
  America...................
American Home Assurance
  Company...................          --             --           2,790,772            9.8%
LW-SP1 L.P. ................          --             --           2,029,372            7.1%
LW-SP2 L.P. ................          --             --             117,376            0.4%
Ameritech Pension Trust.....          --             --           2,817,209            9.8%
Equitable Life Assurance
  Society of the
  United States.............          --             --           1,623,368            5.7%
Equitable Variable Life
  Insurance Company.........          --             --             107,337            0.4%
Equitable Deal Flow
  Fund LP...................          --             --             907,200            3.2%
Equitable Capital
  Partners LP...............          --             --           1,085,400            3.8%
Equitable Capital Partners
  (Retirement Fund) LP......          --             --             534,600            1.9%
Lewis S. Ranieri............          --             --              11,404            0.0%
Salvatore A. Ranieri Cust
  for Margaret Ranieri NY
  UGMA-AGE 21...............          --             --               7,513            0.0%
Lewis S. Ranieri A/C/F Eric
  Jimenez NJ UTMA-21........          --             --                 376            0.0%
Lewis S. Ranieri A/C/F Jason
  Jimenez NJ UTMA-21........          --             --                 376            0.0%
Ranieri Family Trust F/B/O
  Claudia L. Ranieri U/A
  7/1/93....................          --             --               4,938            0.0%
Ranieri Family Trust F/B/O
  Angela S. Ranieri U/A
  7/1/93....................          --             --               4,938            0.0%
Scott A. Shay...............          --             --               5,366            0.0%
Trust F/B/O Benjamin Jacob
  Shay U/A 7/23/93..........          --             --               2,254            0.0%
Trust F/B/O Ariel Rebecca
  Shay U/A 7/23/93..........          --             --               2,254            0.0%
Trust F/B/O Dara Jen Golush
  U/A 12/20/84..............          --             --               3,086            0.0%
Trust F/B/O Jason Reid
  Golush U/A 12/20/84.......          --             --               2,683            0.0%
Gail W. Marcus..............          --             --               2,281            0.0%
Janet L. Perro..............          --             --               1,073            0.0%
Ranieri Bros. Shay &
  Co., Inc. ................          --             --              24,117            0.1%
The Sweater Trust...........          --             --             644,024            2.3%
 
<CAPTION>
American Home Assurance
LW-SP1 L.P. ................
LW-SP2 L.P. ................
Ameritech Pension Trust.....
Equitable Life Assurance
  Society of the
  United States.............
Equitable Variable Life
  Insurance Company.........
Equitable Deal Flow
  Fund LP...................
Equitable Capital
  Partners LP...............
Equitable Capital Partners
  (Retirement Fund) LP......
Lewis S. Ranieri............
Salvatore A. Ranieri Cust
  for Margaret Ranieri NY
  UGMA-AGE 21...............
Lewis S. Ranieri A/C/F Eric
  Jimenez NJ UTMA-21........
Lewis S. Ranieri A/C/F Jason
  Jimenez NJ UTMA-21........
Ranieri Family Trust F/B/O
  Claudia L. Ranieri U/A
  7/1/93....................
Ranieri Family Trust F/B/O
  Angela S. Ranieri U/A
  7/1/93....................
Scott A. Shay...............
Trust F/B/O Benjamin Jacob
  Shay U/A 7/23/93..........
Trust F/B/O Ariel Rebecca
  Shay U/A 7/23/93..........
Trust F/B/O Dara Jen Golush
  U/A 12/20/84..............
Trust F/B/O Jason Reid
  Golush U/A 12/20/84.......
Gail W. Marcus..............
Janet L. Perro..............
Ranieri Bros. Shay &
  Co., Inc. ................
The Sweater Trust...........
 
<CAPTION>
  Company...................
</TABLE>
 
                                       117
<PAGE>   120
<TABLE>
<CAPTION>
                                SHARES OF                         SHARES OF                                           SHARES OF
                                 CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                                 COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                              STOCK-- OWNED    PERCENT OWNED     STOCK-OWNED     PERCENT OWNED    STOCK OFFERED      STOCK-OWNED
                             BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                             ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
<S>                          <C>              <C>              <C>              <C>              <C>               <C>
Sun Life Insurance Co. of
  America...................          --             --           1,073,374            3.8%
 
<CAPTION>
                                                 SHARES OF       CLASS B
                                                  CLASS B        COMMON
                                  CLASS A          COMMON        STOCK--
                               COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                               PERCENT OWNED       AFTER          AFTER
                               AFTER OFFERING     OFFERING      OFFERING
                              ----------------  ------------  -------------
<S>                          <C>                <C>           <C>
Sun Life Insurance Co. of
  America...................
Marilyn B. Arison...........          --             --             858,699            3.0%
Masco Capital Corp..........          --             --             536,687            1.9%
Wolfson Descendants' 1983
  Trust.....................          --             --             214,675            0.8%
South Ferry #2, L.P.........          --             --             271,921            1.0%
EDN Equities................          --             --             135,961            0.5%
Leslie Wexner...............          --             --             429,350            1.5%
The Airlie Group, L.P.......          --             --             429,350            1.5%
Julius Berman...............          --             --             126,975            0.4%
FAME Associates.............          --             --             193,207            0.7%
Institutional Interests.....          --             --             336,097            1.2%
Houston Firemen's Relief and
  Retirement Fund...........          --             --             536,687            1.9%
Alpine Investment
  Partners..................          --             --             214,675            0.8%
Mortimer Zuckerman..........          --             --              21,467            0.1%
Edward Linde................          --             --              21,467            0.1%
Connie S. Maniatty..........          --             --              21,467            0.1%
Micha Astrachan.............          --             --              66,232            0.2%
 
<CAPTION>
Marilyn B. Arison...........
<S>                          <C>                <C>           <C>
Masco Capital Corp..........
Wolfson Descendants' 1983
  Trust.....................
South Ferry #2, L.P.........
EDN Equities................
Leslie Wexner...............
The Airlie Group, L.P.......
Julius Berman...............
FAME Associates.............
Institutional Interests.....
Houston Firemen's Relief and
  Retirement Fund...........
Alpine Investment
  Partners..................
Mortimer Zuckerman..........
Edward Linde................
Connie S. Maniatty..........
Micha Astrachan.............
</TABLE>
 
- ---------------
 
(1) All stock owned by Lewis S. Ranieri.
 
(2) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay and
Kendrick R. Wilson III.
 
(3) All stock owned by Salvatore A. Ranieri.
 
(4) All stock owned by Scott A. Shay.
 
(5) All stock owned by Kendrick R. Wilson III.
 
(6) All stock owned by Clinton J. Kendrick.
 
(7)
 
(8)
 
(9)
 
(10)
 
(11)
 
     Since its formation in 1988, Hyperion Partners directly or indirectly has
made a number of investments, other than in the Bank, including: (i) Hyperion
Credit Capital Partners L.P., the partnership which purchased a portfolio of
commercial and multifamily loans and real estate from the RTC; (ii) Hyperion
Credit Services Corporation, which was formed to service the portfolio of real
estate loans owned by Hyperion Credit Capital Partners L.P., (iii) Suntex
Ventures, which made real estate investments in multifamily apartments and in
high-rise residential condominiums; (iv) the Centeq Companies, which are real
estate service companies, (v) Hyperion Capital, a Commission-registered
investment advisory firm; (vi) Cardholder Partners L.P., which held accounts and
other intangibles related to a credit card portfolio; (vii) de minimis minority
equity investments in a Spanish mortgage banker and a mortgage conduit vehicle
for the securitization of Spanish residential mortgage loans; and (viii)
miscellaneous investments in marketable financial instruments.
 
     The general partner of Hyperion Partners is Hyperion Ventures L.P.
("Hyperion Ventures"). Four corporations are general partners of Hyperion
Ventures: (i) LSR Hyperion Corp., which is wholly owned by Lewis S. Ranieri;
(ii) Hyperion Funding Corp., which is owned by Lewis S. Ranieri, Salvatore A.
Ranieri, Scott A. Shay and Kendrick R. Wilson III; (iii) SAR Hyperion Corp.,
which is wholly owned by Salvatore A. Ranieri; and (iv) SAS Hyperion Corp.,
which is wholly owned by Scott A. Shay.
 
     In June 1995, Lewis S. Ranieri and Scott A. Shay established a new private
equity fund, Hyperion Partners II. Hyperion Partners II follows many of the same
investment strategies as Hyperion Partners. Both the general partner of and the
advisor to Hyperion Partners II are controlled by Lewis S. Ranieri and Scott A.
Shay, who were also among the founders, and remain two of the three control
persons, of Hyperion Partners and are members of the Company Board. See "Risk
Factors -- Concentration of Ownership".
 
     Prior to the Restructuring, Hyperion Partners held all of the Company's
common stock, other than the Class C Common Stock, through its wholly owned
subsidiary, Hyperion Holdings. On June 18, 1996, Hyperion Holdings was merged
with and into the Company in the Merger.
 
                                       118
<PAGE>   121
 
SELLING STOCKHOLDER LETTER AGREEMENTS
 
     Each of the Selling Stockholders, LW-SP1 and LW-SP2 (which are subject to
each of the provisions described herein as applicable to Selling Stockholders,
except as otherwise indicated) have entered into a Letter Agreement, dated as of
June 17, with each of Hyperion Partners and the Company (the "Letter
Agreement"). Pursuant to the Letter Agreement, each Selling Stockholder
consented to the Distribution and agreed to hold the common stock of Hyperion
Holdings received pursuant to the Distribution according to the terms of such
Letter Agreement. Also, each Selling Stockholder (including those who prior to
the Merger held voting shares of capital stock of Hyperion Holdings and those
who prior to the Merger held shares of Class C Common Stock), by executing the
Letter Agreement and agreeing to be bound thereby, consented to and approved of,
for purposes of Section 228 of the DGCL and otherwise, the Merger Agreement,
dated as of June 17, 1996, by and between Hyperion Holdings and the Company (the
"Merger Agreement"), and the Merger.
 
     Pursuant to the Letter Agreement, each Selling Stockholder acknowledged (i)
that under the By-laws of Hyperion Holdings, it is not permitted to Transfer any
shares of capital stock of Hyperion Holdings except pursuant to the Merger
Agreement and (ii) that, under the By-Laws, after the Distribution and prior to
the consummation of the Offering, such Selling Stockholder would not effect any
Transfer of shares of capital stock of the Company (a) in the case of such
shares received in respect of Class C Common Stock in the Merger, except as such
Selling Stockholder would have been permitted to transfer such Class C Common
Stock under the Stockholders' Agreement, dated as of August 1, 1989, by and
among the Company and the other parties specified therein, and (b) in the case
of any other such shares, except in accordance with the terms of the limited
partnership agreement of Hyperion Partners applicable to the transfer of
partnership interests of Hyperion Partners. Each 5% Stockholder acknowledged
that it is not permitted, prior to the earlier of an IPO or October 31, 1996, to
Transfer any such shares owned by such 5% Stockholder or its affiliates (other
than to a person of whom the 5% Stockholder is a wholly-owned subsidiary) or
acquire any additional such shares. If an IPO is not consummated within six
months of the date of the Transaction Agreement, the Company is obligated to
provide each Selling Stockholder with registration and tag-along rights
substantially similar to those set forth in the Stock Purchase Agreement, dated
as of August 1, 1989, by and among the Company and certain Selling Stockholders
and the Stockholders' Agreement. Under the Letter Agreements, each Selling
Stockholder is also obligated to provide certain cooperation to the Company in
the case of an IPO, including entering into customary underwriting and lockup
agreements.
 
     Selling Stockholders retaining shares of Common Stock may not sell such
shares for (1) one year after the Offering, if such stock was received in
respect of general partnership interests in Hyperion Partners or (2) six months
after the Offering, if such shares were received in respect of limited
partnership interests in Hyperion Partners (although a regulated insurance
company may sell shares in a private off-market transaction subject to Rule 144
limits and reasonable representations requested by the Underwriters). Subject to
certain adjustments by the Company Board based upon advice of the Underwriters
to improve the marketability of the shares of Common Stock to be sold in the
Offering, each 5% Stockholder may sell up to 45% of such holder's shares of
Common Stock in the Offering, except for LW-SP1 and LW-SP2, affiliates of Lehman
Brothers Inc., which are prohibited from selling any shares until August 8,
1998, and any other Selling Stockholder may sell up to 16% of its shares in the
Offering (subject to increase pro rata in the discretion of the Company Board if
the 5% Stockholders elect to sell fewer than the maximum number of shares they
are permitted to sell in the Offering). Each Selling Stockholder acknowledged
that, except for shares that could have been sold pursuant to the Offering but
were not sold at the election of such 5% Stockholder, no 5% Stockholder is
permitted by the By-Laws to acquire or Transfer any shares of capital stock of
the Company for three years following the Offering (or upon termination of the
Letter Agreement, if earlier) unless as of an earlier date the Company Board
determines that such acquisition or Transfer would not be reasonably likely to
have a material adverse effect on the tax position of the Company.
 
     Pursuant to the Letter Agreement, as soon as practicable after the
Offering, the Company is obligated to file, and to use best efforts to cause to
promptly become effective, a registration statement under the Securities Act
with respect to shares of class A or Class B Common Stock then held by any
Selling Stockholder. The Company is also obligated to take action to keep such
registration statement effective (subject to occasional periods of suspension of
such effectiveness as necessary) until all Common Stock registered thereunder
has been sold pursuant thereto or until such registration under the Securities
Act is no longer required to sell such shares without restriction but in no case
later than December 31, 1999.
 
     The Letter Agreement also restricts the conversion rights of holders of
Class B Common Stock. See "Description of Capital Stock -- Common Stock --
Conversion".
 
     In connection with the Letter Agreement, each of the Selling Stockholders,
Hyperion Partners, Hyperion Holdings and the Company have made certain
representations and warranties. The Letter Agreement may be terminated by
consent of each of the parties thereto and if not earlier terminated will
terminate on the earlier of the third anniversary of the Offering or of October
31, 1996 (except for certain provisions restricting transfers and pertaining to
registration rights and conversion of Class B Common Stock).
 
                                       119
<PAGE>   122
 
                          DESCRIPTION OF CAPITAL STOCK
 
AUTHORIZED CAPITAL STOCK
 
     Immediately following the Offering, the Company's authorized capital stock
will consist of 10 million shares of preferred stock, par value $0.01 per share
("Preferred Stock"), 40 million shares of Class A Common Stock and, 40 million
shares of Class B Common Stock. Immediately following the Offering,
shares of Class A Common Stock will be outstanding and           shares of Class
B Common Stock will be outstanding. All of the shares of Class A Common Stock
that will be outstanding immediately following the Offering, including the
shares of Class A Common Stock sold in the Offering, will be validly issued,
fully paid and nonassessable.
 
COMMON STOCK
 
  Dividends
 
     The holders of each class of Common Stock, to the exclusion of the holders
of Preferred Stock, share equally 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.
 
  Liquidation Rights
 
     In the event of a liquidation, dissolution or winding up of the affairs of
the Company, after payment has been made to the holders of Preferred Stock of
the full amount to which they are entitled, the holders of Common Stock share
ratably according to the number of shares of Common Stock held by them, in all
remaining assets of the Company available for distribution to its stockholders.
 
  Voting Rights
 
     The holders of Class A Common Stock are entitled to vote on each matter on
which the stockholders of the Company are entitled to vote, and each holder of
Class A Common Stock is entitled to one vote for each share held. The holders of
Class B Common Stock do not have any voting rights except as otherwise required
by applicable law.
 
  Conversion
 
     Each share of Class B Common Stock is convertible into one share of Class A
Common Stock (a) automatically, upon the sale or other transfer of the 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 (except that such election shall not apply to shares of
Class B Common Stock held by any person that is prohibited under applicable
federal or state statute or regulation from holding voting securities of the
type or in an amount represented by the shares of Class A Common Stock that
could otherwise be held by such person upon such conversion). 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 may not be effected by a Selling Stockholder prior to
the earlier to occur of the consummation of an initial public offering of shares
of capital stock of the Company (including the Offering) or October 31, 1996,
unless the Company Board agrees to such conversion or unless such holder is
subject to Title I of ERISA. In addition, 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
 
                                       120
<PAGE>   123
 
the outstanding shares of Class A Common Stock (or such lower percentage as may
apply to such holder under regulatory restrictions).
 
  Restrictions on Transfers of Stock
 
     The Certificate limits transfers of shares of Common Stock and other
interests that would be treated as stock of the Company under the Code or
applicable IRS regulations and certain options that would cause either a person
or an entity to become a 5% Stockholder or increase a 5% Stockholder's
percentage ownership interest in the Company. This limitation is intended to
prevent transfers of stock of the Company from triggering an Ownership Change
which would result in the limitation of certain potential tax benefits available
to the Company. See "Regulation -- Taxation". The By-Laws prohibit any 5%
Stockholder from acquiring or transferring any shares of Common Stock received
by such 5% Stockholder in the Merger for three years following the consummation
of an IPO, such as the Offering, unless as of an earlier date such acquisition
or transfer would not, as determined by the Company Board, be reasonably likely
to have a material adverse effect on the tax position of the Corporation.
 
     Also, pursuant to the Letter Agreements, the holders of shares of Class B
Common Stock which such holders may not elect to convert to shares of Class A
Common Stock because of the restrictions described in the last sentence of
"-- Conversion", may not transfer such shares of Class B Common Stock other than
to an affiliate, in a widely-dispersed offering of shares of the Company's
capital stock under an effective registration statement filed under the
Securities Act or in a transaction in which no single person or group acting in
concert would, as a result of such transfer and assuming the conversion of such
shares of Class B Common Stock into shares of Class A Common Stock, possess more
than 2% of the voting power of the shares of Class A Common Stock.
 
PREFERRED STOCK
 
     The Certificate authorizes the Company Board to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the terms and rights of such series, including (i) the
designation of the series, (ii) the number of shares of the series, which number
the Company Board may thereafter (except where otherwise provided in the
applicable certificate of designation) increase or decrease (but not below the
number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative, and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series shall be
cumulative, (iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any conditions
upon which such dividends will be paid and the date or dates or the method for
determining the date or dates upon which such dividends will be payable; (v) the
redemption rights and price or prices, if any, for shares of the series, (vi)
the terms and amounts of any sinking funds provided for the purchase or
redemption of shares of the series, (vii) the amounts payable on and the
preferences, if any, of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible or
exchangeable into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates as of
which such shares will be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made, (ix) restrictions
on the issuance of shares of the same series or of any other class or series,
(x) the voting rights, if any, of the holders of the shares of the series, and
(xi) any other relative rights, preferences and limitations of such series.
 
     The Company believes that the ability of the Company Board to issue one or
more series of Preferred Stock, while providing the Company with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs which might arise, could make it more difficult for a third
party to acquire a majority of the outstanding voting stock. The authorized
shares of Preferred Stock, as well as shares of Common Stock, will be available
for issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on
 
                                       121
<PAGE>   124
 
which the Company's securities may be listed or traded. If the approval of the
Company's stockholders is not required for the issuance of shares of Preferred
Stock or Common Stock, the Company Board may determine not to seek stockholder
approval. Accordingly, the issuance of Preferred Stock may be used as an "anti-
takeover" device without further action on the part of the Company's
stockholders.
 
     Although the Company Board has no intention at the present time of doing
so, it could issue a series of Preferred Stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. The Company Board will make any determination to issue such
shares based on its judgment as to the best interests of the Company and its
stockholders. The Company Board, in so acting, could issue Preferred Stock
having terms that could discourage an acquisition attempt through which an
acquirer may be able to change the composition of the Company Board, including a
tender offer or other transaction that some, or a majority, of the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
 
CERTAIN PROVISIONS OF THE CERTIFICATE AND BY-LAWS; ANTI-TAKEOVER EFFECTS
 
  Board of Directors
 
     The Certificate provides that, except as otherwise fixed by or pursuant to
the provisions of a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, the number of the directors
of the Company will be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the total number of directors which the
Company would have if there were no vacancies (the "Whole Board") (but shall not
be less than three). The directors, other than those who may be elected by the
holders of Preferred Stock, will be classified with respect to the time for
which they severally hold office into three classes, as nearly equal in number
as possible, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1996, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1997 and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1998, with each director to
hold office until its successor is duly elected and qualified. Commencing with
the 1996 annual meeting of stockholders, directors elected to succeed directors
whose terms then expire will be elected for a term of office to expire at the
third succeeding annual meeting of stockholders after their election, with each
director to hold office until such person's successor is duly elected and
qualified.
 
     The Certificate provides that, except as otherwise provided for or fixed by
or pursuant to a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Company Board resulting from death, resignation, disqualification, removal or
other cause will be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Company Board, and not by the stockholders. Any director elected in accordance
with the preceding sentence will hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
Company Board will shorten the term of any incumbent director. Subject to the
rights of holders of Preferred Stock, any director may be removed from office
only for cause by the affirmative vote of the holders of at least a majority of
the voting power of all Voting Stock then outstanding, voting together as a
single class.
 
     These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of the Company Board by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of the Company Board. Accordingly,
these provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of the Company.
 
                                       122
<PAGE>   125
 
  Stockholder Action by Unanimous Written Consent; Special Meetings
 
     Except as otherwise required by law and subject to the rights of the
holders of any Preferred Stock, special meetings of stockholders of the Company
for any purpose or purposes may be called only by the Company Board pursuant to
a resolution stating the purpose or purposes thereof approved by a majority of
the Whole Board or by the Chairman of the Board. Any power of stockholders to
call a special meeting is specifically denied. No business other than that
stated in the notice shall be transacted at any special meeting. Stockholders
entitled to vote at an annual or special meeting may act by written consent in
lieu of such meeting only if such consent is unanimous. These provisions may
have the effect of delaying consideration of a stockholder proposal until the
next annual meeting unless a special meeting is called by the Company Board or
the Chairman of the Board.
 
  Advance Notice Procedures
 
     The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure"). The Stockholder Notice Procedure provides that only individuals who
are nominated by, or at the direction of, the Chairman of the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Chairman of the
Board or the Company Board, or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. Under the Stockholder Notice Procedure, for
notice of stockholder nominations to be made at an annual meeting to be timely,
such notice must be received by the Company not later than the close of business
on the 90th calendar day nor earlier than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting (except that, in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th calendar day prior to such
annual meeting and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting or the 10th calendar day following the
day on which public announcement of a meeting date is first made by the
Company).
 
     Notwithstanding the foregoing, in the event that the number of directors to
be elected to the Company Board is increased and there is no public announcement
by the Company naming all of the nominees for director or specifying the size of
the increased Company Board at least 100 calendar days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice also
will be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered not later than the
close of business on the 10th calendar day following the day on which such
public announcement is first made by the Company. Under the Stockholder Notice
Procedure, for notice of a stockholder nomination to be made at a special
meeting at which directors are to be elected to be timely, such notice must be
received by the Company not earlier than the close of business on the 120th
calendar day prior to such special meeting and not later than the close of
business on the 90th calendar day prior to such special meeting or the 10th
calendar day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Company Board to
be elected at such meeting.
 
     In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate an individual for election as a director or
relating to the conduct of business other than the nomination of directors must
contain certain specified information. If the chairman of a meeting determines
that an individual was not nominated, or other business was not brought before
the meeting, in accordance with the Stockholder Notice Procedure, such
individual will not be eligible for election as a director, or such business
will not be conducted at such meeting, as the case may be.
 
                                       123
<PAGE>   126
 
  Amendment
 
     The Certificate provides that the affirmative vote of the holders of at
least 80% of the Voting Stock, voting together as a single class, is required to
amend provisions of the Certificate relating to stockholder action without a
meeting; the calling of special meetings; the number, election and term of the
Company's directors; the filling of vacancies; and the removal of directors. The
Certificate further provides that the related By-Laws described above (including
the Stockholder Notice Procedure) may be amended only by the Company Board or by
the affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of Voting Stock, voting together as a single class.
 
DELAWARE BUSINESS COMBINATION STATUTE
 
     Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, 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) on or subsequent to such date,
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 (x) any person that
is the owner of 15% or more of the outstanding voting stock of the corporation,
or is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within three
years immediately prior to the date of determination and (y) the affiliate and
associates of any such person.
 
     Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring the
Company to negotiate in advance with the Company Board, since the stockholder
approval requirement would be avoided if a majority of the directors then in
office approves either the business combination or the transaction which results
in any such person becoming an interested shareholder. Such provisions also may
have the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which the Company's stockholders may otherwise deem to be in their
best interests.
 
LIABILITY OF DIRECTORS; INDEMNIFICATION
 
     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.
 
                                       124
<PAGE>   127
 
     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
 
                 will be the transfer agent and registrar for the Class A Common
Stock.
 
                                       125
<PAGE>   128
 
                                  UNDERWRITING
 
     Subject to the terms and conditions set forth in the purchase agreement
(the "Purchase Agreement") among the Selling Stockholders, the Company and each
of the underwriters named below (the "Underwriters"), the Selling Stockholders
have agreed to sell to each of the Underwriters, and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, is acting as
representative (the "Representative"), has severally agreed to purchase from the
Selling Stockholders the aggregate number of shares of Class A Common Stock set
forth opposite its name below:
 
<TABLE>
<CAPTION>
                                                                            NUMBER OF
                                   UNDERWRITERS                              SHARES
        ------------------------------------------------------------------  ---------
        <S>                                                                 <C>
        Merrill Lynch, Pierce, Fenner & Smith
                     Incorporated.........................................
        Lehman Brothers Inc. .............................................
        Smith Barney Inc. ................................................
                                                                             -------
                  Total...................................................
                                                                             =======
</TABLE>
 
     In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Class A
Common Stock being sold pursuant to such Purchase Agreement if any of the shares
of Class A Common Stock being sold pursuant to such Purchase Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased.
 
     The Underwriters have advised the Company and the Selling Stockholders that
the Underwriters propose to offer the shares of Class A Common Stock offered
hereby to the public initially at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price, less a
concession not in excess of $     per share of Class A Common Stock. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $     per share of Class A Common Stock on sales to certain other dealers.
After the public offering, the public offering price, concession and discount
may be changed.
 
     The Selling Stockholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to an aggregate of an additional           shares of Class A Common
Stock at the initial public offering price set forth on the cover page of this
Prospectus, less the underwriting discount. The Underwriters may exercise the
option only to cover over-allotments, if any, made on the sale of shares of
Class A Common Stock offered hereby. To the extent that the Underwriters
exercise the option, each Underwriter will be obligated, subject to certain
conditions, to purchase the same percentage of such additional shares of Class A
Common Stock as the number of shares of Class A Common Stock to be purchased by
it bears to the total number of shares of Class A Common Stock initially offered
by the Underwriters.
 
     The Company and the Selling Stockholders have agreed with the Underwriters
not to directly or indirectly offer, sell, contract to sell or otherwise dispose
of any shares of Class A Common Stock of the Company or any interests therein or
securities convertible into or exchangeable or exercisable for shares of Class A
Common Stock of the Company (except, in the case of the Selling Stockholders,
for the shares of Class A Common Stock offered hereby), for a period of   days
after the date of this Prospectus, without the prior written consent of the
Representative.
 
     At the request of the Company, the Underwriters have initially reserved up
to           shares of Class A Common Stock for sale at the price at which the
shares of Class A Common Stock are being offered to the public to certain
employees and retirees of the Company and its affiliates. The number of shares
of Class A Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
which are not so purchased will be offered by the Underwriters to the general
public on the same basis as other shares offered hereby.
 
                                       126
<PAGE>   129
 
     The Company and the Selling Stockholders have severally agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
 
     Certain of the Underwriters or their affiliates have provided from time to
time, and may provide in the future, investment banking services to the Company
and its affiliates, for which such Underwriters or their affiliates have
received or will receive fees and commissions.
 
     LW-SP1 L.P. ("LW-SP1") and LW-SP2 L.P. ("LW-SP2") are limited partnerships
of which LW Real Estate Investments, L.P. is general partner and of which it
owns a 99% interest. Lehman Brothers Inc. owns an approximately 75% partnership
interest in LW Real Estate Investments, L.P. LW-SP1 and LW-SP2 hold a limited
partnership interest in Hyperion Partners. Accordingly, as a result of the
Restructuring, LW-SP1 and LW-SP2 became owners of Class B Common Stock. Although
LW-SP1 and LW-SP2 have indicated their intention not to participate in the
Offering and, accordingly, are not among the Selling Stockholders, they have
entered into the Letter Agreement pursuant to which, among other things, they
have agreed not to transfer their Common Stock until August 8, 1998. See
"Selling Stockholders". In light of this indirect beneficial ownership interest
of Lehman Brothers Inc. in the Company, the Offering is being made pursuant to
the provisions of Rule 2720 ("Schedule E") of the NASD Conduct Rules. Merrill
Lynch Pierce Fenner & Smith Incorporated will act as qualified independent
underwriter as defined in Schedule E and in accordance with Schedule E will
conduct due diligence and recommend the initial public offering price of the
shares of Class A Common Stock offered hereby.
 
     Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock was
determined by negotiations between the Company and the Underwriters. Among the
factors considered in determining the initial public offering price were the
sales, earnings and certain other pro forma financial and operating information
of the Company in recent periods, the future prospects of the Company and its
industry in general, and certain ratios and market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company.
 
                                 LEGAL MATTERS
 
     The validity of the Class A Common Stock offered hereby and certain other
legal matters will be passed upon for the Company by Bryan Cave LLP, Washington
D.C. and Wachtell, Lipton, Rosen & Katz, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Cleary, Gottlieb, Steen and
Hamilton, New York, New York.
 
                                    EXPERTS
 
     The consolidated financial statements of the Company as of September 30,
1995 and 1994 and for each of the three years in the period ended September 30,
1995 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
 
                             AVAILABLE INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock offered
hereby (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement"). This Prospectus, which forms a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract, agreement or other document
are not necessarily complete, and, in each instance, reference is made to the
 
                                       127
<PAGE>   130
 
copy of the document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and 7
World Trade Center (13th Floor), New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
 
     The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the Offering, the Company will become subject
to the informational requirements of the Exchange Act. The Company will fulfill
its obligations with respect to such requirements by filing periodic reports and
other information with the Commission. In addition, the Company intends to
furnish to its stockholders annual reports containing consolidated financial
statements examined by an independent public accounting firm.
 
                                       128
<PAGE>   131
 
                             INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
                 TERM                    PAGE
- ---------------------------------------  ----
<S>                                      <C>
1988 Act...............................    88
1995 Amendments........................    85
1996 Incentive Compensation Plan.......   104
15.75% Notes...........................    48
5% Stockholders........................    13
Acquisition............................     6
ACE....................................    92
ADA....................................    89
adequately capitalized.................    75
affiliate..............................    83
ALCO...................................     4
American Marine........................    98
AMT....................................    92
AMTI...................................    92
Annual Retainer........................   108
APY....................................    89
Assistance Agreement...................    72
Awards.................................   104
Bank...................................     3
Bank Common Stock......................     8
Bank Preferred Stock...................     8
Barnett................................   100
BIF....................................    14
BSA....................................    88
By-Laws................................    10
capital distributions..................    78
CDs....................................    40
CEO....................................     5
Certificate............................    10
CGSA...................................    71
Change of Control Price................   106
Class A Common Stock...................     1
Class B Common Stock...................     1
Class C Common Stock...................    20
CMOs...................................    64
Code...................................    13
Commission.............................     1
Committee..............................   104
Common Stock...........................     1
Company................................     1
Company Board..........................     6
Compensation Plan......................   104
Consolidated Financial Statements......     7
core capital...........................    77
Covered Assets.........................    72
Covered Transactions...................    82
 
<CAPTION>
                 TERM                    PAGE
- ---------------------------------------  ----
<S>                                      <C>
CRA....................................    82
DBL....................................    91
DGCL...................................    16
Director Stock Plan....................   108
Distribution...........................     5
DSSP...................................   111
ECOA...................................    17
EFTA...................................    88
Eligible Director......................   108
employment taxes.......................   107
ERISA..................................   105
Exchange Act...........................     9
Exchange Offer.........................     6
Expedited Funds Act....................    89
FASB...................................    38
FDIA...................................    82
FDIC...................................     1
Federal Reserve Board..................    11
federally related mortgage loan........    86
FH Act.................................    17
FHA....................................    15
FHLB...................................     6
FHLB Dallas............................    12
FHLBB..................................    97
FHLMC..................................    15
FIRREA.................................     6
First Amendment to Warrant Agreement...    73
FNMA...................................    15
Forbearance Agreement..................     6
FRA....................................    82
Freestanding SARs......................   105
FRF....................................     6
FSLIC..................................     6
GAAP...................................    77
GNMA...................................    15
HELOCs.................................    54
HMDA...................................    86
HOLA...................................    74
HUD....................................    86
Hyperion Capital.......................    98
Hyperion Holdings......................     5
Hyperion Partners......................     1
Hyperion Partners II...................    16
Hyperion Ventures......................   118
institution-affiliated parties.........    84
interest rate sensitivity gap..........    68
</TABLE>
 
                                       129
<PAGE>   132
<TABLE>
<CAPTION>
                 TERM                    PAGE
- ---------------------------------------  ----
<S>                                      <C>
IRR....................................    78
ISOs...................................   107
Letter Agreement.......................   119
leverage capital.......................    75
LW-SP1.................................   127
LW-SP2.................................   127
Maxxam.................................    17
MBF....................................     4
MBS....................................     3
Merger.................................     5
Meritor................................   100
MSRs...................................     3
Merger Agreement.......................   119
NASD...................................    72
NASDAQ.................................     1
Net Tax Benefits.......................    92
NOLs...................................     6
non-agency securities..................    64
non-qualifying loans...................    91
nonconforming subsidiaries.............    78
NQOs...................................   107
Offering...............................     1
Old USAT...............................     6
operating subsidiary...................    80
Options................................   104
Order..................................    96
OTS....................................     1
Ownership Change.......................    13
Participants...........................   104
Performance Awards.....................   104
portfolio assets.......................    81
Preferred Stock........................   120
Principal Shareholder..................    82
Purchase Agreement.....................   126
QTL....................................    74
qualified investments..................    87
qualifying real property loans.........    91
Registration Statement.................   127
REMICs.................................    91
REO....................................    34
Representative.........................   126
 
<CAPTION>
                 TERM                    PAGE
- ---------------------------------------  ----
<S>                                      <C>
repurchase agreements..................    37
RESPA..................................    17
Restricted Period......................   105
Restricted Stock.......................   104
reverse repurchase agreement...........    12
Restructuring..........................     5
RTC....................................     8
SAIF...................................     3
Salomon................................    98
SARs...................................   104
Schedule E.............................   127
Section 203............................    16
Securities Act.........................     1
Selling Stockholders...................     1
Senior Notes...........................     6
SESP...................................   110
Settlement Agreement...................    72
SFAS...................................    25
Stockholder Notice Procedure...........   123
Tandem SARs............................   105
tangible capital.......................    78
Tax Benefits Agreement.................    91
Tier 1 Association.....................    79
Tier 2 Association.....................    79
Tier 3 Association.....................    79
Tier 1 risk-based capital..............    75
TILA...................................    17
TISA...................................    89
total capital..........................    78
total risk-based capital...............    75
Transfers..............................    13
UFM....................................    72
undercapitalized.......................    75
Underwriters...........................   126
VA.....................................    15
Voting Stock...........................    16
Warrant Agreement......................    73
Warrants...............................     8
well capitalized.......................    75
Whole Board............................   122
Winstar cases..........................    97
</TABLE>
 
                                       130
<PAGE>   133
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                        -----
<S>                                                                                     <C>
Independent Auditors' Report..........................................................    F-2
Consolidated Statements of Financial Condition as of March 31, 1996 (unaudited) and
  September 30, 1995 and 1994.........................................................    F-3
Consolidated Statements of Operations for the Six Months Ended March 31, 1996
  (unaudited) and March 31, 1995 (unaudited) and for the Years Ended September 30,
  1995, 1994, and 1993................................................................    F-4
Consolidated Statements of Stockholders' Equity for the Six Months Ended March 31,
  1996 (unaudited) and March 31, 1995 (unaudited) and for the Years Ended September
  30, 1995, 1994, and 1993............................................................    F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1994,
  and 1993............................................................................    F-6
Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1996
  (unaudited) and March 31, 1995 (unaudited)..........................................    F-8
Notes to Consolidated Financial Statements............................................   F-10
</TABLE>
 
     All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or
Notes thereto.
 
                                       F-1
<PAGE>   134
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors of Bank United Corp. (formerly USAT Holdings Inc.):
 
     We have audited the accompanying consolidated statements of financial
condition of Bank United Corp. (formerly USAT Holdings Inc.) and its subsidiary
(collectively known as the "Company") as of September 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company at
September 30, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
 
     Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The information as of
September 30, 1993, 1992 and 1991 and for the years ended September 30, 1992 and
1991 included in notes 3, 4, 5 and 8 are presented for the purpose of additional
analysis, and are not a required part of the basic consolidated financial
statements. This information is the responsibility of the Company's management.
Such information has been subjected to the auditing procedures applied in our
audits of the basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic consolidated
financial statements from which such information has been derived.
 
     As discussed in notes 1 and 6 to the consolidated financial statements,
effective October 1, 1994, the Company changed its method of accounting for
mortgage servicing rights to conform with Statement of Financial Accounting
Standards No. 122.
 
DELOITTE & TOUCHE LLP
New York, New York
October 31, 1995, except for Note 21, as to
which the date is June      , 1996
 
                                       F-2
<PAGE>   135
 
                               BANK UNITED CORP.
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                       MARCH 31,
                                                                      -----------        SEPTEMBER 30,
                                                                         1996       ------------------------
                                                             NOTES    -----------      1995          1994
                                                           ---------  (UNAUDITED)   -----------   ----------
<S>                                                        <C>        <C>           <C>           <C>
ASSETS
Cash and cash equivalents.................................    21      $   135,691   $   112,931   $   76,938
Securities purchased under agreements to resell and
  federal funds sold......................................     2          659,279       471,052      358,710
Trading account assets, at fair value.....................                  1,267         1,081        1,011
Securities                                                   3, 12
     Held to maturity, at amortized cost (fair value of
       $3.0 million in 1996, $2.7 million in 1995, and
       $2.8 million in 1994)..............................                  1,903         1,902        2,358
     Available for sale, at fair value....................                 56,448       114,111      111,757
Mortgage-backed securities                                 4, 9, 10
     Held to maturity, at amortized cost (fair value of
       $657.6 million in 1996, $2,031 million in 1995, and
       $2,341 million in 1994)............................                674,488     2,051,304    2,394,978
     Available for sale, at fair value....................              1,279,582       346,959      433,925
Loans                                                        5, 9
     Held to maturity (net of the allowance for credit
       losses of $36.4 million in 1996, $36.8 million in
       1995, and $23.4 million in 1994)...................              7,447,500     7,763,676    4,780,328
     Held for sale (net of the allowance for credit losses
       of $44 thousand in 1996, $38 thousand in 1995, and
       $76 thousand in 1994)..............................                430,580       496,564      265,846
FHLB stock................................................                233,038       225,952      132,816
Premises and equipment....................................                 36,157        37,687       40,537
Mortgage servicing rights.................................     6           83,383        75,097       56,677
Intangible assets.........................................                 23,105        26,519       36,446
Real estate owned (net of allowance for losses of
  $727 thousand in 1996, $1.1 million in 1995, and
  $373 thousand in 1994)..................................                 27,539        23,764       20,311
Other assets.............................................. 4, 13, 21      176,676       234,935      197,523
                                                                      -----------   -----------   ----------
TOTAL ASSETS..............................................            $11,266,636   $11,983,534   $8,910,161
                                                                       ==========    ==========    =========
LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits..................................................     8      $ 4,963,321   $ 5,182,220   $4,764,204
FHLB advances.............................................  4, 5, 9     4,139,023     4,383,895    2,620,329
Securities sold under agreements to repurchase and federal
  funds purchased.........................................   4, 10        949,936     1,172,533      553,000
Senior Notes..............................................    11          115,000       115,000      115,000
Advances from borrowers for taxes and insurance...........                104,749       183,968      145,383
Other liabilities.........................................                282,666       264,315      175,383
                                                                      -----------   -----------   ----------
          Total liabilities...............................             10,554,695    11,301,931    8,373,299
                                                                      -----------   -----------   ----------
COMMITMENTS AND CONTINGENCIES                               12, 17
MINORITY INTEREST
Preferred stock issued by consolidated subsidiary.........    16          185,500       185,500       85,500
                                                                      -----------   -----------   ----------
STOCKHOLDERS' EQUITY......................................  15, 16
Common stock
     Class A: 13,238 shares outstanding...................    21                1             1            1
     Class C: 2,797 shares outstanding....................    21                1             1            1
Paid-in capital...........................................                118,009       118,009      121,767
Retained earnings.........................................    21          411,498       384,739      343,020
Unrealized gains (losses) on securities and
  mortgage-backed securities available for sale, net of
  tax.....................................................     4           (3,068)       (6,647)     (13,427)
                                                                      -----------   -----------   ----------
          Total stockholders' equity......................                526,441       496,103      451,362
                                                                      -----------   -----------   ----------
TOTAL LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS'
  EQUITY..................................................            $11,266,636   $11,983,534   $8,910,161
                                                                       ==========    ==========    =========
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       F-3
<PAGE>   136
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                 FOR THE SIX
                                                                                MONTHS ENDED             FOR THE YEAR ENDED
                                                                                  MARCH 31,                SEPTEMBER 30,
                                                                             -------------------   ------------------------------
                                                                     NOTES     1996       1995       1995       1994       1993
                                                                    -------  --------   --------   --------   --------   --------
<S>                                                                 <C>      <C>        <C>        <C>        <C>        <C>
                                                                                 (UNAUDITED)
INTEREST INCOME
Short-term interest-earning assets...............................            $ 17,360   $ 14,415   $ 29,675   $ 19,019   $ 14,301
Trading account assets...........................................                  35         29         62       (144)     6,224
Securities.......................................................      3        2,112      2,950      5,893      5,007         63
Mortgage-backed securities.......................................      4       70,699     87,134    173,155    151,972     83,525
Loans............................................................      5      323,930    218,370    526,528    308,804    344,515
FHLB stock.......................................................               7,085      4,688     11,446      5,558      3,095
Covered Assets and related assets................................      7        --         --         --         4,490     30,767
                                                                             --------   --------   --------   --------   --------
        Total interest income....................................             421,221    327,586    746,759    494,706    482,490
                                                                             --------   --------   --------   --------   --------
INTEREST EXPENSE
Deposits.........................................................      8      138,510    122,504    264,366    209,034    225,983
FHLB advances....................................................      9      136,501     92,281    224,767     91,060     48,594
Securities sold under agreements to repurchase and
  federal funds purchased........................................     10       29,073     19,973     53,220     10,574     11,180
Long-term debt...................................................     11        --         --         --         --        10,214
Senior Notes.....................................................     11        5,205      5,202     10,407     10,177      3,446
Other............................................................               --         --         --            79      1,414
                                                                             --------   --------   --------   --------   --------
        Total interest expense...................................             309,289    239,960    552,760    320,924    300,831
                                                                             --------   --------   --------   --------   --------
        Net interest income......................................             111,932     87,626    193,999    173,782    181,659
PROVISION FOR CREDIT LOSSES......................................      5        5,850      4,157     24,293      6,997      4,083
                                                                             --------   --------   --------   --------   --------
        Net interest income after provision for credit
          losses.................................................             106,082     83,469    169,706    166,785    177,576
                                                                             --------   --------   --------   --------   --------
NON-INTEREST INCOME
Net gains (losses)
    Sales of single family servicing rights and single
      family warehouse loans.....................................              19,157     38,464     60,495     63,286     67,403
    Securities and mortgage-backed securities....................     3,4       2,863          8         26     10,404     43,702
    Other loans..................................................               3,485       (380)    (1,210)       163      1,496
Loan servicing fees and charges..................................              22,107     22,813     43,508     31,741     21,780
Other fees and charges...........................................               6,997      5,748     12,162     13,295     12,310
                                                                             --------   --------   --------   --------   --------
        Total non-interest income................................              54,609     66,653    114,981    118,889    146,691
                                                                             --------   --------   --------   --------   --------
NON-INTEREST EXPENSE
Compensation and benefits........................................     14       39,898     43,192     83,520     86,504     81,472
Occupancy........................................................     17        9,439      9,072     18,713     17,196     15,971
Data processing..................................................     17        8,120      8,116     16,360     15,821     15,072
Advertising and marketing........................................               4,053      4,782      9,262     10,796      8,772
Amortization of intangibles......................................               9,801     10,718     21,856     18,247     24,469
SAIF deposit insurance premiums..................................               6,129      5,630     11,428     11,329     10,162
Furniture and equipment..........................................               3,128      3,219      6,428      6,810      5,535
Other............................................................              18,736     16,916     27,009     32,890     40,511
                                                                             --------   --------   --------   --------   --------
        Total non-interest expense...............................              99,304    101,645    194,576    199,593    201,964
                                                                             --------   --------   --------   --------   --------
        Income before income taxes, minority interest, and
          extraordinary loss.....................................              61,387     48,477     90,111     86,081    122,303
INCOME TAX EXPENSE (BENEFIT).....................................   13, 21     25,278     20,186     37,415    (31,899)   (26,153)
                                                                             --------   --------   --------   --------   --------
INCOME BEFORE MINORITY INTEREST AND
  EXTRAORDINARY LOSS.............................................              36,109     28,291     52,696    117,980    148,456
Less minority interest:
    Subsidiary preferred stock dividends.........................               9,126      4,326     10,600      8,653      6,537
    Payments in lieu of dividends................................   16, 21        224        306        377        357      --
                                                                             --------   --------   --------   --------   --------
INCOME BEFORE EXTRAORDINARY LOSS.................................              26,759     23,659     41,719    108,970    141,919
Extraordinary loss -- early extinguishment of debt...............     11        --         --         --         --        14,549
                                                                             --------   --------   --------   --------   --------
NET INCOME.......................................................            $ 26,759   $ 23,659   $ 41,719   $108,970   $127,370
                                                                             ========   ========   ========   ========   ========
EARNINGS PER COMMON SHARE:
Income before extraordinary loss.................................   16, 21   $   0.87   $   0.76   $   1.35   $   3.55   $   4.61
Extraordinary loss...............................................               --         --         --         --          0.50
                                                                             --------   --------   --------   --------   --------
Net income.......................................................            $   0.87   $   0.76   $   1.35   $   3.55   $   4.11
                                                                             ========   ========   ========   ========   ========
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       F-4
<PAGE>   137
 
                               BANK UNITED CORP.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                COMMON STOCK
                                   --------------------------------------
                                        CLASS A              CLASS C                                    UNREALIZED      TOTAL
                                   ------------------   -----------------    PAID-IN       RETAINED       GAINS      STOCKHOLDERS'
                                   SHARES    AMOUNT     SHARES   AMOUNT      CAPITAL       EARNINGS      (LOSSES)       EQUITY
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
<S>                                <C>     <C>          <C>    <C>         <C>           <C>           <C>           <C>
BALANCE AT SEPTEMBER 30, 1992..... 13,238      $1       2,797      $1        $125,691      $106,680      $   --        $232,373
    Net income....................   --        --        --        --            --         127,370          --         127,370
    Cost of subsidiary's preferred
      stock issuance..............   --        --        --        --          (3,924)         --            --          (3,924)
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --          33,384        33,384
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT SEPTEMBER 30, 1993..... 13,238       1       2,797       1         121,767       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..... 13,238       1       2,797       1         121,767       343,020       (13,427)      451,362
    Net income....................   --        --        --        --            --          41,719          --          41,719
    Cost of subsidiary's preferred
      stock issuance..............   --        --        --        --          (3,758)         --            --          (3,758)
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --           6,780         6,780
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT SEPTEMBER 30, 1995..... 13,238      $1       2,797      $1        $118,009      $384,739      $ (6,647)     $496,103
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
                                                                            (UNAUDITED)
BALANCE AT SEPTEMBER 30, 1994..... 13,238      $1       2,797      $1        $121,767      $343,020      $(13,427)     $451,362
    Net income....................   --        --        --        --            --          23,659          --          23,659
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --           1,672         1,672
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT MARCH 31, 1995......... 13,238      $1       2,797      $1        $121,767      $366,679      $(11,755)     $476,693
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
                                                                            (UNAUDITED)
BALANCE AT SEPTEMBER 30, 1995..... 13,238      $1       2,797      $1        $118,009      $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......... 13,238      $1       2,797      $1        $118,009      $411,498      $ (3,068)     $526,441
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       F-5
<PAGE>   138
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                     FOR THE YEAR ENDED SEPTEMBER 30,
                                                                 -----------------------------------------
                                                                    1995           1994           1993
                                                                 -----------    -----------    -----------
<S>                                                              <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.....................................................  $    41,719    $   108,970    $   127,370
Adjustments to reconcile net income to net cash (used) provided
  by operating activities:
     Provision for credit losses...............................       24,293          6,997          4,083
     Net gains on sales of assets..............................      (72,918)       (80,524)      (112,349)
     Net depreciation, amortization, and accretion.............      (49,335)        (7,921)        (8,781)
     Amortization of intangibles...............................       21,856         18,247         24,469
     FHLB stock dividend.......................................      (11,446)        (5,558)        (3,095)
     Purchases of trading account assets.......................         (203)           (46)      (222,593)
     Proceeds from sales of trading account assets.............          143            103         30,220
     Repayments of trading account assets......................           --             --         29,590
     Originations of loans held for sale.......................   (2,275,058)    (4,128,979)    (6,116,430)
     Purchases of loans held for sale..........................     (103,926)       (60,900)       (58,879)
     Proceeds from sales of loans held for sale................    2,164,407      4,838,051      6,258,670
     Change in loans held for sale.............................        5,661         53,117        207,477
     Change in interest receivable.............................      (37,778)       (10,284)           791
     Change in other assets....................................       (1,547)        (4,213)        41,616
     Change in other liabilities...............................       89,056        (44,432)       131,034
                                                                 -----------    -----------    -----------
          Net cash (used) provided by operating activities.....     (205,076)       682,628        333,193
                                                                 -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in securities purchased under agreements to
       resell and federal funds sold...........................     (117,342)       189,278       (341,988)
     Purchases of securities held to maturity..................       (2,920)       (32,812)        (2,500)
     Proceeds from maturities of securities held to maturity...        3,472         33,000          5,500
     Purchases of mortgage-backed securities held to
       maturity................................................      (38,515)       (83,854)      (480,915)
     Proceeds from sales of mortgage-backed securities held to
       maturity................................................           --         38,294             --
     Repayments of mortgage-backed securities held to
       maturity................................................      390,364        162,328         40,966
     Purchases of securities available for sale................           --       (135,930)            --
     Proceeds from sales of securities available for sale......           --         61,482             --
     Purchases of mortgage-backed securities available for
       sale....................................................         (230)      (735,757)      (731,677)
     Proceeds from sales of mortgage-backed securities
       available for sale......................................       77,626        187,189        403,129
     Repayments of mortgage-backed securities available for
       sale....................................................       16,346        760,111        289,304
     Change in mortgage-backed securities available for sale...           --        (12,148)            --
     Purchases of loans held to maturity.......................   (2,658,093)    (1,406,275)    (1,212,103)
     Proceeds from sales of loans held to maturity.............       31,543         27,093          2,878
     Change in loans held to maturity..........................     (379,229)      (734,276)      (404,530)
     Change in Covered Assets..................................           --        318,176        152,467
     Purchases of FHLB stock...................................     (100,190)          (793)       (55,030)
     Redemption of FHLB stock..................................       18,500             --             --
     Purchases of premises and equipment.......................       (6,132)       (10,379)       (14,401)
     Proceeds from sales of real estate owned acquired through
       foreclosure.............................................       34,137         31,212         29,117
     Proceeds from sales of servicing rights...................       34,080         67,198         64,260
                                                                 -----------    -----------    -----------
          Net cash used by investing activities................   (2,696,583)    (1,276,863)    (2,255,523)
                                                                 -----------    -----------    -----------
</TABLE>
 
                                                   (Continued on following page)
 
                                       F-6
<PAGE>   139
 
                               BANK UNITED CORP.
 
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   FOR THE YEAR ENDED SEPTEMBER 30,
                                                               ----------------------------------------
                                                                  1995           1994           1993
                                                               ----------     ----------     ----------
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Net change in deposits..................................  $  419,738     $  (73,290)    $  (72,284)
     Proceeds from FHLB advances.............................   3,821,754      2,161,384      8,454,000
     Repayment of FHLB advances..............................  (2,058,200)    (1,726,500)    (6,900,900)
     Net change in securities sold under agreements to
       repurchase and federal funds purchased................     619,533        243,000        310,000
     Change in advances from borrowers for taxes and
       insurance.............................................      38,585          1,191         11,693
     Repayment of long-term debt.............................          --             --       (102,000)
     Repayment of notes payable to related party.............          --             --         (4,090)
     Proceeds from issuance of Senior Notes..................          --             --        115,000
     Proceeds from issuance of the Bank's Preferred Stock....      96,242             --         81,576
                                                               ----------     ----------     ----------
          Net cash provided by financing activities..........   2,937,652        605,785      1,892,995
                                                               ----------     ----------     ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........      35,993         11,550        (29,335)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...............      76,938         65,388         94,723
                                                               ----------     ----------     ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.....................  $  112,931     $   76,938     $   65,388
                                                               ==========     ==========     ==========
Supplemental disclosures of cash flow information and noncash
  investing activities
     Cash paid for interest..................................  $  523,250     $  313,092     $  298,643
     Cash paid for income taxes..............................       9,863          5,102             --
     Cash paid in lieu of taxes..............................         157          4,000          2,800
     Real estate owned acquired through foreclosure..........      49,403         44,753         30,751
     Covered real estate owned acquired through
       foreclosure...........................................          --          3,744         26,320
     Sales of real estate owned financed by the Bank.........          30          2,732         16,752
     Securitization of loans.................................          --      1,182,172        572,582
     Transfer of loans from held to maturity to held for
       sale..................................................          --         88,100        575,306
     Transfer of loans from held for sale to held to
       maturity..............................................          --        486,745             --
     Transfer of mortgage-backed securities from available
       for sale to held to maturity..........................          --      1,318,877          8,907
     Transfer of mortgage-backed securities from held to
       maturity to loans held to maturity....................          --             --         23,125
     Transfer of mortgage-backed securities from held to
       maturity to available for sale........................          --         68,741        202,509
     Transfer of trading account assets to mortgage-backed
       securities available for sale.........................          --             --        214,926
     Transfer of trading account assets to securities
       available for sale....................................          --             --         41,526
     Change in unrealized gains (losses) on securities and
       mortgage-backed securities available for sale.........       6,780        (46,811)        33,384
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       F-7
<PAGE>   140
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 FOR THE SIX MONTHS
                                                                                        ENDED
                                                                                      MARCH 31,
                                                                               -----------------------
                                                                                 1996          1995
                                                                               ---------     ---------
                                                                                     (UNAUDITED)
<S>                                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................................... $   26,759    $   23,659
Adjustments to reconcile net income to net cash provided by operating
  activities:
     Provision for credit losses.............................................      5,850         4,157
     Net gains on sales of assets............................................    (26,783)      (40,976)
     Net depreciation, amortization, and accretion...........................     (7,753)      (11,386)
     Amortization of intangibles.............................................      9,801        10,718
     FHLB stock dividend.....................................................     (7,086)       (4,687)
     Purchases of trading account assets.....................................    (10,722)          (30)
     Proceeds from sales of trading account assets...........................     10,620            --
     Originations of loans held for sale..................................... (1,492,463)     (826,541)
     Purchases of loans held for sale........................................    (52,957)      (63,074)
     Proceeds from sales of loans held for sale..............................  1,810,776       932,582
     Change in loans held for sale...........................................     11,368          (455)
     Change in interest receivable...........................................     19,443       (11,304)
     Change in other assets..................................................     27,365        (8,691)
     Change in other liabilities.............................................     18,350        16,164
                                                                              ----------    ----------
          Net cash provided by operating activities..........................    342,568        20,136
                                                                              ----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in securities purchased under agreements to resell and
      federal funds sold.....................................................   (188,227)     (277,564)
     Purchases of securities held to maturity................................     (1,460)       (1,451)
     Proceeds from maturities of securities held to maturity.................      1,500         1,972
     Purchases of mortgage-backed securities held to maturity................     (3,841)      (38,515)
     Repayments of mortgage-backed securities held to maturity...............    135,527       183,210
     Purchases of securities available for sale..............................     (9,142)           --
     Proceeds from sales of securities available for sale....................     67,375            --
     Proceeds from sales of mortgage-backed securities available for sale....    201,523        77,651
     Repayments of mortgage-backed securities available for sale.............    115,954        10,819
     Purchases of loans held to maturity.....................................   (100,247)     (765,118)
     Change in loans held to maturity........................................    203,214      (399,890)
     Purchases of FHLB stock.................................................         --       (47,875)
     Redemption of FHLB stock................................................         --        18,500
     Purchases of premises and equipment.....................................     (2,989)       (1,228)
     Proceeds from sales of real estate owned acquired through foreclosure...     20,099        14,134
     Proceeds from sales of servicing rights.................................      6,174        28,304
                                                                              ----------    ----------
          Net cash provided (used) by investing activities...................    445,460    (1,197,051)
                                                                              ----------    ----------
</TABLE>
                                       Continued on following page
 
                                                   F-8
<PAGE>   141
 
                               BANK UNITED CORP.
 
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 FOR THE SIX MONTHS
                                                                                        ENDED
                                                                                      MARCH 31,
                                                                               -----------------------
                                                                                 1996          1995
                                                                               ---------     ---------
                                                                                     (UNAUDITED)
<S>                                                                            <C>           <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Net change in deposits..................................................  $(218,952)    $ 251,521
     Proceeds from FHLB advances.............................................    200,000     1,620,000
     Repayment of FHLB advances..............................................   (444,500)     (958,200)
     Net change in securities sold under agreements to repurchase and federal
      funds purchased........................................................   (222,597)      286,939
     Change in advances from borrowers for taxes and insurance...............    (79,219)       (9,371)
                                                                               ---------     ---------
          Net cash (used) provided by financing activities...................   (765,268)    1,190,889
                                                                               ---------     ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................................     22,760        13,974
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............................    112,931        76,938
                                                                               ---------     ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................  $ 135,691     $  90,912
                                                                               =========     =========
Supplemental disclosures of cash flow information and noncash investing
  activities
     Cash paid for interest..................................................  $ 318,849     $ 226,171
     Cash paid for income taxes..............................................      2,044         6,440
     Real estate owned acquired through foreclosure..........................     33,983        20,700
     Transfer of loans from held to maturity to held for sale................    188,748            --
     Transfer of mortgage-backed securities from held to maturity to
      available for sale.....................................................  1,244,945            --
     Change in unrealized gains (losses) on securities and mortgage-backed
      securities available for sale..........................................      3,579         1,672
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements
 
                                       F-9
<PAGE>   142
 
                               BANK UNITED CORP.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
 
     Bank United Corp. (formerly USAT Holdings Inc.) (the "Parent Company") was
incorporated in the State of Delaware on December 19, 1988, and became the
holding company for Bank United (formerly Bank United of Texas), a federal
savings bank (the "Bank") upon the Bank's formation on December 30, 1988. The
Parent Company has no significant assets other than its equity interest in the
Bank. The Parent Company owns all of the outstanding common stock of the Bank,
subject to a potential minority interest represented by certain warrants. The
Parent Company and the Bank, are referred to on a consolidated basis as the
"Company". Substantially all of the Parent Company's revenues are derived from
the operations of the Bank.
 
     The accompanying consolidated financial statements include the accounts of
the Parent Company, the Bank, and the Bank's wholly-owned subsidiaries. To date,
the results of operations of these subsidiaries are not significant to the
Bank's consolidated results of operations. All intercompany accounts and
balances of these subsidiaries have been eliminated in consolidation.
 
     The accompanying consolidated financial statements and information as of
March 31, 1996 and for the six months ended March 31, 1996 and 1995 are
unaudited, and include all adjustments (consisting of only normal recurring
adjustments), that are necessary, in the opinion of management, for a fair
presentation.
 
     The accounting and reporting policies conform to generally accepted
accounting principles and general practices within the thrift and mortgage
banking industries. The following summarizes the more significant of these
policies.
 
SHORT-TERM INTEREST-EARNING ASSETS
 
     Short-term interest-earning assets are comprised of cash, cash equivalents,
securities purchased under agreements to resell ("repurchase agreements"), and
federal funds sold. Short-term instruments with original maturities of three
months or less (measured from their acquisition date) and highly liquid
instruments readily convertible to cash are generally considered to be cash
equivalents. Cash and cash equivalents consist primarily of interest-earning and
non-interest earning deposits in other banks.
 
     The Parent Company's cash is principally invested in repurchase agreements
that mature on a daily basis. Cash required for operating activities is
withdrawn prior to the daily purchase of the securities.
 
     Federal Reserve Board regulations require average cash reserve balances
based on deposit liabilities to be maintained by the Bank with the Federal
Reserve Bank. The required reserve balances were approximately $62.6 million,
$63.7 million, and $45.4 million for the periods including March 31, 1996 and
September 30, 1995, and 1994. The Bank was in compliance with these requirements
for each of these periods.
 
TRADING ACCOUNT ASSETS, SECURITIES, AND MORTGAGE-BACKED SECURITIES
 
     Debt and equity securities, including mortgage-backed securities, are
classified into one of three categories: held to maturity, available for sale,
or trading securities.
 
     Trading account assets are carried at fair value with any realized or
unrealized gains and losses recognized in current operations. Trading account
assets are generally comprised of assets that are actively and frequently bought
and sold with the objective of generating income on short-term changes in price.
 
     Securities and mortgage-backed securities that the Bank has the positive
intent and ability to hold to maturity are classified as held to maturity and
recorded at cost, adjusted for the amortization of premiums and the accretion of
discounts. Under certain circumstances (including the deterioration of the
issuer's
 
                                      F-10
<PAGE>   143
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
creditworthiness or a change in tax law, statutory requirements, or regulatory
requirements), securities and mortgage-back securities held to maturity may be
sold or transferred to another portfolio.
 
     Securities and mortgage-back securities that the Bank intends to hold for
indefinite periods of time are classified as available for sale and are recorded
at fair value. Unrealized holding gains or losses are excluded from earnings and
reported net of tax as a separate component of stockholders' equity until
realized.
 
     In connection with the securitization of certain loans into mortgage-backed
securities, a portion of the original loan basis is allocated to an excess
servicing receivable. This receivable represents the present value of the
estimated future servicing revenue in excess of a "normal" service fee. The
securitized portion of the receivable is classified and accounted for as
mortgage-backed securities in the Consolidated Statements of Financial
Condition. That portion of the receivable not securitized is classified as other
assets in the Consolidated Statements of Financial Condition and is amortized to
operations over the lives of the underlying mortgages. The Bank reviews this
asset periodically for valuation impairment in a manner similar to its mortgage
servicing rights ("MSRs").
 
     The overall return or yield earned on mortgage-backed securities depends on
the amount of interest collected over the life of the security and the
amortization of any premium or discount. Premiums and discounts are recognized
in income using the level-yield method over the assets' remaining lives
(adjusted for anticipated prepayments). The actual yields and maturities of
mortgage-backed securities depend on the timing of the payment of the underlying
mortgage principal and interest. Accordingly, changes in interest rates and
prepayments can have a significant impact on the yields of mortgage-backed
securities.
 
     If the fair value of a security or mortgage-backed security classified as
held to maturity or available for sale was to decline for reasons other than
temporary market conditions, the carrying value of such a security would be
written down to current fair value by a charge to operations.
 
LOANS
 
     Loans that the Bank has the intent and ability to hold to maturity are
classified as held to maturity and are carried at unpaid principal balances,
adjusted for unamortized premiums, unearned discounts, the allowance for credit
losses, and net deferred loan origination fees (costs) ("Book Value"). Loans
held for sale, excluding single family mortgage warehouse loans, are carried at
the lower of allocated Book Value, as applicable, or fair value on an aggregate
basis, as determined by discounting contractual cash flows (adjusted for
anticipated prepayments) and using discount rates based on secondary market
sources. The Book Value is allocated to loans and the MSRs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 122. See " -- Loan
Servicing". Single family mortgage warehouse loans held for sale are carried at
the lower of aggregate allocated Book Value or market value, as determined by
commitments from investors or current investor yield requirements. Any net
unrealized losses on loans held for sale are recognized in a valuation allowance
by a charge to current operations.
 
     Interest income on loans, including impaired loans, is recognized
principally using the level-yield method. Based upon management's periodic
evaluation or at the time a loan is ninety days past due ("nonperforming"), the
related accrued interest is generally reversed by a charge to operations and the
subject loan is simultaneously placed on nonaccrual. Once a loan becomes current
and the borrower demonstrates a continuation of its ability to repay the loan,
the loan is returned to accrual status.
 
     Premiums, discounts and loan fees (net of certain direct loan origination
costs) on warehouse loans held for sale are recognized in income when the
related loans are sold. Premiums, discounts and loan fees (net of certain direct
loan origination costs) associated with other loans for which collection is
probable and estimable are recognized in income using the level-yield method,
over the loans' remaining lives (adjusted for anticipated prepayments) or when
such loans are sold. Net discounts associated with loans for which
 
                                      F-11
<PAGE>   144
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
collection may not be probable and estimable are not accreted to income
("non-accretable discounts"). These non-accretable discounts relate to bulk
purchases of loans, a portion of which were nonperforming and acquired at
discounts from their principal balance. Management periodically evaluates
current loss estimates on loans with non-accretable discounts to determine if
the remaining non-accretable discounts should be accreted to income.
 
ALLOWANCE FOR CREDIT LOSSES
 
     The allowance for credit losses is maintained at levels management deems
adequate to cover estimated losses on loans. The adequacy of the allowance is
based on management's periodic evaluation of the loan portfolio and considers
such factors as historical loss experience, delinquency status, identification
of adverse situations that may affect the ability of obligors to repay, known
and inherent risks in the portfolio, assessment of economic conditions,
regulatory policies, and the estimated value of the underlying collateral, if
any. Provisions for credit losses are charged to current operations when they
are determined to be both probable and estimable. Losses are charged to the
allowance for credit losses when the loss actually occurs or when a
determination is made that a loss is likely to occur. Cash recoveries are
credited to the allowance for credit losses.
 
     The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, an amendment of SFAS No. 114,"
effective October 1, 1995. These statements address the accounting by creditors
for impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogenous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases,
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
 
     The adoption of SFAS No. 114 did not result in additional provisions for
credit losses. SFAS No. 114 requires that impaired loans that are within the
scope of this statement be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Any excess of the Bank's
recorded investment in the loans (unpaid principal balance, adjusted for
unamortized premium or discount and net deferred loan origination fees or costs)
over the measured value of the loans is provided for in the allowance for credit
losses.
 
LOAN SERVICING
 
     In September 1995, the Bank adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65," effective October 1,
1994. (See Note 6). This statement requires mortgage loan servicing rights to be
recognized as separate assets from the related loans, regardless of how those
servicing rights are acquired. Upon origination of a mortgage loan, the Book
Value of the mortgage loan is allocated to the MSR and to the loan (without the
MSR) based on its estimated relative fair value, provided there is a plan to
sell or securitize the related loan. The allocation of the Book Value of the
loan between the MSR and the loan basis results in increased gains on the sales
of the loan, reflecting the value of the servicing rights. Prior to the
implementation of SFAS No. 122, the value of the originated mortgage servicing
rights ("OMSRs") was not recognized until the servicing rights were sold.
 
     The statement further requires that MSRs, both OMSRs and purchased mortgage
servicing rights ("PMSRs"), periodically be evaluated for impairment based on
the fair value of those rights. The fair value of
 
                                      F-12
<PAGE>   145
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
MSRs is determined by discounting the present value of estimated expected future
cash flows using a discount rate commensurate with the risks involved. This
method of valuation incorporates assumptions that market participants would use
in their estimates of future servicing income and expense, including assumptions
about prepayment, default, and interest rates. For purposes of measuring
impairment, the loans underlying the MSRs are stratified on the basis of
interest rate and type (conventional or government). The amount of impairment is
the amount by which the MSRs, net of accumulated amortization, exceed their fair
value. Impairment, if any, is recognized through a valuation allowance and a
charge to current operations.
 
     MSRs, net of valuation allowances, are amortized in proportion to, and over
the period of, the estimated net servicing revenue of the underlying mortgages,
which are collateralized by single family properties. The amortization expense
is reflected in amortization of intangibles in the Consolidated Statement of
Operations.
 
     An allowance for other losses associated with the mortgage servicing
portfolio and certain receivables, advances, and other assets associated with
that portfolio is established for expected costs that are incurred as a result
of the Bank's responsibility as servicer of the Federal Housing Administration
(the "FHA") insured and the Department of Veteran Affairs (the "VA") guaranteed
loans and is determined based on a number of variables. The allowance is netted
against the related assets in the Consolidated Statements of Financial Condition
and the related provision is included in non-interest expense in the
Consolidated Statements of Operations.
 
SALES OF SINGLE FAMILY LOANS
 
     Loans are sold periodically to institutional and private investors. Gains
or losses on loan sales are recognized at the time of sale, determined using the
specific identification method, and reflect the extent that net sales proceeds
differ from the allocated Book Value of the loans. Single family mortgage
warehouse loans are generally packaged into pools and sold as mortgage-backed
securities. Accordingly, gains or losses on loan sales include both gains from
sales of mortgage-backed securities created from single family mortgage
warehouse loans and whole loan sales. Certain of the loans and servicing rights
are sold with general representations and warranties under contracts for sales
of loans and servicing rights. Repurchases of the loans and servicing rights may
be required when a loan fails to meet certain conditions specified in the
contract pursuant to which the loans and servicing rights were sold and that
failure was caused by a matter covered by the general representations and
warranties. An accrual is determined for the estimated future costs of such
obligations and is maintained at a level management believes is adequate to
cover estimated losses. This accrual is included in other liabilities on the
Consolidated Statements of Financial Condition and the related expense is
reflected in non-interest expense in the Consolidated Statements of Operations.
 
FEDERAL HOME LOAN BANK STOCK
 
     As a member of the Federal Home Loan Bank (the "FHLB") System, the Bank is
required to purchase and maintain stock in the FHLB of Dallas in an amount equal
to the greater of 1% of the aggregate unpaid balance of loans and securities
secured by single family and multi-family properties, .3% of total assets, or 5%
of total FHLB advances. FHLB stock is redeemable by the Bank at par value at the
discretion of the FHLB of Dallas and is used to collateralize FHLB advances.
 
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.
 
                                      F-13
<PAGE>   146
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
INTANGIBLE ASSETS
 
     Intangible assets consist of the excess cost over fair value of net assets
acquired, acquisition costs and debt issuance costs. The excess of cost over
fair value of net assets acquired is comprised of identifiable and
unidentifiable intangibles. The identifiable portion relates to core deposit
premiums paid and the value of mortgage origination networks acquired. The core
deposit premiums are amortized using an accelerated method over the estimated
lives of the deposit relationships acquired. The premiums paid for mortgage
origination networks are amortized using the straight-line method over five
years. The unidentifiable intangible, or goodwill, resulting from thrift related
acquisitions is amortized at a constant rate applied to the carrying amount of
the long-term interest-earning assets acquired that are expected to be
outstanding at the beginning of each subsequent period based on their terms. The
original estimated lives of these long-term interest-earning assets ranged from
one to 26 years. The amortization periods of the identifiable and unidentifiable
intangibles are evaluated on an ongoing basis to determine whether events and
circumstances have developed that warrant revision of the estimated lives of the
related assets. Acquisition costs are being amortized over 5 years using the
straight-line method. Debt issuance costs are being amortized over the life of
the notes using the straight-line method.
 
REAL ESTATE OWNED
 
     At the time of foreclosure, REO is recorded at the lower of the outstanding
loan amount (including accrued interest, if any) or fair value (less estimated
costs to sell). The resulting loss, if any, is charged to the allowance for
credit losses. Subsequent to foreclosure, REO is carried at the lower of its new
cost basis or fair value, with any further declines in fair value charged to
current operations. Revenues, expenses, gains or losses on sales and increases
or decreases in the allowance for losses are charged to operations as incurred.
Net gains on sales of certain REO properties, primarily single family
residences, are deferred (a) when such properties are acquired through the
foreclosure of loans that are part of discounted bulk purchases of loans and,
(b) uncertainty exists as to the total gains or losses that would be realized
from foreclosures associated with the bulk loan purchase. Upon obtaining
sufficient loss history or seasoning of the purchases, the deferred net gains
are recognized.
 
OTHER FINANCIAL INSTRUMENTS
 
     The Bank enters into traditional financial instruments such as interest
rate exchange agreements ("swaps"), interest rate caps and floors, financial
options and futures contracts, and forward delivery contracts in the normal
course of business in an effort to reduce its exposure to changes in interest
rates. Fees incurred to enter into these financial contracts are amortized over
the lives of the contracts as a component of the income or expense on the asset
or liability hedged. Gains or losses on early termination of such contracts, if
any, are amortized over the remaining terms of the hedged items. The Bank does
not utilize instruments such as leveraged derivatives or structured notes.
 
     Interest Rate Exchange Agreements, Caps, Floors, and Options. Amounts
receivable and payable are accrued and offset against interest income or expense
on the hedged items.
 
     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
 
                                      F-14
<PAGE>   147
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
commitment will be exercised is remote or the fees are offset against the
related net gains as the commitment is filled.
 
     Other Off-Balance-Sheet Instruments. The Bank has entered into other
off-balance-sheet financial instruments consisting of commitments to extend
credit. Such financial instruments are recorded in the financial statements when
they are funded.
 
FEDERAL INCOME TAXES
 
     The Parent Company and the Bank are members of a consolidated group of
corporations as defined by the Internal Revenue Code of 1986, as amended (the
"Code") and accordingly participate in the filing of a consolidated tax return.
For financial reporting purposes, however, the Parent Company and the Bank each
compute their tax on a separate company basis and the results are combined for
purposes of preparing the consolidated financial statements. Deferred tax assets
and liabilities are recognized for the estimated tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. A deferred tax asset has
been recognized for certain net operating losses and credit carryforwards that
will be utilized against future taxable income.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
     In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement establishes accounting
standards for recognizing and measuring impairment of long-lived assets (and
related goodwill) to be held and used and for such assets held for disposal. The
statement is effective for financial statements with fiscal years beginning
after December 15, 1995, with earlier application encouraged. Implementation of
this pronouncement should have no material adverse effect on the Consolidated
Financial Statements.
 
EARNINGS PER COMMON SHARE
 
     Earnings per common share is calculated by dividing net income (adjusted
for earnings on the common stock equivalents attributable to the Bank's warrants
outstanding) by the weighted average number of Parent Company common shares
outstanding. Common stock equivalents on the Bank's warrants are computed using
the treasury stock method. Earnings per common share results have been
retroactively restated for all periods presented to reflect an 1,800 to one
stock conversion. See Notes 16 and 21.
 
RELATED PARTY TRANSACTIONS
 
     All transactions with the Parent Company's and the Bank's related parties
have been reflected herein. Management believes that the amounts, terms, and
conditions of such transactions are reasonably indicative of the marketplace at
the time the transaction occurred. During the six months ended March 31, 1996
and for fiscal 1995, 1994, and 1993, there were no material transactions with
related parties. At March 31, 1996 and September 30, 1995 and 1994, the Parent
Company and the Bank had no outstanding receivables from or payables to related
parties other than those related to participation in the filing of the
consolidated tax return and there were no loans outstanding to directors,
executive officers, or principal shareholders of the Bank's or the Parent
Company's voting securities.
 
                                      F-15
<PAGE>   148
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
RECLASSIFICATIONS
 
     Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes as of March 31, 1995 and September 30, 1995, 1994, 1993,
1992, and 1991 have been reclassified to conform to the current presentation.
Such reclassifications had no effect on previously presented net income or
retained earnings.
 
2. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND FEDERAL FUNDS SOLD
 
<TABLE>
<CAPTION>
                                                  FOR THE
                                                    SIX
                                                  MONTHS
                                                   ENDED       FOR THE YEAR ENDED SEPTEMBER 30,
                                                 MARCH 31,   ------------------------------------
                                                   1996         1995         1994         1993
                                                 ---------   ----------   ----------   ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                              <C>         <C>          <C>          <C>
Repurchase agreements
  Balance outstanding at period-end............  $ 631,279   $  428,052   $  248,710   $  547,988
  Fair value of collateral at period-end.......    668,538      449,152      255,210      557,013
  Maximum outstanding at any month-end.........    666,836      602,274      768,200      656,000
  Daily average balance........................    518,839      420,355      422,745      374,407
  Average interest rate........................      5.89%        6.28%        4.04%        3.45%
Federal funds sold
  Balance outstanding at period-end............  $  28,000   $   43,000   $  110,000   $       --
  Maximum outstanding at any month-end.........     69,000       75,000      110,000       65,000
  Daily average balance........................     47,060       37,493       16,948        3,559
  Average interest rate........................      5.39%        5.68%        4.01%        3.00%
</TABLE>
 
                                      F-16
<PAGE>   149
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and mortgage-backed securities. The loans and mortgage-backed
securities underlying the repurchase agreements are held by the counterparty in
safekeeping for the account of the Bank or by a third party custodian for the
benefit of the Bank. All of the investments in repurchase agreements and federal
funds sold at March 31, 1996 matured on or before April 24, 1996 and those
outstanding at September 30, 1995 matured on or before October 5, 1995. The
repurchase agreements provide for the same loans and mortgage-backed securities
to be resold at maturity. At March 31, 1996 and September 30, 1995, the
following concentrations of repurchase agreements and federal funds sold
outstanding with individual counterparties exceeded ten percent of stockholders'
equity:
 
<TABLE>
<CAPTION>
                                                           AT MARCH 31,      AT SEPTEMBER 30,
                                                               1996                1995
                                                           -------------     -----------------
                                                                     CARRYING VALUE
                                                           -----------------------------------
                                                                     (IN THOUSANDS)
<S>                                                        <C>               <C>
Donaldson, Lufkin, and Jenrette Mortgage Capital.........    $ 204,936           $ 185,000
Salomon Brothers Holding Company Inc.....................      120,000              88,000
Paine Webber Inc.........................................      120,000              75,000
Merrill Lynch Mortgage Capital Inc.......................       80,000                  --
Bear Stearns and Company, Inc............................           --              58,500
                                                           -------------     -----------------
                                                             $ 524,936           $ 406,500
                                                           =============     ================
</TABLE>
 
3. SECURITIES

<TABLE>
<CAPTION>
                                                            AT MARCH 31, 1996
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
<S>                                    <C>         <C>           <C>           <C>        <C>
Held to maturity
     Federal agency..................  $  1,903      $ 1,107       $    --     $  3,010   $  1,903
                                                   ==========    ==========               =========
Available for sale
     Federal agency..................  $  4,278      $    --       $    --     $  4,278
     U.S. Treasury notes.............    52,466           --           296       52,170
                                       ---------   ----------    ----------    --------
     Available for sale..............    56,744      $    --       $   296       56,448   $ 56,448
                                       ---------   ==========    ==========    --------   =========
          Total securities...........  $ 58,647                                $ 59,458
                                       =========                               ========
</TABLE>

<TABLE>
<CAPTION>
                                                          AT SEPTEMBER 30, 1995
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
<S>                                    <C>         <C>           <C>           <C>        <C>
Held to maturity
     Federal agency..................  $  1,902      $   799       $     1     $  2,700   $  1,902
                                                   ==========    ==========               =========
Available for sale
     U.S. Treasury notes.............   114,924      $    --       $   813      114,111   $114,111
                                       ---------   ==========    ==========    --------   =========
          Total securities...........  $116,826                                $116,811
                                       =========                               ========
</TABLE>
 
                                      F-17
<PAGE>   150
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
                                                          AT SEPTEMBER 30, 1994
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
<S>                                    <C>         <C>           <C>           <C>        <C>
Held to maturity
     Federal agency..................  $  1,894      $   541       $    76     $  2,359
     U.S. Treasury notes.............       464           --            --          464
                                       --------     --------      --------     --------
          Held to maturity...........     2,358      $   541       $    76        2,823   $  2,358
                                       --------     ========      ========     --------   ========
Available for sale
     U.S. Treasury notes.............   114,833      $    --       $ 3,076      111,757   $111,757
                                       --------     ========      ========     --------   ========
          Total securities...........  $117,191                                $114,580
                                       ========                                ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                          AT SEPTEMBER 30, 1993
                                       ------------------------------------------------------------
<S>                                    <C>         <C>           <C>           <C>        <C>
Held to maturity
     Federal agency..................  $  1,904      $   492       $    --     $  2,396   $  1,904
                                                   ==========    ==========               =========
Available for sale
     Mutual funds....................    41,526      $    --       $    --       41,526   $ 41,526
                                       ---------   ==========    ==========    --------   =========
          Total securities...........  $ 43,430                                $ 43,922
                                       =========                               ========
</TABLE>
 
     During the six months ended March 31, 1996, there were $67.4 million of
available for sale securities sold with proceeds of $67.4 million and a gross
gain of $1,000. During fiscal 1994, there were $62.7 million of available for
sale securities sold with proceeds of $61.5 million and a gross loss of $1.2
million. There were no sales of securities during fiscal 1995 or 1993. At
September 30, 1995, securities with carrying values totalling $13.5 million and
fair values totalling $13.3 million, were pledged towards margin requirements
for futures transactions and interest rate swap agreements.
 
     Securities outstanding at March 31, 1996 and September 30, 1995 mature as
follows:
<TABLE>
<CAPTION>
                                                             AT MARCH 31, 1996
                                            ----------------------------------------------------
                                                HELD TO MATURITY           AVAILABLE FOR SALE
                                            ------------------------     -----------------------
                                            AMORTIZED        FAIR        AMORTIZED        FAIR
                                               COST          VALUE          COST         VALUE
                                            ----------     ---------     ----------     --------
                                                               (IN THOUSANDS)
<S>                                         <C>            <C>           <C>            <C>
Due in one year or less...................    $1,903        $ 3,010       $ 52,466      $ 52,170
Due from one to five years................        --             --          4,278         4,278
                                              ------        -------        -------      --------
                                              $1,903        $ 3,010       $ 56,744      $ 56,448
                                              ======        =======        =======      ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                           AT SEPTEMBER 30, 1995
                                            ----------------------------------------------------
<S>                                         <C>            <C>           <C>            <C>
Due in one year or less...................    $1,902        $ 2,700       $ 64,972      $ 64,838
Due from one to five years................        --             --         49,952        49,273
                                            --------       --------       --------      --------
                                              $1,902        $ 2,700       $114,924      $114,111
                                            ========       ========       ========      ========
</TABLE>
 
                                      F-18
<PAGE>   151
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4. MORTGAGE-BACKED SECURITIES

<TABLE>
<CAPTION>
                                                          AT MARCH 31, 1996
                                   ---------------------------------------------------------------
                                                   GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
                                                     (IN THOUSANDS)
<S>                                <C>            <C>           <C>        <C>           <C>
Held to maturity
  Agency CMOs -- fixed-rate....... $    3,061     $    61       $     --   $    3,122
  Non-agency
     Fixed-rate...................      7,529       1,837             93        9,273
     Adjustable-rate..............    559,365         635         12,526      547,474
     CMOs -- fixed-rate...........    104,286           7          6,893       97,400
  Other...........................        303          --             --          303
                                   ----------     -------       --------   ----------
                                      674,544     $ 2,540       $ 19,512      657,572
                                                  =======       ========
  Allowance for losses............        (56)                                     --
                                   ----------                              ----------
          Held to maturity........    674,488                                 657,572    $  674,488
                                   ----------                              ----------    ==========
Available for sale
  Agency
     Adjustable-rate..............    386,876     $ 3,335       $      5      390,206
     CMOs -- fixed-rate...........      4,032           6             --        4,038
     CMOs -- adjustable-rate......    245,565       1,219            121      246,663
  Non-agency
     Fixed-rate...................     72,760       2,390              1       75,149
     Adjustable-rate..............    440,638         687          2,723      438,602
     CMOs -- fixed-rate...........     79,944          --          1,460       78,484
     CMOs -- adjustable-rate......     37,851          12          1,017       36,846
  Other...........................      8,360       1,234             --        9,594
                                   ----------     -------       --------   ----------
          Available for sale......  1,276,026     $ 8,883       $  5,327    1,279,582    $1,279,582
                                   ----------     =======       ========   ----------    ==========
          Total mortgage-backed
            securities............ $1,950,514                              $1,937,154
                                   ==========                              ==========
</TABLE>
 
                                      F-19
<PAGE>   152
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
                                                        AT SEPTEMBER 30, 1995
                                   ---------------------------------------------------------------
                                                   GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
<S>                                <C>          <C>           <C>           <C>          <C>
                                                     (IN THOUSANDS)
Held to maturity
  Agency
     Fixed-rate................... $    4,259     $   167       $    77     $   4,349
     Adjustable-rate..............    489,412       5,212         2,711       491,913
     CMOs -- fixed-rate...........     57,935          96         1,623        56,408
  Non-agency
     Fixed-rate...................    126,562       4,489           318       130,733
     Adjustable-rate..............  1,130,102       4,343        21,256     1,113,189
     CMOs -- fixed-rate...........    239,487         173         8,643       231,017
  Other...........................      3,603          --            --         3,603
                                     --------    --------      --------      --------
                                    2,051,360     $14,480       $34,628     2,031,212
                                                 ========      ========
  Allowance for losses............        (56)                                     --
                                     --------                                --------
     Held to maturity.............  2,051,304                               2,031,212    $2,051,304
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     CMOs -- adjustable-rate......    250,208     $ 1,132       $   217       251,123
  Non-agency
     Fixed-rate...................     22,060         627            --        22,687
     CMOs -- fixed-rate...........     36,895          --           640        36,255
     CMOs -- adjustable-rate......     37,580           7           693        36,894
                                     --------    --------      --------      --------
          Available for sale......    346,743     $ 1,766       $ 1,550       346,959    $ 346,959
                                                 ========      ========                   ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $2,398,047                               $2,378,171
                                     ========                                ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                        AT SEPTEMBER 30, 1994
                                   ---------------------------------------------------------------
<S>                                <C>          <C>           <C>           <C>          <C>
Held to maturity
  Agency
     Fixed-rate................... $    5,313     $    20       $    15     $   5,318
     Adjustable-rate..............    563,629         830        15,290       549,169
     CMOs -- fixed-rate...........     81,395          --         3,967        77,428
  Non-agency
     Fixed-rate...................    184,929         603         2,057       183,475
     Adjustable-rate..............  1,288,271         226        23,048     1,265,449
     CMOs -- fixed-rate...........    267,658          --        11,601       256,057
  Other...........................      3,896          --            --         3,896
                                     --------    --------      --------      --------
                                    2,395,091     $ 1,679       $55,978     2,340,792
                                                 ========      ========
  Allowance for losses............       (113)                                     --
                                     --------                                --------
          Held to maturity........  2,394,978                               2,340,792    $2,394,978
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     Fixed-rate...................     85,492     $ 1,688       $ 1,552        85,628
     CMOs -- adjustable-rate......    254,933          --         2,727       252,206
  Non-agency
     Fixed-rate...................     22,141          --         1,198        20,943
     CMOs -- fixed-rate...........     41,825          --         2,634        39,191
     CMOs -- adjustable-rate......     37,733          --         1,776        35,957
                                     --------    --------      --------      --------
          Available for sale......    442,124     $ 1,688       $ 9,887       433,925    $ 433,925
                                                 ========      ========                   ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $2,837,102                               $2,774,717
                                     ========                                ========
</TABLE>
 
                                      F-20
<PAGE>   153
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
                                                          AT SEPTEMBER 30, 1993
                                      --------------------------------------------------------------
                                                      GROSS         GROSS
                                      AMORTIZED    UNREALIZED    UNREALIZED      FAIR      CARRYING
                                         COST         GAINS        LOSSES        VALUE       VALUE
                                      ----------   -----------   -----------   ---------   ---------
<S>                                   <C>          <C>           <C>           <C>         <C>
                                                        (IN THOUSANDS)
Held to maturity
  Agency CMOs -- fixed-rate.......... $    8,809     $   166        $  --      $   8,975
  Non-agency
     Fixed-rate......................     46,573       3,461           --         50,034
     Adjustable-rate.................    205,482       1,271          371        206,382
     CMOs -- fixed-rate..............     95,169       1,396          115         96,450
  Other..............................      3,436          --           --          3,436
                                        --------    --------     --------       --------
                                         359,469     $ 6,294        $ 486        365,277
                                                    ========     ========
  Allowance for losses...............       (573)                                     --
                                        --------                                --------
          Held to maturity...........    358,896                                 365,277   $ 358,896
                                                                                            ========
                                        --------                                --------
Available for sale
  Agency fixed-rate..................    149,519     $ 6,514        $ 189        155,844
     CMOs -- fixed-rate..............     50,827          --            7         50,820
     CMOs -- adjustable-rate.........    505,046       1,202           25        506,223
  Non-agency
     Fixed-rate......................    365,433      41,122           --        406,555
     Adjustable-rate.................    619,874       4,833           41        624,666
     CMOs -- fixed-rate..............     21,982          --           20         21,962
     CMOs -- adjustable-rate.........     35,563          28            3         35,588
  Other..............................     15,371          --           --         15,371
                                        --------    --------     --------       --------
          Available for sale.........  1,763,615     $53,699        $ 285      1,817,029   $1,817,029
                                                    ========     ========                   ========
                                        --------                                --------
          Total mortgage-backed
            securities............... $2,122,511                               $2,182,306
                                        ========                                ========
</TABLE>
 
     In November 1995, the FASB issued, "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities." This
implementation guide provided the Bank the opportunity to reassess the
appropriateness of the classifications of its securities. It further stated that
reclassifications of securities from the held to maturity category resulting
from this one-time reassessment would not call into question the intent to hold
other securities to maturity in the future. During the first quarter of fiscal
1996, the Bank reassessed its securities portfolios and reclassified $1.2
billion in mortgage-backed securities from the held to maturity portfolio to the
available for sale portfolio. An unrealized gain of $4.2 million before tax, or
$2.6 million after tax, was recorded in stockholders' equity as a result of this
transfer.
 
     During fiscal 1994, $68.7 million of fixed-rate collateralized mortgage
obligations ("CMOs") were transferred at fair value from the held to maturity
portfolio to the available for sale portfolio. The related unrealized gain
($66,000 at the time of transfer, before taxes) is included as a component of
stockholders' equity. This transfer was made in response to the classification
of securities as high-risk under the FASB's Emerging Issues Task Force
guidelines in effect at that time. Subsequent to the transfer, $45.5 million of
these securities were sold and the remaining $23.2 million was no longer
classified as high-risk.
 
                                      F-21
<PAGE>   154
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1994, $38.3 million of non-agency mortgage-backed securities
that had been included in the held to maturity portfolio were sold. This sale
was made due to a deterioration of the issuer's creditworthiness and resulted in
a gross gain of $42,000.
 
     Mortgage-backed securities of approximately $1.3 billion were transferred
from the available for sale portfolio to the held to maturity portfolio at fair
value during fiscal 1994. The gross unrealized loss of $10.8 million on these
securities at the time of transfer is included as a component of stockholders'
equity and is being amortized over the remaining lives of the securities.
 
     At March 31, 1996 and September 30, 1995, mortgage-backed securities with
carrying values totalling $1,213.9 million and $1,691.1 million and fair values
totalling $1,199.4 million and $1,678.1 million were used to collateralize FHLB
advances and securities sold under agreements to repurchase ("reverse repurchase
agreements").
 
                      CHANGES IN UNREALIZED GAINS (LOSSES)
 
<TABLE>
<CAPTION>
                                          MORTGAGE-BACKED
                                            SECURITIES
                                       ---------------------      SECURITIES
                                       AVAILABLE    HELD TO       AVAILABLE       TAX
                                       FOR SALE     MATURITY       FOR SALE      EFFECT      TOTAL
                                       ---------    --------      ----------    --------    --------
<S>                                    <C>          <C>           <C>           <C>         <C>
                                                              (IN THOUSANDS)
Balance at September 30, 1993........  $ 53,414     $     --       $     --     $(20,030)   $ 33,384
  Market value changes and the effect
     of prepayments..................   (60,960 )         --         (4,264)      24,457     (40,767)
  (Gains) losses realized due to
     sales...........................   (11,488 )         --          1,188        3,862      (6,438)
  Transfer to held to maturity.......    10,835      (10,835)            --           --          --
  Amortization of held to maturity...        --          633             --         (239)        394
                                       ---------    --------      ----------    --------    --------
Balance at September 30, 1994........    (8,199 )    (10,202)        (3,076)       8,050     (13,427)
                                       ---------    --------      ----------    --------    --------
  Market value changes and the effect
     of prepayments..................     8,431           --          2,263       (4,005)      6,689
  (Gains) losses realized due to
     sales...........................       (16 )         --             --            6         (10)
  Amortization of held to maturity...        --          162             --          (61)        101
                                       ---------    --------      ----------    --------    --------
Balance at September 30, 1995........       216      (10,040)          (813)       3,990      (6,647)
                                       ---------    --------      ----------    --------    --------
  Market value changes and the effect
     of prepayments..................     3,070           --            526       (1,348)      2,248
  (Gains) losses realized due to
     sales...........................    (2,770 )         --             (9)       1,042      (1,737)
  Transfer from held to maturity.....     3,040        1,114             --       (1,558)      2,596
  Amortization of held to maturity...        --          755             --         (283)        472
                                       ---------    --------      ----------    --------    --------
Balance at March 31, 1996............  $  3,556     $ (8,171)      $   (296)    $  1,843    $ (3,068)
                                       ========     ========      =========     ========    ========
</TABLE>
 
                                      F-22
<PAGE>   155
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1994 and 1993, the Banking Segment securitized single family
loans from its own portfolio as follows:
 
                                SECURITIZATIONS
 
<TABLE>
<CAPTION>
                                                                         FOR THE YEAR ENDED
                                                                            SEPTEMBER 30,
                                                                       -----------------------
                                                                          1994          1993
                                                                       ----------     --------
<S>                                                                    <C>            <C>
                                                                           (IN THOUSANDS)
Principal securitized, gross.........................................  $1,178,999     $674,132
  Principal securitized, net.........................................   1,182,172      572,582
Principal sold.......................................................     161,864      269,511
Gains recognized.....................................................      10,441       41,001
</TABLE>
 
     The activity in the excess servicing receivable generated as a result of
these securitizations was as follows:
 
                          EXCESS SERVICING RECEIVABLE
 
<TABLE>
<CAPTION>
                                          FOR THE SIX MONTHS
                                            ENDED MARCH 31,      FOR THE YEAR ENDED SEPTEMBER 30,
                                         ---------------------   ---------------------------------
                                           1996        1995        1995        1994        1993
                                         ---------   ---------   ---------   ---------   ---------
<S>                                      <C>         <C>         <C>         <C>         <C>
                                                              (IN THOUSANDS)
Balance at beginning of period.........  $  11,116   $  12,182   $  12,182   $  15,023   $   3,623
  Additions............................         --          --          --       2,044      13,534
  Amortization.........................       (512)       (506)     (1,066)     (4,885)     (2,134)
                                         ---------   ---------   ---------   ---------   ---------
Balance at end of period...............  $  10,604   $  11,676   $  11,116   $  12,182   $  15,023
                                         =========   =========   =========   =========   =========
</TABLE>
 
     Approximately $3.7 million, $4.0 million, $4.3 million, and $5.5 million of
the excess servicing receivable balance at March 31,1996 and at September 30,
1995, 1994, and 1993 represented the securitized portion of the receivable,
which was included in the mortgage-backed securities portfolio. The remaining
balance was included in other assets.
 
     The following table provides information related to the sales of
mortgage-backed securities available for sale, including those assets
securitized by the Bank.
 
<TABLE>
<CAPTION>
                                         FOR THE SIX MONTHS
                                          ENDED MARCH 31,        FOR THE YEAR ENDED SEPTEMBER 30,
                                        --------------------     ---------------------------------
                                          1996        1995        1995         1994         1993
                                        --------     -------     -------     --------     --------
<S>                                     <C>          <C>         <C>         <C>          <C>
                                                              (IN THOUSANDS)
Proceeds from sales...................  $201,523     $77,651     $77,626     $186,190     $403,129
Gross gains on sales..................     3,472         206         217       16,300       43,712
Gross losses on sales.................       702         201         201        4,812           --
</TABLE>
 
                                      F-23
<PAGE>   156
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  LOANS
 
     The loan portfolio, less the non-accretable unearned discounts and the
undisbursed portion of loans in process, was as follows:
 
<TABLE>
<CAPTION>
                                                                                AT SEPTEMBER 30,
                                         AT MARCH 31,     -------------------------------------------------------------
                                             1996           1995         1994         1993         1992         1991
                                         -------------    ---------    ---------    ---------    ---------    ---------
<S>                                      <C>              <C>          <C>          <C>          <C>          <C>
                                                                         (IN THOUSANDS)
Held to maturity
  Single family.........................   $6,651,723     $7,061,088   $4,203,614   $2,847,602   $2,302,073   $3,053,914
  Single family residential
    construction........................     179,505        115,436       57,786       35,904       31,920       24,215
  Consumer..............................     130,356        123,096      108,179       57,902       21,732       19,826
  Multi-family..........................     341,094        392,017      276,799      112,055       50,741       23,870
  Commercial real estate................      45,098         31,006       61,919       49,510       58,521       58,931
  Business credit.......................      15,008          6,495           --           --           --           --
  Mortgage banker finance line of
    credit..............................     141,781        109,339      147,754      385,548           --           --
                                          ----------      ----------   ----------   ----------   ----------   ----------
                                           7,504,565      7,838,477    4,856,051    3,488,521    2,464,987    3,180,756
  Allowance for credit losses...........     (36,445)       (36,763)     (23,378)     (27,970)     (25,529)      (9,919)
  Accretable unearned discounts.........     (17,168)       (34,784)     (50,384)     (25,486)     (53,174)    (193,900)
  Net deferred loan origination fees....      (3,452)        (3,254)      (1,961)        (625)        (402)        (485)
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Held to maturity..................   7,447,500      7,763,676    4,780,328    3,434,440    2,385,882    2,976,452
                                          ----------      ----------   ----------   ----------   ----------   ----------
Held for sale
  Single family mortgage warehouse......     379,720        411,287      252,153      899,602    1,016,854      457,137
  Single family.........................          --             --           --      528,579      783,002           --
  Multi-family..........................      52,510         87,781       12,535           --           --           --
  Business credit.......................       4,007            825           --           --           --           --
                                          ----------      ----------   ----------   ----------   ----------   ----------
                                             436,237        499,893      264,688    1,428,181    1,799,856      457,137
  Allowance for credit losses...........         (44)           (38)         (76)      (1,894)      (2,685)        (229)
  Unrealized losses.....................        (256)        (1,142)          --           --           --           --
  Accretable unearned discounts.........      (7,284)        (3,676)        (266)      (2,437)     (85,115)      (3,160)
  Net deferred loan origination costs...       1,927          1,527        1,500        4,089        3,778          954
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Held for sale.....................     430,580        496,564      265,846    1,427,939    1,715,834      454,702
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Total loans.......................   $7,878,080     $8,260,240   $5,046,174   $4,862,379   $4,101,716   $3,431,154
                                          ==========      ==========   ==========   ==========   ==========   ==========
Supplemental information
  Non-accretable unearned discounts.....   $ (11,210)     $ (15,423)   $ (31,917)   $ (42,975)   $ (41,060)   $ (41,306)
  Undisbursed portion of loans in
    process.............................    (195,478)      (179,737)    (136,797)     (39,162)     (41,534)     (25,975)
</TABLE>
 
                                      F-24
<PAGE>   157
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following tables set forth the geographic distribution of loans by
states with concentrations of 4% of loans or greater at March 31, 1996 and
September 30, 1995. The geographic data is based on gross loan principal and
includes REO.
 
<TABLE>
<CAPTION>
                                                            AT MARCH 31, 1996
                                  ---------------------------------------------------------------------
                                                           COMMERCIAL
                                    SINGLE      % OF      REAL ESTATE      % OF                   % OF
                                    FAMILY      TOTAL     AND BUSINESS     TOTAL                  TOTAL
             STATE                AND OTHER     ASSETS       CREDIT        ASSETS     TOTAL       ASSETS
- -------------------------------   ----------    -----     ------------     ----     ----------    -----
<S>                               <C>           <C>       <C>              <C>      <C>           <C>
                                                         (DOLLARS IN THOUSANDS)
California.....................   $3,793,197    33.67%      $     --         --%    $3,793,197    33.67%
Texas..........................    1,299,730    11.54         44,660       0.39      1,344,390    11.93
Florida........................      448,958     3.98          1,986       0.02        450,944     4.00
Other..........................    1,851,933    16.44         18,313       0.16      1,870,246    16.60
                                  ----------    -----        -------       ----     ----------    -----
                                   7,393,818    65.63%        64,959       0.57%     7,458,777    66.20%
                                                =====                      ====                   =====
                                  ----------                 -------                ----------
Mortgage banker finance line of
  credit.......................      141,781                      --                   141,781
Single family mortgage
  warehouse....................      379,720                      --                   379,720
                                  ----------                 -------                ----------
     Total.....................   $7,915,319                $ 64,959                $7,980,278
                                  ==========                 =======                ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                           AT SEPTEMBER 30, 1995
                                 -------------------------------------------------------------------------
                                                           COMMERCIAL
                                   SINGLE       % OF      REAL ESTATE       % OF                     % OF
                                   FAMILY      TOTAL      AND BUSINESS     TOTAL                    TOTAL
            STATE                AND OTHER     ASSETS        CREDIT        ASSETS       TOTAL       ASSETS
- ------------------------------   ----------    ------     ------------     ------     ----------    ------
                                                          (DOLLARS IN THOUSANDS)
<S>                              <C>           <C>        <C>              <C>        <C>           <C>
California....................   $3,958,401     33.03%      $     --          --%     $3,958,401     33.03%
Texas.........................    1,340,063     11.18         15,065        0.13       1,355,128     11.31
Florida.......................      477,479      3.98          1,999        0.02         479,478      4.00
Other.........................    2,038,953     17.02         24,971        0.20       2,063,924     17.22
                                 ----------     -----        -------        ----      ----------     -----
                                  7,814,896     65.21%        42,035        0.35%      7,856,931     65.56%
                                                =====                       ====                     =====
                                 ----------                  -------                  ----------
Mortgage banker finance line
  of credit...................      109,339                       --                     109,339
Single family mortgage
  warehouse...................      411,287                       --                     411,287
                                 ----------                  -------                  ----------
     Total....................   $8,335,522                 $ 42,035                  $8,377,557
                                 ==========                  =======                  ==========
</TABLE>
 
                                      F-25
<PAGE>   158
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Contractual maturities of the loans held to maturity portfolio as of March
31, 1996 and September 30, 1995, were as follows:
 
<TABLE>
<CAPTION>
                                           PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED MARCH 31,
                                  --------------------------------------------------------------------------------
                                                                    2000-       2002-        2007-       2012 AND
                                    1997       1998       1999       2001        2006         2011      THEREAFTER     TOTAL
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
<S>                               <C>        <C>        <C>        <C>        <C>          <C>          <C>          <C>
                                                                         (IN THOUSANDS)
Type of loan
Single family...................  $105,763   $113,983   $122,841   $275,066   $  897,988   $1,265,826   $3,870,256   $6,651,723
Single family residential
  construction..................   179,505      --         --         --          --           --           --          179,505
Consumer........................    74,627      9,303     10,244     23,698       12,484       --           --          130,356
Multi-family....................    93,097    101,389     55,140      4,943       85,329        1,196       --          341,094
Commercial real estate..........     2,780      3,018      3,276      6,593       17,652        6,453        5,326       45,098
Business credit.................     8,619      6,389      --         --          --           --           --           15,008
Mortgage banker finance line of
  credit........................   136,606      --         --         2,685        2,490       --           --          141,781
                                  --------   --------   --------   --------     --------   ----------   ----------   ----------
    Total.......................  $600,997   $234,082   $191,501   $312,985   $1,015,943   $1,273,475   $3,875,582   $7,504,565
                                  ========   ========   ========   ========     ========   ==========   ==========   ==========
Type of interest
Fixed-rate loans................  $ 39,979   $ 43,349   $ 46,558   $104,417   $  333,122   $  298,805   $   --       $  866,230
Adjustable-rate loans...........   561,018    190,733    144,943    208,568      682,821      974,670    3,875,582    6,638,335
                                  --------   --------   --------   --------     --------   ----------   ----------   ----------
    Total.......................  $600,997   $234,082   $191,501   $312,985   $1,015,943   $1,273,475   $3,875,582   $7,504,565
                                  ========   ========   ========   ========     ========   ==========   ==========   ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                         PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED SEPTEMBER 30,
                                  --------------------------------------------------------------------------------
                                                                    1999-       2001-        2006-       2011 AND
                                    1996       1997       1998       2000        2005         2010      THEREAFTER     TOTAL
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
<S>                               <C>        <C>        <C>        <C>        <C>          <C>          <C>          <C>
                                                                         (IN THOUSANDS)
Type of loan
Single family...................  $106,424   $114,883   $124,015   $278,393   $  914,393   $1,221,214   $4,301,766   $7,061,088
Single family residential
  construction..................   115,436      --         --         --          --           --           --          115,436
Consumer........................    80,277      7,624      8,398     19,437        7,360       --           --          123,096
Multi-family....................    82,207     89,932     57,012      3,740      158,086        1,040       --          392,017
Commercial real estate..........       607        655        706      1,584       14,385        6,507        6,562       31,006
Business credit.................     2,154      2,201      2,140      --          --           --           --            6,495
Mortgage banker finance line of
  credit........................   102,274      --         --         4,587        2,478       --           --          109,339
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
    Total.......................  $489,379   $215,295   $192,271   $307,741   $1,096,702   $1,228,761   $4,308,328   $7,838,477
                                  ========   ========   ========   ========   ==========   ==========   ==========   ==========
Type of interest
Fixed-rate loans................  $ 34,770   $ 37,643   $ 40,857   $ 92,814   $  397,784   $  229,547   $   --       $  833,415
Adjustable-rate loans...........   454,609    177,652    151,414    214,927      698,918      999,214    4,308,328    7,005,062
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
    Total.......................  $489,379   $215,295   $192,271   $307,741   $1,096,702   $1,228,761   $4,308,328   $7,838,477
                                  ========   ========   ========   ========   ==========   ==========   ==========   ==========
</TABLE>
 
     The performing single family loans are pledged, under a blanket lien, as
collateral securing advances from the FHLB at March 31, 1996 and September 30,
1995.
 
                                      F-26
<PAGE>   159
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                     PRINCIPAL BALANCE OF NONACCRUAL LOANS
 
<TABLE>
<CAPTION>
                                                  AT MARCH             AT SEPTEMBER 30,
                                                     31,       ---------------------------------
                                                    1996         1995        1994        1993
                                                 -----------   ---------   ---------   ---------
<S>                                              <C>           <C>         <C>         <C>
                                                                 (IN THOUSANDS)
Nonaccrual loans
     Single family.............................   $ 101,936    $  83,954   $  85,722   $  61,451
     Single family residential construction....          35          505          --          --
     Consumer..................................         745          563         506         427
     Multi-family..............................         510          213       3,802       3,233
     Commercial real estate....................         488           --       2,342          --
                                                     ------       ------      ------      ------
          Total................................   $ 103,714    $  85,235   $  92,372   $  65,111
                                                     ======       ======      ======      ======
</TABLE>
 
     At September 30, 1994 and 1993, nonaccrual loans above included $5.7
million and $9.0 million of single family loans that were ninety days
delinquent, subject to government guaranty, and upon which interest continued to
accrue. There were no such loans at March 31, 1996 and September 30, 1995.
 
     If the nonaccrual loans as of March 31, 1996 and September 30, 1995 had
been performing in accordance with their original terms throughout the six
months ended March 31, 1996 and fiscal 1995, interest income recognized would
have been $4.3 million and $6.4 million. The actual interest income recognized
on these loans for the six months ended March 31, 1996 was $695,000 and for
fiscal 1995 was $2.0 million. No commitments exist to lend additional funds to
borrowers whose loans were on nonaccrual status at March 31, 1996 and September
30, 1995.
 
     At March 31, 1996, the recorded investment in impaired loans pursuant to
SFAS No. 114, totalled $4.7 million and the average outstanding balance for the
six months ended March 31, 1996 was $4.5 million. No allowance for credit losses
was required on these loans because the measured values of the loans exceeded
the recorded investments in the loans. Interest income of $230,000 was
recognized on impaired loans during the six months ended March 31, 1996, of
which $192,000 was collected in cash.
 
                                      F-27
<PAGE>   160
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                          ALLOWANCE FOR CREDIT LOSSES
 
<TABLE>
<CAPTION>
                                                     LOANS HELD TO MATURITY
                               ------------------------------------------------------------------         LOANS
                                                                            COMMERCIAL                HELD FOR SALE
                                                                               REAL      MORTGAGE   ------------------
                                            SINGLE                            ESTATE      BANKER     SINGLE
                                            FAMILY                             AND       FINANCE     FAMILY
                               SINGLE    RESIDENTIAL               MULTI-    BUSINESS    LINE OF    MORTGAGE    SINGLE
                               FAMILY    CONSTRUCTION   CONSUMER   FAMILY     CREDIT      CREDIT    WAREHOUSE   FAMILY    TOTAL
                               -------   ------------   --------   ------   ----------   --------   ---------   ------   -------
<S>                            <C>       <C>            <C>        <C>      <C>          <C>        <C>         <C>      <C>
                                                                        (IN THOUSANDS)
Balance at
  September 30, 1990.......... $ 6,729       $ 38        $--       $  53     $ --         $--         $--       $--      $ 6,820
    Provision.................   3,133        148         --          60          552      --           229      --        4,122
    Net charge-offs...........    (775)     --              (19)    --         --          --         --         --         (794)
    Other.....................    (131)     --              100       31       --          --         --         --        --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1991..........   8,956        186            81      144          552      --           229      --       10,148
    Provision.................  14,156        135            39       75        6,261      --           467      --       21,133
    Net charge-offs...........  (2,827)     --              (76)    --         --          --          (118)     --       (3,021)
    Other.....................  (6,817)     --              100     --          4,564      --         --        2,107        (46)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1992..........  13,468        321           144      219       11,377      --           578     2,107     28,214
    Provision.................   1,824         56           264    1,285          (25)       944       (265)     --        4,083
    Net charge-offs...........  (2,161)       (71)          (53)    --         --          --          (148)     --       (2,433)
    Other.....................     378      --            --         (30 )         30      --         --         (378 )    --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1993..........  13,509        306           355    1,474       11,382        944        165     1,729     29,864
    Provision.................   2,369         93         2,794    1,215          875       (260)       (89)     --        6,997
    Net charge-offs...........  (1,702)     --           (1,327)    (233 )    (10,145)     --         --         --      (13,407)
    Other.....................   1,729      --            --        --         --          --         --        (1,729)    --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1994..........  15,905        399         1,822    2,456        2,112        684         76      --       23,454
    Provision.................  18,493        (38)        4,178      596        1,374       (274)       (36)     --       24,293
    Net charge-offs...........  (4,804)     --           (2,753)       2       (3,389)     --            (2)     --      (10,946)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1995.......... $29,594       $361        $3,247    $3,054    $     97     $  410      $  38     $--      $36,801
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
Balance at
  September 30, 1994.......... $15,905       $399        $1,822    $2,456    $  2,112     $  684      $  76     $--      $23,454
    Provision.................   2,293         74         1,791      516       --           (448)       (69)     --        4,157
    Net charge-offs...........  (1,414)     --           (1,158)       2       --          --            (2)     --       (2,572)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  March 31, 1995.............. $16,784       $473        $2,455    $2,974    $  2,112     $  236      $   5     $--      $25,039
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
Balance at
  September 30, 1995.......... $29,594       $361        $3,247    $3,054    $     97     $  410      $  38     $--      $36,801
    Provision.................   2,429        122         3,030      175           86          2          6      --        5,850
    Net charge-offs...........  (3,224)     --           (2,938)    --         --          --         --         --       (6,162)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  March 31, 1996.............. $28,799       $483        $3,339    $3,229    $    183     $  412      $  44     $--      $36,489
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
</TABLE>
 
                                      F-28
<PAGE>   161
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6.  LOAN SERVICING
 
                       SINGLE FAMILY SERVICING PORTFOLIO
 
                               PRINCIPAL BALANCES
 
<TABLE>
<CAPTION>
                                                            AT MARCH         AT SEPTEMBER 30,
                                                               31,         --------------------
                                                              1996          1995          1994
                                                           -----------     -------       ------
<S>                                                        <C>             <C>           <C>
                                                                      (IN MILLIONS)
Owned loans...............................................   $ 7,261       $ 7,603       $4,537
     Less:  Loans serviced by others......................     3,125         3,477        1,764
                                                              ------        ------       ------
          Total owned loans serviced by Bank..............     4,136         4,126        2,773
                                                              ------        ------       ------
Loans serviced for others
     Purchased servicing rights...........................     4,315         4,652        1,419
     Loans originated and sold with servicing retained....     1,720         1,187        1,886
     Servicing sales -- not yet transferred from Bank.....       351         1,047        1,109
     Other................................................        27           276          239
                                                              ------        ------       ------
          Total loans serviced for others.................     6,413         7,162        4,653
Mortgage-backed securities securitized by Banking
  Segment.................................................     1,225         1,360        1,554
                                                              ------        ------       ------
          Total servicing portfolio.......................   $11,774       $12,648       $8,980
                                                              ======        ======       ======
</TABLE>
 
     The table above includes single family, single family residential
construction, and single family mortgage warehouse loans. In addition to the
single family servicing portfolio, there were $296 million, $177 million, and
$252 million of multi-family loans serviced for others at March 31, 1996 and
September 30, 1995 and 1994.
 
                FAIR VALUE OF SINGLE FAMILY SERVICING PORTFOLIO
 
<TABLE>
<CAPTION>
                                                         AT MARCH          AT SEPTEMBER 30,
                                                            31,         -----------------------
                                                           1996           1995           1994
                                                        -----------     --------       --------
<S>                                                     <C>             <C>            <C>
                                                                     (IN MILLIONS)
Principal
     Total loans serviced for others...................  $   6,413      $  7,162       $  4,653
     Mortgage-backed securities securitized by Banking
       Segment.........................................      1,225         1,360          1,554
     Servicing purchases -- not yet transferred to
       Bank............................................         --            --          3,357
     Servicing sales -- not yet transferred from
       Bank............................................       (351)       (1,047)        (1,109)
     Single family mortgage warehouse loans subject to
       SFAS No. 122....................................        380           411             --
                                                            ------        ------         ------
          Total principal..............................  $   7,667      $  7,886       $  8,455
                                                            ======        ======         ======
                                                                    (IN THOUSANDS)
Fair value.............................................  $ 132,235      $122,250       $137,433
Book value
     OMSR..............................................     38,267        23,062             --
     PMSR..............................................     45,116        52,035         56,677
                                                            ------        ------         ------
          Total book value.............................     83,383        75,097         56,677
                                                            ------        ------         ------
          Fair value in excess of book value (see Note
            12)........................................  $  48,852      $ 47,153       $ 80,756
                                                            ======        ======         ======
</TABLE>
 
                                      F-29
<PAGE>   162
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                           MORTGAGE SERVICING RIGHTS
 
<TABLE>
<CAPTION>
                                          FOR THE SIX MONTHS ENDED
                                                 MARCH 31,                        FOR THE YEAR ENDED SEPTEMBER 30,
                                  ----------------------------------------    ----------------------------------------
                                         1996                  1995                  1995            1994       1993
                                  ------------------    ------------------    ------------------    -------    -------
<S>                               <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
                                    OMSRS      PMSRS      OMSRS      PMSRS      OMSRS      PMSRS      PMSRS     PMSRS
                                                                     (IN THOUSANDS)
Balance at beginning of
  period........................  $23,062    $52,035    $    --    $56,677    $    --    $56,677    $10,650    $16,036
  Additions.....................   14,944      1,142     13,435     10,508     28,694     12,546     50,955      1,768
  Amortization..................   (1,125)    (4,823)      (234)    (4,930)    (1,010)    (9,821)    (4,928)    (3,518)
  Writedown.....................       --         --         --         --         --         --         --     (2,633)
  Deferred hedging (gains)
    losses......................       --     (1,730)        --         --         --     (7,173)        --         --
  Sales.........................       --       (122)    (8,543)        --     (4,622)      (376)        --     (1,003)
  Other.........................    1,386     (1,386)        --       (173)        --        182         --         --
                                  -------    -------    -------    -------    -------    -------    -------    -------
Balance at end of period........  $38,267    $45,116    $ 4,658    $62,082    $23,062    $52,035    $56,677    $10,650
                                  =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>
 
     As discussed in Note 1, SFAS No. 122 was implemented effective October 1,
1994. As a result, originated MSRs of $28.7 million were recorded, net income
for fiscal 1995 and stockholders' equity increased $9.8 million, and earnings
per common share increased $0.33. Per share results have been restated to
reflect the 1,800 to one stock conversion effective June 1996. See Note 21 for a
discussion of subsequent events. The effect of the implementation on the
Consolidated Statement of Operations was as follows:
 
<TABLE>
<CAPTION>
                                              TOTAL
                                             FISCAL       FOURTH      THIRD     SECOND      FIRST
                                              1995        QUARTER    QUARTER    QUARTER    QUARTER
                                           -----------    -------    -------    -------    -------
<S>                                        <C>            <C>        <C>        <C>        <C>
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
Before SFAS No. 122 Implementation
     Non-interest income..................  $  98,042     $13,096    $23,185    $29,120    $32,641
     Non-interest expense.................    193,567      51,905     40,251     51,381     50,030
     Income before income taxes and
       minority interest..................     74,181       9,256     21,106     17,593     26,226
     Income tax expense...................     31,323       3,754      9,164      7,546     10,859
     Net income...........................     31,881       1,391      9,708      7,884     12,898
     Earnings per common share............       1.02        0.04       0.31       0.25       0.42
After SFAS No. 122 Implementation
     Non-interest income..................    114,981      25,201     23,127     30,641     36,012
     Non-interest expense.................    194,576      52,466     40,465     51,553     50,092
     Income before income taxes and
       minority interest..................     90,111      20,800     20,834     18,942     29,535
     Income tax expense...................     37,415       8,169      9,060      8,062     12,124
     Net income...........................     41,719       8,520      9,540      8,717     14,942
     Earnings per common share............       1.35        0.28       0.31       0.28       0.48
</TABLE>
 
7.  COVERED ASSETS AND FEDERAL FINANCIAL ASSISTANCE
 
     Concurrent with the Bank's incorporation on December 30, 1988, the Parent
Company, the Bank, and certain of their direct and indirect parent entities
entered into an Assistance Agreement (the "Assistance Agreement") with the
Federal Savings and Loan Insurance Corporation (the "FSLIC") whereby the Bank
acquired substantially all of the assets and assumed all of the deposits and
certain liabilities of United Savings Association of Texas ("Old USAT"), an
insolvent thrift institution (the "Acquisition"). The majority of assets
acquired were designated as Covered Assets ("Covered Assets") and were subject
to certain provisions contained in the Assistance Agreement. The Assistance
Agreement provided for, among other things, financial assistance to the Bank.
 
                                      F-30
<PAGE>   163
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On December 23, 1993, the Parent Company, the Bank, and certain of their
direct and indirect parent entities, and the Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund ("FRF"), entered into a
Settlement and Termination Agreement (the "Settlement Agreement") providing,
among other things, for the termination of the Assistance Agreement and the
disposition of Covered Assets. Accordingly, effective December 28, 1993, the
Bank no longer owned or managed any Covered Assets, and stopped receiving
financial assistance from the FRF. In connection with this settlement, the Bank
received a payment totalling $195.3 million.
 
<TABLE>
<CAPTION>
                                                                  FOR THE YEAR ENDED
                                                                    SEPTEMBER 30,
                                                                ----------------------
                                                                  1994          1993
                                                                --------       -------
        <S>                                                     <C>            <C>
                                                                    (IN THOUSANDS)
        Payments affecting the results of operations..........  $ 23,143       $ 9,289
        Other Payments
             Settlement payment...............................   195,300            --
             Other............................................       468        61,578
                                                                --------       -------
                  Total FRF payments..........................  $218,911       $70,867
                                                                ========       =======
</TABLE>
 
8.  DEPOSITS
 
<TABLE>
<CAPTION>
                                                                                   AT SEPTEMBER 30,
                                                           ----------------------------------------------------------------
                                         AT MARCH 31,
                                             1996                  1995                  1994                  1993
                                     --------------------  --------------------  --------------------  --------------------
                                                WEIGHTED              WEIGHTED              WEIGHTED              WEIGHTED
                                                 AVERAGE               AVERAGE               AVERAGE               AVERAGE
                                      AMOUNT      RATE      AMOUNT      RATE      AMOUNT      RATE      AMOUNT      RATE
                                     ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
                                                                     (DOLLARS IN THOUSANDS)
Non-interest bearing deposits....... $ 242,560       --%   $ 181,196       --%   $  76,498       --%   $  44,149       --%
Interest-bearing deposits
  Transaction accounts..............   222,148     1.00      219,307     1.50      233,666     1.49      229,972     2.07
  Insured money fund accounts
    Consumer........................   493,000     4.11      397,473     3.73      407,029     3.12      397,511     2.69
    Commercial......................   717,308     5.32      857,669     5.82      416,571     4.84       51,938     2.60
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Subtotal...................... 1,210,308     4.83    1,255,142     5.16      823,600     3.99      449,449     2.68
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
  Savings accounts..................   139,343     2.50      144,301     2.73      222,769     2.60      312,778     2.68
  Certificates of deposit
    Consumer........................ 2,912,263     5.72    3,063,631     5.84    2,949,715     4.88    3,251,391     4.77
    Commercial......................     3,348     5.02        2,273     5.36           --       --           --       --
    Wholesale.......................   233,351     9.70      316,370     9.06      457,956     7.92      551,649     7.13
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Subtotal...................... 3,148,962     6.01    3,382,274     6.14    3,407,671     5.29    3,803,040     5.11
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Total interest-bearing
        deposits.................... 4,720,761     5.37    5,001,024     5.59    4,687,706     4.74    4,795,239     4.58
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Total deposits................ $4,963,321    5.11%   $5,182,220    5.40%   $4,764,204    4.67%   $4,839,388    4.53%
                                     =========  =========  =========  =========  =========  =========  =========  =========
Consumer............................ $3,843,134            $3,868,498            $3,834,238            $4,207,739
Commercial..........................   886,836               997,352               472,009                80,000
Wholesale...........................   233,351               316,370               457,957               551,649
                                     ---------             ---------             ---------             ---------
      Total deposits................ $4,963,321            $5,182,220            $4,764,204            $4,839,388
                                     =========             =========             =========             =========
</TABLE>
 
                                      F-31
<PAGE>   164
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At March 31, 1996 and September 30, 1995, certificates of deposit ("CDs")
summarized by scheduled maturity by year and weighted average interest rate were
as follows:
 
<TABLE>
<CAPTION>
                                   CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
                       --------------------------------------------------------------------------
    STATED RATE          1997          1998          1999         2000        2001     THEREAFTER      TOTAL
                       ---------     ---------     --------     --------     -------   ----------    ---------
<S>                    <C>           <C>           <C>          <C>          <C>       <C>           <C>
                                                           (IN THOUSANDS)
2.99% and below......  $   1,824     $      --     $     --     $     --     $    --    $     --     $   1,824
3.00% to 3.99%.......     21,033         3,827          649            8          --           3        25,520
4.00% to 4.99%.......    291,351       237,112       16,495       32,615       1,051       3,099       581,723
5.00% to 5.99%.......    524,650       564,293      144,050       47,412       5,496      15,581     1,301,482
6.00% to 6.99%.......    131,259       436,705       82,683       57,147      60,189      19,592       787,575
7.00% to 7.99%.......    127,964        80,121        7,690        5,723      21,599      12,888       255,985
8.00% to 8.99%.......     11,580         1,273        2,581        3,010       1,700         379        20,523
9.00% to 9.99%.......        265           741        6,249        2,925          12         446        10,638
10.00% to 10.99%.....     31,200         7,444       23,974          728         591         325        64,262
Over 10.99%..........     69,648        29,517           --          265          --          --        99,430
                       ----------    ----------    --------     --------     -------     -------     ----------
                       $1,210,774    $1,361,033    $284,371     $149,833     $90,638    $ 52,313     $3,148,962
                       ==========    ==========    ========     ========     =======     =======     ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                 CERTIFICATES MATURING IN THE YEAR ENDING SEPTEMBER 30,
                       --------------------------------------------------------------------------
                         1996          1997          1998         1999        2000     THEREAFTER      TOTAL
                       ---------     ---------     --------     --------     -------   ----------    ---------
<S>                    <C>           <C>           <C>          <C>          <C>       <C>           <C>
                                                           (IN THOUSANDS)
2.99% and below......  $   1,947     $      --     $     --     $     --     $    --    $     --     $   1,947
3.00% to 3.99%.......     49,923         4,209          649            8          --           3        54,792
4.00% to 4.99%.......    419,671        58,644        7,242       32,816          50         100       518,523
5.00% to 5.99%.......    637,453       338,794      142,232       46,123       5,308         476     1,170,386
6.00% to 6.99%.......    449,506       437,013       82,291       57,725      60,339      16,062     1,102,936
7.00% to 7.99%.......    147,563        82,049        7,726        5,728      21,722      12,944       277,732
8.00% to 8.99%.......     33,642         1,262          675        4,165       2,272         376        42,392
9.00% to 9.99%.......     42,640           564        6,504        2,909          11         442        53,070
10.00% to 10.99%.....      4,950        37,235       13,594       10,019         657         325        66,780
Over 10.99%..........         --        78,438       15,026          252          --          --        93,716
                       ----------    ----------    --------     --------     -------     -------     ----------
                       $1,787,295    $1,038,208    $275,939     $159,745     $90,359    $ 30,728     $3,382,274
                       ==========    ==========    ========     ========     =======     =======     ==========
</TABLE>
 
     Scheduled maturities of CDs of $100,000 or more were as follows:
 
<TABLE>
<CAPTION>
                                                                           AT SEPTEMBER 30,
                                                 AT MARCH 31, 1996               1995
                                                --------------------     --------------------
                                                NUMBER OF   DEPOSIT      NUMBER OF   DEPOSIT
                                                ACCOUNTS     AMOUNT      ACCOUNTS     AMOUNT
                                                ---------   --------     ---------   --------
    <S>                                         <C>         <C>          <C>         <C>
                                                           (DOLLARS IN THOUSANDS)
    Three months or less.......................     648     $ 68,289         475     $ 51,307
    Over three through six months..............     895       94,458         664       70,615
    Over six through twelve months.............   1,455      151,881       1,188      124,752
    Over twelve months.........................   1,352      143,660       2,115      222,801
                                                  -----     --------       -----     --------
              Total............................   4,350     $458,288       4,442     $469,475
                                                  =====     ========       =====     ========
</TABLE>
 
                                      F-32
<PAGE>   165
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                          INTEREST EXPENSE ON DEPOSITS
 
<TABLE>
<CAPTION>
                                           FOR THE SIX MONTHS
                                            ENDED MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                          --------------------    --------------------------------
                                            1996        1995        1995        1994        1993
                                          --------    --------    --------    --------    --------
<S>                                       <C>         <C>         <C>         <C>         <C>
                                                              (IN THOUSANDS)
Transaction and insured money fund
  accounts..............................  $ 34,453    $ 25,261    $ 61,232    $ 22,261    $ 18,314
Savings accounts........................     1,883       2,620       4,715       7,311       7,055
Certificates of deposit.................   102,174      94,623     198,419     179,462     200,614
                                          --------    --------    --------    --------    --------
     Total..............................  $138,510    $122,504    $264,366    $209,034    $225,983
                                          ========    ========    ========    ========    ========
</TABLE>
 
9. FEDERAL HOME LOAN BANK ADVANCES
 
<TABLE>
<CAPTION>
                                                FOR THE
                                               SIX MONTHS
                                                 ENDED          FOR THE YEAR ENDED SEPTEMBER 30,
                                               MARCH 31,     --------------------------------------
                                                  1996          1995          1994          1993
                                               ----------    ----------    ----------    ----------
<S>                                            <C>           <C>           <C>           <C>
                                                             (DOLLARS IN THOUSANDS)
Maximum outstanding at any month-end.........  $4,384,798    $4,386,605    $2,697,829    $2,217,745
Daily average balance........................   4,346,960     3,560,844     2,285,630     1,344,129
Average interest rate........................        6.18%         6.31%         3.98%         3.62%
</TABLE>
 
     The aggregate amounts of principal maturities for FHLB advances for the
periods indicated were as follows:
 
<TABLE>
<CAPTION>
                                                                     AT SEPTEMBER 30,
                                                       ---------------------------------------------
                                   AT MARCH 31,
                                       1996                    1995                    1994
                               ---------------------   ---------------------   ---------------------
                                            WEIGHTED                WEIGHTED                WEIGHTED
                                            AVERAGE                 AVERAGE                 AVERAGE
                                 AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE
                               ----------   --------   ----------   --------   ----------   --------
<S>                            <C>          <C>        <C>          <C>        <C>          <C>
                                                     (DOLLARS IN THOUSANDS)
1995.........................  $   --         --  %    $   --         --  %    $1,838,200     4.98%
1996.........................      --         --        2,391,885     6.22        640,884     5.19
1997.........................   3,815,107     5.79      1,855,765     6.33        115,000     6.03
1998.........................     192,671     6.03        115,000     6.60          5,000     7.44
1999.........................     118,700     5.50          8,700     7.65          8,700     7.65
2000.........................       2,700     7.80          2,700     7.80          2,700     7.80
2001.........................       4,800     7.92          4,800     7.92          4,800     7.92
Thereafter...................       5,045     8.33          5,045     8.33          5,045     8.33
                               ----------   --------   ----------   --------   ----------   --------
     Total...................  $4,139,023     5.80%    $4,383,895     6.28%    $2,620,329     5.11%
                                =========   ========    =========   ========    =========   ========
</TABLE>
 
                                      F-33
<PAGE>   166
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
    AND FEDERAL FUNDS PURCHASED
 
<TABLE>
<CAPTION>
                                                   FOR THE
                                                     SIX
                                                   MONTHS
                                                    ENDED      FOR THE YEAR ENDED SEPTEMBER 30,
                                                  MARCH 31,    ---------------------------------
                                                    1996         1995         1994        1993
                                                  ---------    ---------    --------    --------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                               <C>          <C>          <C>         <C>
Reverse repurchase agreements
     Balance outstanding at period-end..........  $ 949,936    $1,172,533   $553,000    $300,000
     Fair value of collateral at period-end.....    987,478    1,239,527     673,000     321,200
     Maximum outstanding at any month-end.......  1,096,508    1,355,540     553,000     659,000
     Daily average balance......................    982,115      887,932     273,899     345,269
     Average interest rate......................       5.82%        5.99%       3.85%       3.23%
Federal funds purchased
     Balance outstanding at period-end..........  $      --    $      --    $     --    $ 10,000
     Maximum outstanding at any month-end.......         --           --      15,000      10,000
     Daily average balance......................         54          521         767         740
     Average interest rate......................       5.94%        5.95%       3.73%       2.84%
</TABLE>
 
     Scheduled maturities of reverse repurchase agreements outstanding at March
31, 1996 and September 30, 1995 were as follows:
 
<TABLE>
<CAPTION>
                                                  AT MARCH 31, 1996   AT SEPTEMBER 30, 1995
                                                  -----------------   ---------------------
                                                               (IN THOUSANDS)
    <S>                                           <C>                 <C>
    October 1995................................      $      --             $ 627,533
    April 1996..................................        589,936               185,000
    July 1996...................................        360,000               360,000
                                                     ----------            ----------
                                                      $ 949,936             $1,172,533
                                                     ==========            ==========
</TABLE>
 
     The counterparties to all reverse repurchase agreements at March 31, 1996
and September 30, 1995 have agreed to resell the same securities upon maturity
of such agreements. The securities collateralizing the reverse repurchase
agreements have been delivered to the counterparty or its agent. At March 31,
1996 and September 30, 1995, the reverse repurchase agreements were outstanding
with the following counterparties:
<TABLE>
<CAPTION>
                                                  AT MARCH 31, 1996   AT SEPTEMBER 30, 1995
                                                  -----------------   ---------------------
                                                               CARRYING VALUE
                                                  -----------------------------------------
    <S>                                           <C>                 <C>
 
<CAPTION>
                                                               (IN THOUSANDS)
    <S>                                           <C>                 <C>
    Morgan Stanley and Co. Incorporated.........      $ 360,000             $ 496,614
    Donaldson, Lufkin, and Jenrette Securities
      Corporation...............................        239,936                94,000
    CS First Boston Corporation.................        185,000               239,309
    Goldman, Sachs and Co.......................        165,000               146,500
    Salomon Brothers Holding Company Inc........             --               196,110
                                                     ----------            ----------
                                                      $ 949,936             $1,172,533
                                                     ==========            ==========
</TABLE>
 
                                      F-34
<PAGE>   167
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
11. SENIOR NOTES
 
     In May 1993, the Parent Company issued $115 million of 8.05% Senior Notes
("Senior Notes") and repaid the long-term debt and the note payable to a related
party. In connection with this transaction, the Parent Company paid a prepayment
penalty, a make-whole premium, and charged-off the remaining capitalized debt
issuance costs of $9.5 million, $1.6 million, and $3.4 million, respectively.
These penalties and costs are reflected as an extraordinary loss in fiscal 1993.
The extraordinary loss had no tax benefit in accordance with SFAS No. 109.
 
     The Senior Notes were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), but were offered and sold in a private offering
to qualified institutional investors in reliance on Rule 144A under the
Securities Act and to a limited number of institutional accredited investors
within the meaning of Rule 501 of Regulation D under the Securities Act.
 
     The Senior Notes had an initial interest rate of 8.05% per annum, payable
semi-annually, and are due on May 15, 1998. The interest rate on the Senior
Notes was subject to increase in certain circumstances if the Parent Company did
not consummate an exchange offer ("Exchange Offer") by certain dates. The
Exchange Offer would provide holders of the Senior Notes with the ability to
effect, for federal income tax purposes, a tax free exchange of the Senior
Notes, for Exchange Notes ("Exchange Notes"). The per annum interest rate on the
Senior Notes increased by 0.5%, to 8.55% in October 1993, and increased by 0.5%
to 9.05% in February 1994. When the Exchange Offer is consummated, the interest
rate will revert to the initial rate of 8.05%.
 
     The Senior Notes are not redeemable prior to maturity, except upon the
occurrence of a change of control (as defined) of the Parent Company or the Bank
(i) at the option of the Parent Company, in whole but not in part, and (ii) at
the option of holders, in whole or in part, in each case, at 101% of their
principal amount plus accrued interest to the date of redemption. The Senior
Notes do not have the benefit of any sinking fund obligation.
 
     The cost of issuing the Senior Notes totalled $4.9 million, and
amortization for the six months ended March 31, 1996 and 1995 and fiscal 1995,
1994, and 1993 was $488,000, $488,000, $976,000, $977,000, and $366,000,
respectively.
 
     The Parent Company's ability to meet its long-term obligations is
contingent on the Bank's ability to pay dividends on its common stock. As
discussed in Note 15, the ability of the Bank to pay dividends on its preferred
or common stock without prior Office of Thrift Supervision (the "OTS") approval
is subject to its continued profitability and the maintenance of certain capital
ratios. Further, the payment of dividends by the Bank to the Parent Company on
the Bank's common stock is subordinate to the payment of dividends on the Bank's
preferred stock. See Note 16 for a discussion of the preferred stock of the
Bank. Under the Senior Note indenture, aggregate dividends paid by the Company
on the Common Stock and by the Bank on the Preferred Stock, Series A and
Preferred Stock, Series B, and certain other payments or investments, is limited
to the sum of (i) 50% of cumulative consolidated net income (or, if negative
100% of such deficit) after March 31, 1993, subject to certain exclusions, (ii)
the proceeds from any issuance of capital stock by the Parent Company after
March 31, 1993, and (iii) $12 million. At March 31, 1996 and September 30, 1995,
$123.7 million and $117.5 million were available for payment of future dividends
under this restriction. See Note 21 for a discussion of subsequent events.
 
                                      F-35
<PAGE>   168
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
12. FINANCIAL INSTRUMENTS
 
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires the disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Quoted market
prices, when available, are used as the measure of fair value. In cases where
quoted market prices are not available, fair values are based on present value
estimates or other valuation techniques. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair
values cannot always be substantiated by comparison to independent market quotes
and, in many cases, the estimated fair values could not necessarily be realized
in an immediate sale or settlement of the instrument.
 
     The fair value estimates presented herein are based on relevant information
available to management as of March 31, 1996, September 30, 1995, and 1994.
Management is not aware of any factors that would significantly affect these
estimated fair value amounts. As these reporting requirements exclude certain
financial instruments and all non-financial instruments, the aggregate fair
value amounts presented herein do not represent management's estimate of the
underlying value of the Parent Company and the Bank. Additionally, such amounts
exclude intangible asset values such as the value of core deposit intangibles.
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value.
 
     Short-Term Interest-Earning Assets.  The carrying amount approximates the
fair value.
 
     Trading Account Assets.  The carrying values are market values, which are
generally based on quoted market prices or dealer quotes, if available. If a
quoted market price is not available, market value is estimated using quoted
market prices for instruments with similar credit, maturity, and interest
characteristics.
 
     Securities and Mortgage-Backed Securities.  The carrying amounts for
certain securities and mortgage-backed securities approximate fair value as they
mature within 90 days and do not present significant credit concerns. The fair
value of securities and mortgage-backed securities with longer maturities are
estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers.
 
     Loans.  Fair values are estimated for portfolios of loans with similar
characteristics and include the value of related servicing rights, if
appropriate. Loans are segregated by type, by rate, and by performing and
nonperforming categories. As adjustable-rate loans (excluding single family)
reprice frequently, their carrying value approximates their fair value. For
fixed-rate loans and single family loans, excluding the single family mortgage
warehouse, fair value is estimated using contractual cash flows discounted at
secondary market rates, adjusted for prepayment estimates, or using current
rates offered for similar loans. Fair value of the single family mortgage
warehouse loans is estimated using outstanding commitment prices from investors
or current investor yield requirements. The fair value of nonperforming loans is
estimated using the carrying value less any related allowance for credit losses.
 
     FHLB Stock.  The carrying amount approximates the fair value as it is
redeemable at its par value.
 
     Deposits.  Under SFAS No. 107, the estimated fair value of deposits with no
stated maturity, which includes demand deposits, money market, and other savings
accounts, is equal to the amount payable on demand. Although market premiums
paid for depository institutions reflect an additional value for these deposits,
SFAS No. 107 prohibits adjusting fair value for any value expected to be derived
from retaining those deposits for a future period of time or from the benefit
that results from the ability to fund interest-earning assets with these deposit
liabilities. The SFAS No. 107 fair value of fixed-maturity deposits is
estimated, using a discounted cash flow model with rates currently offered by
the Bank for deposits of similar remaining maturities.
 
                                      F-36
<PAGE>   169
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     FHLB Advances, Reverse Repurchase Agreements, and Federal Funds
Purchased.  The fair value is estimated based on the discounted value of
contractual cash flows using rates currently available to the Bank for
borrowings with similar terms and remaining maturities.
 
     Senior Notes.  The fair value of the Senior Notes is based on discounting
future cash flows using the current rates at which similar debt would be issued
by issuers with similar credit ratings and remaining maturities.
 
     Other Assets and Liabilities.  With the exception of that portion of the
excess servicing receivable classified as other assets, the carrying amounts of
financial instruments in these classifications are considered a reasonable
estimate of fair value due to their short-term nature. At March 31, 1996 and
September 30, 1995 and 1994, the fair value of the excess servicing receivable
exceeded its carrying value of $6.9 million, $7.1 million, and $7.9 million, by
$4.3 million, $5.1 million, and $4.7 million. The fair value of the excess
servicing receivable is equal to the present value of estimated net future cash
flows discounted at a current market rate.
 
     Financial Instruments With Off-Balance-Sheet Risk.  The fair value of
interest rate swaps, caps, and floors, and financial options are based on
pricing models. The fair value of financial futures contracts, forward delivery
contracts, and fixed-rate commitments to extend credit are based on current
market prices. The notional amount of adjustable-rate commitments to extend
credit approximates their fair value.
 
     Servicing Portfolio.  See Note 1 for a description of the method used to
value the single family servicing portfolio.
                            SFAS NO. 107 FAIR VALUES
 
<TABLE>
<CAPTION>
                                                                                          AT SEPTEMBER 30,
                                                                        -----------------------------------------------------
                                                 AT MARCH 31,
                                                     1996                         1995                         1994
                                           -------------------------    -------------------------    ------------------------
                                            CARRYING       SFAS NO.      CARRYING       SFAS NO.      CARRYING      SFAS NO.
                                              VALUE       107 VALUE        VALUE       107 VALUE       VALUE       107 VALUE
                                           -----------    ----------    -----------    ----------    ----------    ----------
                                                                             (IN THOUSANDS)
<S>                                        <C>            <C>           <C>            <C>           <C>           <C>
Financial Assets
  Short-term interest-earning assets....   $   794,970    $  794,970    $   583,983    $  583,983    $  435,648    $  435,648
  Trading account assets................         1,267         1,267          1,081         1,081         1,011         1,011
  Securities............................        58,351        59,458        116,013       116,811       114,115       114,580
  Mortgage-backed securities............     1,954,070     1,935,188      2,398,263     2,378,171     2,828,903     2,774,717
  Loans.................................     7,878,080     8,014,145      8,260,240     8,418,464     5,046,174     5,095,133
  FHLB stock............................       233,038       233,038        225,952       225,952       132,816       132,816
  Other assets..........................       108,708       112,996        150,542       155,631        86,849        91,548
Non-financial assets....................       238,152           N/A        247,460           N/A       264,645           N/A
                                                           =========                    =========                   =========
                                           -----------                  -----------                  ----------
      Total assets......................   $11,266,636                  $11,983,534                  $8,910,161
                                           ===========                  ===========                  ==========
Financial Liabilities
  Deposits..............................   $ 4,963,321    $5,004,342    $ 5,182,220    $5,215,438    $4,764,204    $4,791,027
  FHLB advances.........................     4,139,023     4,145,304      4,383,895     4,395,965     2,620,329     2,615,204
  Reverse repurchase agreements and
    federal funds purchased.............       949,936       950,282      1,172,533     1,171,884       553,000       553,000
  Senior Notes..........................       115,000       119,701        115,000       115,383       115,000       111,324
  Other liabilities.....................       156,418       156,418        162,073       162,073       116,484       116,484
Non-financial liabilities, minority
  interest, and stockholders' equity....       942,938           N/A        967,813           N/A       741,144           N/A
                                                           =========                    =========                   =========
                                           -----------                  -----------                  ----------
      Total liabilities, minority
        interest, and stockholders'
        equity..........................   $11,266,636                  $11,983,534                  $8,910,161
                                           ===========                  ===========                  ==========
</TABLE>
 
                                      F-37
<PAGE>   170
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
SFAS NO. 107 FAIR VALUES, CONTINUED
 
<TABLE>
<CAPTION>
                                                                                          AT SEPTEMBER 30,
                                                                        -----------------------------------------------------
                                                 AT MARCH 31,
                                                     1996                         1995                         1994
                                           -------------------------    -------------------------    ------------------------
                                            CARRYING       SFAS NO.      CARRYING       SFAS NO.      CARRYING      SFAS NO.
                                              VALUE       107 VALUE        VALUE       107 VALUE       VALUE       107 VALUE
                                           -----------    ----------    -----------    ----------    ----------    ----------
                                                                             (IN THOUSANDS)
<S>                                        <C>            <C>           <C>            <C>           <C>           <C>
Other Financial -- Fair Value
  Interest rate swaps...................   $        --    $     (359)   $        --    $   (1,517)   $       --    $   (1,462)
  Interest rate caps....................            --         2,954             --         1,113            --            --
  Interest rate floors..................            --         3,305             --         4,895            --            --
  Financial options.....................            --           156             --           103            --            --
  Financial futures contracts...........            --           971             --        (1,869)           --           375
  Forward delivery contracts............            --         6,686             --        (2,877)           --         3,014
  Commitments to extend credit..........            --         1,257             --           897            --          (767)
Non-Financial -- Unrealized Gains
  Single family servicing portfolio, as
    adjusted (See Note 6)...............            --        48,852             --        47,153            --        80,756
</TABLE>
 
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
 
     The Bank enters into certain financial instruments with off-balance-sheet
risk in the ordinary course of business to reduce its exposure to changes in
interest rates. The Bank utilizes only traditional financial instruments for
this purpose and does not enter into instruments such as leveraged derivatives
or structured notes. The financial instruments used for hedging interest rate
risk include interest rate swaps, caps, floors, and financial options, financial
futures contracts, and forward delivery contracts. A hedge is an attempt to
reduce risk by creating a relationship whereby any losses on the hedged asset or
liability are expected to be counterbalanced in whole or part by gains on the
hedging financial instrument. Thus, market risk resulting from a particular
off-balance-sheet instrument is normally offset by other on or off-balance-sheet
transactions. The Bank seeks to manage credit risk by limiting the total amount
of arrangements outstanding, both by counterparty and in the aggregate, by
monitoring the size and maturity structure of the financial instruments, by
assessing the creditworthiness of the counterparty, and by applying uniform
credit standards for all activities with credit risk.
 
     Notional principal amounts indicated in the following table represent the
extent of the Bank's involvement in particular classes of financial instruments
and generally exceed the expected future cash requirements relating to the
instruments.
 
<TABLE>
<CAPTION>
                                                                               AT SEPTEMBER 30,
                                                               AT MARCH 31,   -------------------
                                                                   1996         1995       1994
                                                               ------------   --------   --------
                                                                         (IN THOUSANDS)
<S>                                                            <C>            <C>        <C>
Interest rate swaps..........................................   $  150,000    $615,000   $505,000
Interest rate caps...........................................    1,315,000     565,000         --
Interest rate floors.........................................      310,000     310,000    200,000
Financial options............................................       89,100      23,000         --
Financial futures contracts..................................       31,800     529,000     40,900
Forward delivery contracts...................................      514,767     509,463    354,439
Commitments to extend credit.................................    1,300,855     999,792    969,072
</TABLE>
 
                                      F-38
<PAGE>   171
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Financial instruments with off-balance-sheet risk at March 31, 1996 and
September 30, 1995 were scheduled to mature as follows:
 
<TABLE>
<CAPTION>
                                              MATURING IN THE YEAR ENDING MARCH 31,
                                            ------------------------------------------
                                               1997        1998      1999     THEREAFTER   TOTAL
                                            ----------   --------   -------   --------   ----------
                                                                (IN THOUSANDS)
<S>                                         <C>          <C>        <C>       <C>        <C>
Interest rate swaps.......................  $  150,000   $     --   $    --   $     --   $  150,000
Interest rate caps........................     350,000    400,000        --    565,000    1,315,000
Interest rate floors......................          --    310,000        --         --      310,000
Financial options.........................      89,100         --        --         --       89,100
Financial futures contracts...............      31,800         --        --         --       31,800
Forward delivery contracts................     514,767         --        --         --      514,767
Commitments to extend credit..............   1,051,080    195,766    12,231     41,778    1,300,855
                                            ----------   --------   -------   --------   ----------
          Total...........................  $2,186,747   $905,766   $12,231   $606,778   $3,711,522
                                            ==========   ========   =======   ========   ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                            MATURING IN THE YEAR ENDING SEPTEMBER 30,
                                           -------------------------------------------
                                              1996        1997       1998     THEREAFTER   TOTAL
                                           ----------   --------   --------   --------   ----------
                                                                (IN THOUSANDS)
<S>                                        <C>          <C>        <C>        <C>        <C>
Interest rate swaps......................  $  565,000   $ 50,000   $     --   $     --   $  615,000
Interest rate caps.......................          --         --         --    565,000      565,000
Interest rate floors.....................          --     60,000    250,000         --      310,000
Financial options........................      23,000         --         --         --       23,000
Financial futures contracts..............     529,000         --         --         --      529,000
Forward delivery contracts...............     509,463         --         --         --      509,463
Commitments to extend credit.............     866,728     78,195     17,764     37,105      999,792
                                           ----------   --------   --------   --------   ----------
          Total..........................  $2,493,191   $188,195   $267,764   $602,105   $3,551,255
                                           ==========   ========   ========   ========   ==========
</TABLE>
 
                                      F-39
<PAGE>   172
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Interest Rate Swaps.  Below is an itemization of swaps by type and items
hedged. These swaps were entered into in an effort to more closely match the
repricing of the Bank's liabilities with the related assets. During the six
months ended March 31, 1996, $465 million of interest rate swap contracts
expired.
 
<TABLE>
<CAPTION>
                                          NOTIONAL     FIXED    FLOATING                HEDGED
                                           AMOUNT      RATE       RATE                   ITEM
                                          --------     ----     --------         --------------------
                                                (DOLLARS IN THOUSANDS)
<S>                                       <C>          <C>      <C>      <C>     <C>
At March 31, 1996
Receive Floating/Pay Fixed............    $100,000     6.58%      5.63%   (2)    Commercial deposits
Receive Fixed/Pay Floating............      25,000     4.60       5.58    (2)    Consumer deposits
                                            25,000     6.00       5.40    (1)    Consumer deposits
                                          --------
          Total.......................    $150,000
                                          ========
At September 30, 1995
Receive Floating/Pay Fixed............    $ 75,000     6.10       5.81    (1)    FHLB advances
                                                                                 Reverse repurchase
                                           340,000     6.50       5.86    (1)      agreements
                                           100,000     6.58       6.00    (2)    Commercial deposits
Receive Fixed/Pay Floating............      75,000     4.32       5.88    (2)    Consumer deposits
                                            25,000     6.00       5.81    (1)    Consumer deposits
                                          --------
  Total...............................    $615,000
                                          ========
At September 30, 1994
Receive Floating/Pay Fixed............    $150,000     6.02       5.02    (1)    FHLB advances
                                                                                 Reverse repurchase
                                           280,000     5.76       4.90    (1)      agreements
Receive Fixed/Pay Floating............      75,000     4.32       4.82    (2)    Consumer deposits
                                          --------
  Total...............................    $505,000
                                          ========
</TABLE>
 
(1) Based on the one month London InterBank Offered Rate ("LIBOR") as of the
    last reset prior to the date reported.
 
(2) Based on the three month LIBOR as of the last reset prior to the date
    reported.
 
     During fiscal 1993, the Bank sold interest rate swap agreements with
notional amounts totalling $215.0 million prior to the original maturities,
resulting in a $4.1 million gain on the sale. The gain was deferred and
amortized as a credit to interest expense over the remaining terms of the hedged
deposit liabilities. This deferred gain was $1.8 million at September 30, 1994
and was fully amortized during fiscal 1995.
 
     Interest Rate Caps.  The Bank simultaneously purchased and sold caps during
fiscal 1995 in an effort to hedge certain adjustable-rate loans. The Bank
purchased interest rate caps during fiscal 1996 in an effort to hedge certain
adjustable-rate mortgage-backed securities. The Bank will receive interest on
the caps it purchased if the index rates rise above the contracted rates. The
Bank will pay interest on the cap it sold if the index rate rises above the
contracted rate.
 
<TABLE>
<CAPTION>
                                                           NOTIONAL       INDEX      CONTRACTED
                                                            AMOUNT        RATE          RATE
                                                           --------       ----       -----------
<S>                                               <C>      <C>            <C>        <C>
                                                                  (DOLLARS IN THOUSANDS)
At March 31, 1996................................ buy      $565,000       5.48%(1)       7.86%
                                                  sell      565,000       5.48(1)        8.57
                                                            750,000       5.06(2)        5.81
At September 30, 1995............................ buy      $565,000       5.91(1)        7.86
                                                  sell      565,000       5.91(1)        8.57
</TABLE>
 
(1) Based on the six month LIBOR as of the last reset prior to the date
    reported.
 
                                      F-40
<PAGE>   173
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) Based on the one year Constant Maturity Treasury ("CMT") as of the last
    reset prior to the date reported.
 
     Interest Rate Floors.  Floor agreements outstanding at September 30, 1994
were entered into in an effort to shorten the duration of certain long-term
fixed-rate consumer deposits in a declining interest rate environment.
Additional floor contracts were entered into during fiscal 1995 in an effort to
hedge the MSRs against declines in value as a result of prepayments.
 
<TABLE>
<CAPTION>
                                                                    AVERAGE
                                            NOTIONAL     INDEX      FLOOR             HEDGED
                                             AMOUNT      RATE       RATE               ITEM
                                            --------     ----       -----       ------------------
<S>                                         <C>          <C>        <C>         <C>
                                                            (DOLLARS IN THOUSANDS)
At March 31, 1996.......................... $260,000     5.78%(1)   6.70 %             MSRs
                                              50,000     6.43(2)    7.20               MSRs
                                            --------
     Total................................. $310,000
                                            --------
                                            --------
At September 30, 1995...................... $260,000     6.01(1)    6.70               MSRs
                                              50,000     6.17(2)    7.20               MSRs
                                            --------
     Total................................. $310,000
                                            --------
                                            --------
At September 30, 1994...................... $200,000     5.13(3)    3.13        Consumer deposits
                                            --------
                                            --------
</TABLE>
 
(1) Based on the five year CMT as of the last reset prior to the date reported.
 
(2) Based on the ten year CMT as of the last reset prior to the date reported.
 
(3) Based on the one month LIBOR as of the last reset prior to the date
    reported.
 
     An interest rate floor agreement with a notional principal amount of $530.0
million hedging single family MSRs was sold prior to its original maturity
during fiscal 1995, resulting in a gain of $6.4 million. The gain was deferred
and is being accreted to operations offsetting the related MSR intangible
amortization expense. At March 31, 1996, the deferred gain remaining from the
sale of the interest rate floor was approximately $5.5 million. Interest
received on interest rate floor agreements totalled $1.7 million and $817,000 at
March 31, 1996 and September 30, 1995.
 
     Financial Options.  At March 31, 1996 and September 30, 1995 there were
purchased Treasury call options outstanding with notional principal amounts
totalling $22.5 million and $23.0 million. These options were entered into in an
effort to hedge MSRs against declines in value as a result of an increase in
prepayments caused by declining interest rates. The purchased Treasury call
option outstanding at September 30, 1995 was sold during fiscal 1996, for a gain
of $319,000 as the MSRs being hedged were sold. This gain was included in the
gain on the sale of MSRs. During the six months ended fiscal 1996, an additional
option with notional principal amount of $22.5 million was purchased.
 
     During fiscal 1996, the Bank purchased a Eurodollar put option with
notional principal amount of $2 billion in an effort to hedge certain MBS. The
Eurodollar put option was then sold for a loss of $49,000 as the mortgage-backed
securities being hedged were sold. The loss was included in the gain on the sale
of the MBS.
 
     During fiscal 1996, Treasury put options with notional principal amounts
totalling $16.6 million were entered into in an effort to hedge loans the Bank
originated for its own portfolio from the date that the interest rate is locked
until the date the loans are sold or funded ("portfolio pipeline").
 
                                      F-41
<PAGE>   174
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1996, the Bank purchased a Treasury call option with a
notional principal amount of $50.0 million. The option was entered into as a
trading activity and the related premium paid was included in trading account
assets at March 31, 1996.
 
     Financial Futures Contracts.  At March 31, 1996 and September 30, 1995 and
1994 there were Treasury futures contracts outstanding with notional principal
amounts totalling $31.8 million, $160.0 million and $40.9 million. These
Treasury futures contracts were entered into in an effort to hedge loans in the
portfolio pipeline. During fiscal 1996, Treasury futures contracts with notional
principal amounts totalling $141.0 million were closed as the loans being hedged
were sold. Losses of $327,000 and $6.0 million and gains of $37,000 on Treasury
futures contracts as of March 31, 1996 and September 30, 1995 and 1994 were
deferred and included as an adjustment to the carrying amount of the loans.
 
     The Eurodollar futures contracts outstanding at September 30, 1995 with
notional amounts totalling $369.0 million, were entered into in an effort to
hedge the interest costs for a fixed period on certain borrowings that reprice
based on short-term rates. As of March 31, 1996, all of the Eurodollar futures
contracts outstanding at September 30, 1995 were closed or had expired. Losses
of $360,000 on closed Eurodollar futures contracts were deferred and included as
an adjustment to the carrying amount of the borrowings at March 31, 1996.
 
     Forward Delivery Contracts.  Forward delivery contracts are entered into to
sell single family mortgage warehouse loans and to manage the risk that a change
in interest rates will decrease the value of the single family mortgage loan
warehouse or commitments to originate mortgage loans ("mortgage pipeline").
 
                           FORWARD DELIVERY CONTRACTS
 
<TABLE>
<CAPTION>
                                                         AT MARCH       AT SEPTEMBER 30,
                                                           31,       ----------------------
                                                           1996         1995        1994
                                                        ----------   ----------  ----------
    <S>                                                 <C>          <C>         <C>
                                                             (IN MILLIONS)
    Counterparty
         FNMA..........................................    $173         $265        $133
         GNMA..........................................     258          205         205
         Other.........................................      84           39          16
                                                        ----------   ----------  ----------
              Total....................................    $515         $509        $354
                                                        ==========   ==========  ==========
    Type
         Fixed.........................................    $463         $428        $236
         Variable......................................      52           81         118
                                                        ----------   ----------  ----------
              Total....................................    $515         $509        $354
                                                        ==========   ==========  ==========
    Loans available to fill commitments
         Single family mortgage warehouse..............    $380         $411        $252
         Mortgage pipeline (estimated).................     191          185         136
                                                        ----------   ----------  ----------
              Total....................................    $571         $596        $388
                                                        ==========   ==========  ==========
</TABLE>
 
     Short Sales.  During fiscal 1994, the Bank entered into short sales of
$121.5 million of Treasury notes in an effort to hedge the fixed-rate portfolio
pipeline, and also in an effort to hedge loans. The short sale positions were
closed out prior to their maturity and the resulting gain of $103,000 was
reflected as a realized gain on
 
                                      F-42
<PAGE>   175
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
trading account assets for the year ended September 30, 1994. The Bank does not
routinely enter into short sales.
 
     Commitments to Extend Credit.  The Bank's exposure to credit loss for
commitments to extend credit is represented by the contractual amount of those
agreements. The Bank uses the same credit policies in making funding commitments
as it does for on-balance-sheet instruments. These commitments generally have
fixed expiration dates or other termination clauses and require the payment of a
fee to the Bank. Because commitments may expire without being drawn upon, the
total contract amounts do not necessarily represent future cash requirements.
 
<TABLE>
<CAPTION>
                                                                       AT SEPTEMBER 30,
                                                  AT MARCH 31,    --------------------------
                                                      1996            1995          1994
                                                  -------------   ------------  ------------
    <S>                                           <C>             <C>           <C>
                                                                (IN THOUSANDS)
    Single family................................   $ 773,137       $589,157      $468,604
    Other........................................     527,718        410,635       500,468
                                                  -------------   ------------  ------------
              Total..............................   $1,300,855      $999,792      $969,072
                                                  =============   ============  ============
    Fixed........................................   $ 398,698       $282,101      $338,462
    Variable.....................................     902,157        717,691       630,610
                                                  -------------   ------------  ------------
              Total..............................   $1,300,855      $999,792      $969,072
                                                  =============   ============  ============
</TABLE>
 
     Included in the commitments to extend credit amounts above are letters of
credit of $6.0 million, $5.4 million, and $320,000 at March 31, 1996 and
September 30, 1995 and 1994.
 
     Recourse Obligations.  The Bank had servicing of approximately $25.6
million, $26.6 million, and $25.4 million, at March 31, 1996 and September 30,
1995 and 1994 for which certain recourse obligations apply. Management believes
that it has adequately provided reserves for its recourse obligations related to
this servicing.
 
13.  INCOME TAXES
 
<TABLE>
<CAPTION>
                                      FOR THE SIX MONTHS
                                       ENDED MARCH 31,           FOR THE YEAR ENDED SEPTEMBER 30,
                                   ------------------------   ---------------------------------------
                                      1996         1995          1995          1994          1993
                                   -----------  -----------   -----------  ------------  ------------
<S>                                <C>          <C>           <C>          <C>           <C>
                                                             (IN THOUSANDS)
Current tax provision (benefit)
     Federal......................   $ 1,677      $ 2,094       $ 3,459      $  1,145      $  7,448
     State........................     2,033        1,447         2,080         1,841         2,091
     Payments due in lieu of
       taxes......................     7,112        6,327        15,261        (3,449)        8,491
Deferred tax provision (benefit)
     Federal......................    14,456       10,318        16,575        17,681        44,441
     State........................        --           --            40        (1,279)           --
     Change in valuation
       allowance..................        --           --            --       (47,838)     (103,203)
Goodwill reduction for utilization
  of acquired net operating loss
  carryforwards...................        --           --            --            --        14,579
                                   -----------  -----------   -----------  ------------  ------------
          Total income tax expense
            (benefit).............   $25,278      $20,186       $37,415      $(31,899)     $(26,153)
                                   ===========  ===========   ===========  ============  ============
</TABLE>
 
                                      F-43
<PAGE>   176
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
FEDERAL TAXATION
 
     The Parent Company and the Bank are subject to regular income tax and
alternative minimum tax ("AMT"). For the six months ended March 31, 1996 and
fiscal 1995, alternative minimum taxable income ("AMTI") was generated resulting
primarily from the limitation on the utilization of AMT net operating loss
carryforwards ("NOLs"). Corporations may only offset 90% of their AMTI with AMT
NOLs. For the six months ended March 31, 1995 and fiscal 1994, federal taxable
income was generated resulting primarily from residual interests in real estate
mortgage investment conduits ("REMICs"), which cannot be offset by NOLs. For
fiscal 1993, AMTI was generated resulting primarily from assistance received
from the FRF and the limitation on the utilization of AMT NOLs.
 
     Tax NOLs at March 31, 1996 and September 30, 1995 were as follows:
 
<TABLE>
<CAPTION>
                                                        AT MARCH 31, 1996
                                            ------------------------------------------
                                             REGULAR         ALTERNATIVE       EXPIRATION
                  YEAR GENERATED               TAX           MINIMUM TAX        DATE
        ----------------------------------  ----------       -----------       -------
        <S>                                 <C>              <C>               <C>
                                                          (IN MILLIONS)
        December 30, 1988.................    $   24            $  46            2003
        September 30, 1989................       329              154            2004
        September 30, 1990................       296              139            2005
        September 30, 1991................       119               52            2006
        September 30, 1992................        33               12            2007
        September 30, 1994................         7               --            2009
<CAPTION>
                                                      AT SEPTEMBER 30, 1995
                                            ------------------------------------------
        <S>                                 <C>              <C>               <C>
        December 30, 1988.................    $  103            $ 113            2003
        September 30, 1989................       329              154            2004
        September 30, 1990................       296              139            2005
        September 30, 1991................       119               52            2006
        September 30, 1992................        33               12            2007
</TABLE>
 
     Utilization of the NOLs generated for the year ended December 30, 1988 are
subject to federal income tax rules that limit the utilization to federal
taxable income of the Bank and its subsidiaries only. The remaining NOLs may be
utilized against the federal taxable income of the other companies within the
"affiliated group" of which the Parent Company and the Bank are members.
 
PAYMENTS DUE IN LIEU OF TAXES
     Pursuant to the terms of the Assistance Agreement, the amount of financial
assistance paid to the Bank by the FRF was reduced each year by an amount equal
to one-third of any Federal and State Net Tax Benefits (as defined by the
Assistance Agreement). The Assistance Agreement further provided that in no
event would the amount paid to the FRF related to Net Tax Benefits be less than
a guaranteed minimum totalling $10 million payable over five years. Additional
payments due in lieu of taxes above the guaranteed minimum payments are included
in the Consolidated Statements of Operations as incurred as a component of the
provision for taxes. The final guaranteed payment was made in July 1994 for
fiscal 1993. The Assistance Agreement was terminated in December 1993. As part
of the Settlement Agreement, the Parent Company, the Bank, and certain of their
direct and indirect parent entities entered into the Tax Benefits Agreement,
pursuant to which the Bank will pay one-third of certain tax benefits that are
utilized by the Bank through the taxable year ending nearest to September 30,
2003. The amounts reflected in the Consolidated Financial Statements are based
on estimated tax benefits utilized by the Bank and may vary from amounts paid
due to the actual utilization of tax benefits reported in the federal income tax
return.
 
                                      F-44
<PAGE>   177
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ACCOUNTING FOR INCOME TAXES
     During the fourth quarter of fiscal 1993, the Bank recognized $59 million
as a tax benefit for the expected utilization of $252 million in NOLs against
future taxable income. Tax benefits arising from an acquisition should first
reduce to zero any goodwill related to that acquisition, then decrease other
non-current intangible assets resulting from that acquisition, and finally
reduce income tax expense. As a result of the recognition of $59 million in tax
benefits, income tax expense was reduced $44 million and goodwill associated
with the Acquisition was reduced by $15 million during the fourth quarter of
1993. During fiscal 1994, the Bank recognized an additional $58 million as a tax
benefit for the expected utilization of $249 million in NOLs against future
taxable income. For the six months ended March 31, 1996 and 1995 and fiscal
1995, no tax benefit was recognized. See Note 21 for a discussion of subsequent
events.
 
     For the six months ended March 31, 1996 and 1995 and fiscal 1995, 1994, and
1993, the Parent Company recognized no benefit for income taxes for its stand
alone net operating loss and net operating loss carryforwards, because the
criteria to recognize a tax benefit under SFAS No. 109 was not met.
 
     Income tax and related payments differ from the amount computed by applying
the federal income tax statutory rate on income as follows:
 
<TABLE>
<CAPTION>
                                         FOR THE SIX MONTHS
                                           ENDED MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                         -------------------     ---------------------------------
                                          1996        1995        1995         1994         1993
                                         -------     -------     -------     --------     --------
<S>                                      <C>         <C>         <C>         <C>          <C>
                                                              (IN THOUSANDS)
Taxes calculated.......................  $21,485     $16,967     $31,539     $ 34,356     $ 47,784
Increase (decrease) from
  Reduction in valuation allowance for
     deferred tax assets...............       --          --          --      (47,838)    (103,203)
  Change in estimate of net deferred
     tax assets........................       --          --          --      (11,340)          --
  Goodwill reduction for utilization of
     acquired net operating loss
     carryforwards.....................       --          --          --           --       14,579
  Nontaxable assistance................       --          --          --       (8,100)      (3,343)
  Alternative minimum tax..............       --          --          --           --        7,448
  Provision (benefit) for payments due
     in lieu of taxes..................       --          --          --       (3,449)       8,491
  State income tax.....................    2,033       1,448       2,080        1,841        2,091
  Other................................    1,760       1,771       3,796        2,631           --
                                         -------     -------     -------     --------     --------
     Total.............................  $25,278     $20,186     $37,415     $(31,899)    $(26,153)
                                         =======     =======     =======     ========     ========
</TABLE>
 
     The change in the valuation allowance for fiscal 1994 and 1993 arises from
the utilization of NOLs against both current and expected future taxable income
of the Bank.
 
                                      F-45
<PAGE>   178
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                      DEFERRED TAX ASSETS AND LIABILITIES
 
<TABLE>
<CAPTION>
                                                                            AT SEPTEMBER 30,
                                                         AT MARCH 31,    ----------------------
                                                             1996          1995         1994
                                                         ------------    ---------    ---------
<S>                                                      <C>             <C>          <C>
                                                                                 (IN THOUSANDS)
Deferred tax assets
  Net operating losses.................................   $  193,196     $ 211,637    $ 241,702
  Purchase accounting..................................        9,451        10,064       12,700
  Capital loss carryforwards...........................           --        --              169
  Unrealized losses on securities available for sale...        1,842         3,990        8,050
  State................................................        2,817         2,817        4,338
  AMT credit...........................................        4,458         2,985       --
  Other................................................       11,028         7,648        8,344
                                                         ------------    ---------    ---------
     Total deferred tax assets.........................      222,792       239,141      275,303
                                                         ------------    ---------    ---------
Deferred tax liabilities
  Bad debt reserve.....................................        8,955        11,577       34,928
  FHLB stock...........................................        8,673         8,673       --
  REO..................................................        7,096         7,096       --
  State................................................           16            16        3,059
  Other................................................        6,016         3,008        7,897
                                                         ------------    ---------    ---------
     Total deferred tax liabilities....................       30,756        30,370       45,884
                                                         ------------    ---------    ---------
  Net deferred tax asset before valuation allowance....      192,036       208,771      229,419
  Valuation allowance..................................     (131,200)     (131,200)    (131,200)
                                                         ------------    ---------    ---------
     Net deferred tax assets...........................   $   60,836     $  77,571    $  98,219
                                                         ============    =========    =========
</TABLE>
 
     The Bank is permitted under the Code to deduct an annual addition to a
reserve for bad debts in determining taxable income, subject to certain
limitations. This addition differs from the provision for credit losses for
financial reporting purposes. No deferred taxes have been provided on
approximately $52 million of tax bad debt reserves prior to 1988. This tax
reserve for bad debts is included in taxable income of later years only if the
bad debt reserves are subsequently used for purposes other than to absorb bad
debt losses. Circumstances that would require an accrual of a portion or all of
this unrecorded tax liability are a reduction in loan levels relative to the end
of 1987, failure to meet the tax definition of a savings institution, dividend
payments in excess of both current year and accumulated tax earnings and
profits, or other distributions in dissolution, liquidation, or redemption of
stock. Because the Bank does not intend to use the reserves for purposes other
than to absorb losses, deferred income taxes of approximately $18 million have
not been provided. The Bank has recognized the deferred tax consequences of
differences between the financial statement and income tax treatment of
allowances for credit losses arising after December 31, 1987. See Note 17.
 
14. EMPLOYEE BENEFITS
 
     The Bank has an employee tax deferred savings plan (plan 401(k) under the
Code) available to all eligible employees. Through June 30, 1995, the Bank
contributed dollar for dollar up to three percent of the participant's earnings
and employees could contribute up to twelve percent of their earnings on a tax
deferred basis. The Bank's 401(k) plan was amended effective July 1, 1995. The
Bank currently contributes fifty cents for every dollar contributed up to two
percent of the participant's earnings, and dollar for dollar for contributions
between two percent and four percent of the participant's earnings. The maximum
contribution percentage is now fifteen percent of an employee's earnings on a
tax deferred basis, subject to Internal Revenue Service maximum contributions
limitations. This is a participant directed plan. Plan assets are held in trust
and managed by Fidelity Institutional Retirement Services Company. Contributions
to the
 
                                      F-46
<PAGE>   179
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
plan are in such amounts and within certain limitations as the Bank may
authorize. The Bank's contributions to the plan were approximately $739,000,
$774,000, $1.5 million, $1.7 million, and $1.5 million for the six months ended
March 31, 1996 and 1995 and for fiscal 1995, 1994, and 1993.
 
15. REGULATORY MATTERS
 
     The regulatory capital requirements, as defined in the OTS capital
regulations, are 1.50% for Tangible Capital, 3.00% for Core Capital, and 8.00%
for Total Capital. Tangible and Core Capital are stated as a percentage of
adjusted total assets and Total Capital is stated as a percentage of
risk-weighted assets. The following table shows the Bank's compliance with
regulatory capital requirements:
 
<TABLE>
<CAPTION>
                               AT MARCH 31, 1996                AT SEPTEMBER 30, 1995              AT SEPTEMBER 30, 1994
                        --------------------------------   --------------------------------   --------------------------------
                         ACTUAL     REQUIRED    ACTUAL %    ACTUAL     REQUIRED    ACTUAL %    ACTUAL     REQUIRED    ACTUAL %
                        ---------   ---------   --------   ---------   ---------   --------   ---------   ---------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                     <C>         <C>         <C>        <C>         <C>         <C>        <C>         <C>         <C>
Stockholders'
  equity..............  $826,455                           $794,678                           $646,334
  Add: Net unrealized
    losses............     3,068                              6,647                                 --
  Less:
    Intangible
      assets..........   (21,030)                           (23,956)                           (32,907)
    Non-qualifying
      deferred tax
      assets..........   (37,617)                           (37,617)                           (81,864)
    Non-qualifying
      MSRs............      (112)                               (25)                            (3,244)
                        ---------                          ---------                          ---------
Tangible Capital......   770,764    $168,104       6.88%    739,727    $178,844       6.20%    528,319    $131,887       6.01%
  Add: Core deposit
    intangibles.......     9,463                             10,838                             15,259
                        ---------                          ---------                          ---------
Core Capital..........   780,227     336,492       6.96%    750,565     358,013       6.29%    543,578     264,232       6.17%
  General allowance
    for credit
    losses............    36,545                             36,855                             23,567
                        ---------                          ---------                          ---------
Total capital.........  $816,772     460,220      14.20%   $787,420     468,245      13.45%   $567,145     323,525      14.02%
                        =========                          =========                          =========
</TABLE>
 
     Notwithstanding the above capital requirements, the Bank's capital
requirements were established pursuant to the Forbearance Agreement issued
simultaneously with the Assistance Agreement. The OTS has taken the position,
with which the Bank disagrees, that the capital forbearances are no longer
available because of the enactment of the FIRREA. Despite the OTS position,
management believes that all significant waivers, approvals, and forbearances
related to the Bank's acquisition, including the capital forbearances, remain in
full force and effect following the enactment of FIRREA. Pursuant to the
Settlement Agreement, the Bank has retained all claims relating to the
forbearances against the United States of America, and on July 25, 1995, the
Bank, the Parent Company, and certain of their direct and indirect parent
entities filed suit against the United States of America in the Court of Federal
Claims for alleged failures of the United States to honor certain contractual
obligations, including obligations related to the Forbearance Agreement. The
lawsuit is in a preliminary stage.
 
     The Bank meets its fully phased-in capital requirements. OTS regulations
generally allow dividends to be paid without prior OTS approval under certain
conditions provided that the level of regulatory capital, following the payment
of such dividends, meets the fully phased-in capital requirements. At March 31,
1996 and September 30, 1995, there was an aggregate of approximately $186.5
million and $148.9 million available for the payment of dividends under these
requirements. See Note 21 for a discussion of subsequent events.
 
     The Bank's net income and stockholders' equity figures as presented in the
Consolidated Statements of Financial Condition and Operations in the Bank's
quarterly report on Form 10-Q for the quarter ended March 31, 1996 and the
Bank's annual report on Form 10-K for the year ended September 30, 1995 agree
 
                                      F-47
<PAGE>   180
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
with the information included in the Bank's Thrift Financial Report filed with
the OTS as of March 31, 1996 and as of September 30, 1995. The Bank's capital
level at March 31, 1996 and September 30, 1995, qualified it as
"well-capitalized", the highest of five tiers under applicable regulatory
definition.
 
16.  MINORITY INTEREST AND STOCKHOLDERS' EQUITY
 
MINORITY INTEREST
 
     The Bank is authorized by its charter to issue a total of 10,000,000 shares
of preferred stock. In fiscal 1995, the Bank publicly issued 4,000,000 shares,
$25 liquidation preference per share, of 9.60% noncumulative preferred stock
(par value $0.01) (the "Preferred Stock, Series B"). In fiscal 1993, the Bank
publicly issued 3,420,000 shares, $25 liquidation preference per share, of
10.12% noncumulative preferred stock (par value $0.01) (the "Preferred Stock,
Series A"). Costs incurred in connection with the stock issuances were recorded
as reductions of paid-in capital. These shares are not owned by the Parent
Company.
 
     Shares of the Series A and Series B Preferred Stock are not subject to
redemption prior to December 31, 1997 and September 30, 2000, except in the
event of certain mergers and other transactions. The shares of Series A and
Series B Preferred Stock are redeemable at the option of the Bank, in whole or
in part, at any time on or after December 31, 1997 or September 30, 2000, at the
redemption prices set forth in the table below:
 
<TABLE>
<CAPTION>
                                          SERIES B
            SERIES A                 BEGINNING SEPTEMBER                          DOLLAR EQUIVALENT
     BEGINNING DECEMBER 31,                  30,             REDEMPTION PRICE         PER SHARE
- --------------------------------    ---------------------    ----------------     -----------------
<S>                                 <C>                      <C>                  <C>
1997............................            2000                   105%           $     26.25
1998............................            2001                   104                  26.00
1999............................            2002                   103                  25.75
2000............................            2003                   102                  25.50
2001............................            2004                   101                  25.25
2002 and thereafter.............     2005 and thereafter           100                  25.00
</TABLE>
 
WARRANTS
 
     Warrants outstanding represent the right to purchase 158,823 shares of the
Bank's common stock for an exercise price of $0.01 per share. The warrants are
exercisable through December 29, 2004. The Bank agreed to make payments in lieu
of dividends to the holder of the warrants upon payment of dividends on the
Bank's common stock from December 28, 1993 through December 30, 1998. The
warrants will be redeemed upon the occurrence of the merger or liquidation of
the Bank or certain events constituting a change in control of the Bank's direct
or indirect parent entities, at a price equivalent to the value of the number of
shares of the Bank's common stock into which the warrants are exercisable, such
value to be derived from the consideration paid in connection with the merger,
liquidation, or change in control.
 
CAPITAL STOCK
 
     The authorized capital stock of the Parent Company, par value of $0.01,
consists of Preferred Stock and Common Stock, Class A, B, and C. Of the 2,500
shares of preferred stock and the 2,797 shares of Class B Common Stock
authorized, no shares were issued at March 31, 1996 and September 30, 1995 and
1994. At March 31, 1996 and September 30, 1995, authorized shares of Class A
Common Stock and Class C Common Stock were 22,500 and 2,797. The Class C Common
Stock shares have been privately sold to investors and are non-voting stock.
Holders of Class C Common Stock may, under certain circumstances, convert their
shares into the same number of shares of Class B Common Stock.
 
                                      F-48
<PAGE>   181
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
EARNINGS PER COMMON SHARE
     The table below presents information necessary for the computation of
earnings per common share, on both a primary and fully diluted basis (in
thousands, except earnings per share). The dilutive effect of the outstanding
Bank warrants has been considered in computing earnings per common share.
Average shares and per share results have been restated to reflect the 1,800 to
one stock conversion effective June 1996. See Note 21 for a discussion of
subsequent events.
 
<TABLE>
<CAPTION>
                                      FOR THE SIX MONTHS
                                        ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                    -----------------------   ------------------------------------
                                       1996         1995         1995         1994         1993
                                    ----------   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>          <C>
Income before extraordinary
  loss............................  $   26,759   $   23,659   $   41,719   $  108,970   $  141,919
Less: Bank's net income
  attributable to common stock
  equivalents on warrants.........      (1,791)      (1,622)      (2,895)      (6,451)      (8,730)
                                    ----------      -------      -------      -------     --------
Income before extraordinary loss
  applicable to common shares.....      24,968       22,037       38,824      102,519      133,189
Extraordinary loss................          --           --           --           --      (14,549)
                                    ----------      -------      -------      -------     --------
Net income applicable to common
  shares..........................  $   24,968   $   22,037   $   38,824   $  102,519   $  118,640
                                    ==========      =======      =======      =======     ========
Average number of common shares
  outstanding.....................      28,863       28,863       28,863       28,863       28,863
                                    ==========      =======      =======      =======     ========
Earnings per common share before
  extraordinary loss..............  $     0.87   $     0.76   $     1.35   $     3.55   $     4.61
Extraordinary loss per common
  share...........................          --           --           --           --         0.50
                                    ----------      -------      -------      -------     --------
Earnings per common share.........  $     0.87   $     0.76   $     1.35   $     3.55   $     4.11
                                    ==========      =======      =======      =======     ========
</TABLE>
 
17.  COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
     A petition for review has been filed in the United States Court of Appeals
for the Fifth Circuit seeking to modify, terminate, and set aside the order
approving the Acquisition, which involved substantially all of the Bank's
initial assets and liabilities. The same petitioner filed a Motion to Intervene
and a Complaint in Intervention in an action pending in the U.S. District Court
of Texas, also seeking to set aside the order approving the Acquisition. The
petitioner contends, in both cases, that it submitted the most favorable bid to
acquire the assets and liabilities of Old USAT and that it should have been
selected as the winning bidder.
 
     The Parent Company is not a party to either of these proceedings. The Bank
has intervened in the Fifth Circuit case and may file a Motion to Intervene in
the District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of the petitioner are barred by applicable
time limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Parent Company's financial
condition, results of operations, or liquidity.
 
     The Bank is involved in legal proceedings occurring in the ordinary course
of business that management believes, after consultation with legal counsel, are
not, in the aggregate, material to the financial condition, results of
operations, or liquidity of the Bank or the Parent Company.
 
     A substantial part of the Bank's business has involved the origination,
purchase, and sale of mortgage loans. During the past several years, numerous
individual claims and purported consumer class actions were commenced against a
number of financial institutions, their subsidiaries, and other mortgage lending
companies seeking civil statutory and actual damages and rescission under the
federal Truth In Lending Act (the "TILA"), as well as remedies for alleged
violations of various state unfair trade practices laws and restitution or
unjust enrichment in connection with certain mortgage loan transactions.
 
                                      F-49
<PAGE>   182
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Bank has a substantial mortgage loan servicing portfolio and maintains
escrow accounts in connection with this servicing. During the past several
years, numerous individual claims and purported consumer class action claims
were commenced against a number of financial institutions, their subsidiaries,
and other mortgage lending institutions generally seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the Real
Estate Settlement Practices Act and breach the lenders' contracts with
borrowers. Such claims also generally seek actual damages and attorney's fees.
 
     In addition to the foregoing, mortgage lending institutions have been
subjected to an increasing number of other types of individual claims and
purported consumer class action claims that relate to various aspects of the
origination, pricing, closing, servicing, and collection of mortgage loans and
that allege inadequate disclosure, breach of contract, or violation of state
laws. Claims have involved, among other things, interest rates and fees charged
in connection with loans, interest rate adjustments on adjustable-rate mortgage
loans, timely release of liens upon loan payoffs, the disclosure and imposition
of various fees and charges, and the placing of collateral protection insurance.
 
     While the Bank has had various claims similar to those discussed above
asserted against it, management does not expect these claims to have a material
adverse effect on the Bank's or the Parent Company's financial condition,
results of operations, or liquidity.
 
INSURANCE ASSESSMENT
     Congress has passed legislation, which is currently in joint conference
committee that, if it became law, would result in an assessment on all Savings
Association Insurance Fund ("SAIF")-insured deposits in such amounts that will
increase the SAIF Fund reserve ratio to 1.25% of SAIF-insured deposits. This
one-time assessment has been estimated in the range of 0.75% to 0.90% of
deposits. If this legislation became law, it could result in an assessment, net
of tax, payable by the Bank amounting to as much as $23.7 million to $28.5
million. Thereafter, SAIF premiums are expected to decline to levels
approximating BIF premiums. Management believes that the Bank will be able to
maintain its status as a "well-capitalized" institution after payment of any
assessment described above.
 
BAD DEBT RESERVE RECAPTURE
     The United States Congress has passed legislation that, if it became law,
would require recapture of a thrift's post-1987 tax bad debt reserve over a six
year period, with the opportunity to defer recapture by up to two years if
certain residential loan requirements are met. There would be no financial
statement impact from this recapture because a deferred tax liability has
already been provided for on the Bank's post-1987 tax bad debt reserves. At
September 30, 1995, the Bank has approximately $101 million of post-1987 tax bad
debt reserves. The current tax liability resulting from recapture of these
reserves would be reduced by NOLs available to offset this income.
 
FACILITIES OPERATIONS
     Future minimum payments on data processing agreements and significant
operating leases in effect at September 30, 1995 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                        YEARS ENDING
                                       SEPTEMBER 30,                                  AMOUNT
        ---------------------------------------------------------------------------  ---------
        <S>                                                                          <C>
           1996....................................................................   $19,884
           1997....................................................................    11,671
           1998....................................................................     8,937
           1999....................................................................     5,072
           2000....................................................................     1,495
           Thereafter..............................................................     8,678
                                                                                      -------
                                                                                      $55,737
                                                                                      =======
</TABLE>
 
     Total data processing and rental expense for the six months ended March 31,
1996 and 1995 and fiscal 1995, 1994, and 1993, under the same or similar
agreements as in the preceding table, after consideration of
 
                                      F-50
<PAGE>   183
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
certain credits and rental income, were $11.5 million, $11.5 million, $22.9
million, $22.4 million, and $21.5 million.
 
18.  FINANCIAL HIGHLIGHTS BY PRINCIPAL BUSINESS OPERATION
     The Bank operates as a fully integrated financial services company. This
business is conducted through the Community Banking, Financial Markets, and
Commercial Banking Groups, which comprise the Banking Segment, and the Mortgage
Banking Segment of the Bank. Summarized financial information by business
segment and for the Parent Company for the periods indicated, was as follows:
 
<TABLE>
<CAPTION>
                                                          FOR THE SIX MONTHS ENDED MARCH 31, 1996
                                                 ----------------------------------------------------------
                                                              MORTGAGE
                                                  BANKING      BANKING     PARENT
                                                  SEGMENT      SEGMENT     COMPANY    ELIMINATIONS COMBINED
                                                 ---------    ---------    -------    --------    ---------
<S>                                              <C>          <C>          <C>        <C>         <C>
                                                                       (IN THOUSANDS)
Revenues........................................ $ 123,856    $  49,842    $(1,366)   $ (5,791)   $ 166,541
Earnings before income taxes and minority
  interest......................................    64,121        3,006     (1,930)     (3,810)      61,387
Depreciation and amortization of intangibles....     4,594       11,132        488      (1,981)      14,233
Capital expenditures............................     2,750          239         --          --        2,989
Average identifiable assets..................... 11,295,739     634,013      4,707    (394,930)   11,539,529
Loan transfers to (from)........................   493,180     (493,180)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    11,895      (11,895)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (6,917)       6,917         --          --           --
</TABLE>
 
- ---------------
 
The elimination amounts reflect the following: (i) dividends received by the
Parent Company from the Bank, (ii) interest income and MSR amortization expense
relating to loans held by the Banking Segment serviced by the Mortgage Banking
Segment, and (iii) the single family mortgage warehouse funded by the Banking
Segment.
 
                                      F-51
<PAGE>   184
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                          FOR THE SIX MONTHS ENDED MARCH 31, 1995
                                                 ----------------------------------------------------------
                                                              MORTGAGE
                                                  BANKING      BANKING     PARENT
                                                  SEGMENT      SEGMENT     COMPANY    ELIMINATIONS COMBINED
                                                 ---------    ---------    -------    --------    ---------
<S>                                              <C>          <C>          <C>        <C>         <C>
                                                                       (IN THOUSANDS)
Revenues........................................ $  93,919    $  67,149    $    38    $ (6,827)   $ 154,279
Earnings before income taxes and minority
  interest......................................    37,223       17,029       (566)     (5,209)      48,477
Depreciation and amortization of intangibles....     6,194       10,149        488      (1,618)      15,213
Capital expenditures............................     1,123          105         --          --        1,228
Average identifiable assets..................... 9,359,478      452,593      9,587    (289,060)   9,532,598
Loan transfers to (from)........................   659,186     (659,186)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...     9,393       (9,393)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (5,604)       5,604         --          --           --
<CAPTION>

                                                           FOR THE YEAR ENDED SEPTEMBER 30, 1995
                                                 ----------------------------------------------------------
<S>                                              <C>          <C>        <C>         <C>         <C> 
Revenues........................................   203,115      119,601     (3,910)     (9,826)     308,980
Earnings before income taxes and minority
  interest......................................    82,163       19,357     (5,000)     (6,409)      90,111
Depreciation and amortization of intangibles....    12,305       20,965        976      (3,417)      30,829
Capital expenditures............................     5,859          273         --          --        6,132
Average identifiable assets..................... 10,258,857     482,965      8,061    (312,820)   10,437,063
Loan transfers to (from)........................ 1,012,771    (1,012,771)       --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    19,903      (19,903)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................   (12,672)      12,672         --          --           --

<CAPTION>
                                                           FOR THE YEAR ENDED SEPTEMBER 30, 1994
                                                 ----------------------------------------------------------
<S>                                              <C>          <C>        <C>         <C>         <C> 
Revenues........................................   189,378      115,544      1,279     (13,530)     292,671
Earnings before income taxes and minority
  interest......................................    73,757       24,404       (645)    (11,435)      86,081
Depreciation and amortization of intangibles....    16,560       10,696        977      (2,095)      26,138
Capital expenditures............................     5,456        4,962         --          --       10,418
Average identifiable assets..................... 8,174,275      717,551      4,401    (612,600)   8,283,627
Loan transfers to (from)........................ 1,319,020    (1,319,020)       --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    33,173      (33,173)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................   (10,223)      10,223         --          --           --

<CAPTION>
                                                           FOR THE YEAR ENDED SEPTEMBER 30, 1993
                                                 ----------------------------------------------------------
<S>                                              <C>          <C>        <C>         <C>         <C> 
Revenues........................................   221,476      121,028      1,070     (15,224)     328,350
Earnings before income taxes, minority interest,
  and extraordinary loss........................   106,015       31,492         20     (15,224)     122,303
Depreciation and amortization of intangibles....    20,757        8,445        694          --       29,896
Capital expenditures............................     6,145        8,256         --          --       14,401
Average identifiable assets..................... 7,193,808      981,711      7,790    (864,532)   7,318,777
Loan transfers to (from)........................   528,666     (528,666)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    43,103      (43,103)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (8,256)       8,256         --          --           --
</TABLE>
 
     Revenues are comprised of net interest income (before the provision for
credit losses) and non-interest income, and, in the case of Parent Company only
revenue, dividends received from the Bank. Interest costs incurred by the Parent
Company are included in its results above since they relate to long-term debt
and are not directly attributable to a specific segment. Earnings before income
taxes, minority interest, and extraordinary loss equal revenue, less the
provision for credit losses and non-interest expenses. Non-interest expenses of
the Bank are fully allocated to each segment of the Bank. Non-interest expenses
incurred by support departments that are directly attributable to a segment are
charged to the appropriate segment.
 
                                      F-52
<PAGE>   185
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
General corporate overhead expenses not specifically identified to an individual
segment, but necessary for the maintenance of the Bank as a going concern, are
also allocated to the two segments. Parent Company expenses are not allocated to
the Bank's business segments.
 
     For segment reporting purposes, the value of servicing related to loans
purchased from third parties by the Banking Segment is segregated from the
original loan basis and is allocated to the Mortgage Banking Segment. The
amortization of this capitalized amount approximated $1.2 million and $1.2
million or the six months ended March 31, 1996 and 1995, respectively, $2.4
million for fiscal 1995, and $1.8 million for fiscal 1994, and is reflected in
the Mortgage Banking Segment figures above.
 
     For loans transferred from the Mortgage Banking Segment to the Banking
Segment, the difference, if any, between the Banking Segment's "purchase price"
and the loan's actual Book Value is retained by the Mortgage Banking Segment at
the time of transfer. The amount retained is amortized to operations of the
Mortgage Banking Segment and approximated $736,000 and $443,000 for the six
months ended March 31, 1996 and 1995, respectively, $1.0 million for fiscal
1995, and $283,000 for fiscal 1994.
 
                                      F-53
<PAGE>   186
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
19.  QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     The following table represents summarized data for the first two quarters
in fiscal 1996 and each of the quarters in fiscal 1995 and 1994 (dollars in
thousands, except earnings per share).
 
<TABLE>
<CAPTION>
                            1996                             1995                                        1994
                     -------------------   -----------------------------------------   -----------------------------------------
                      SECOND     FIRST      FOURTH     THIRD      SECOND     FIRST      FOURTH     THIRD      SECOND     FIRST
                     QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                  <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Interest income..... $203,436   $217,785   $224,308   $194,865   $172,992   $154,594   $133,563   $119,136   $118,333   $123,674
Interest expense....  148,548    160,741    166,580    146,220    129,915    110,045     93,118     76,998     73,617     77,191
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
    Net interest
      income........   54,888     57,044     57,728     48,645     43,077     44,549     40,445     42,138     44,716     46,483
Provision for credit
  losses............    3,181      2,669      9,663     10,473      3,223        934      3,421        798      1,298      1,480
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net interest income
  after provision
  for credit
  losses............   51,707     54,375     48,065     38,172     39,854     43,615     37,024     41,340     43,418     45,003
Non-interest
  income............   27,687     26,922     25,201     23,127     30,641     36,012     28,479     26,453     27,909     36,048
Non-interest
  expense...........   50,012     49,292     52,466     40,465     51,553     50,092     50,607     53,723     45,133     50,130
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Income before income
  taxes and minority
  interest..........   29,382     32,005     20,800     20,834     18,942     29,535     14,896     14,070     26,194     30,921
Income tax expense
  (benefit).........   12,144     13,134      8,169      9,060      8,062     12,124        681    (38,551)     5,751        220
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net income before
  minority
  interest..........   17,238     18,871     12,631     11,774     10,880     17,411     14,215     52,621     20,443     30,701
Less minority
  interest:
    Subsidiary
      preferred
      stock
      dividends.....    4,563      4,563      4,111      2,163      2,163      2,163      2,164      2,163      2,163      2,163
    Payments in lieu
      of
      dividends.....       --        224         --         71         --        306         --        298         59         --
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
    Net Income...... $ 12,675   $ 14,084   $  8,520   $  9,540   $  8,717   $ 14,942   $ 12,051   $ 50,160   $ 18,221   $ 28,538
                     ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Net income
  applicable to
  common stock...... $ 11,824   $ 13,144   $  7,936   $  8,851   $  8,086   $ 13,951   $ 11,531   $ 47,199   $ 17,038   $ 26,751
Earnings per common
  share............. $   0.41   $   0.46   $   0.28   $   0.31   $   0.28   $   0.48   $   0.40   $   1.63   $   0.59   $   0.93
Average common
  shares and common
  stock equivalents
  outstanding.......   28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863
</TABLE>
 
     The 1995 figures have been restated to reflect the implementation of SFAS
No. 122 effective October 1, 1994. See Notes 1 and 6. Average shares and per
share results have been restated to reflect the 1,800 to one stock conversion
effective June 1996. See Note 21 for a discussion of subsequent events.
 
                                      F-54
<PAGE>   187
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
20.  CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
 
     The condensed financial statements of the Parent Company do not include all
of the information and notes normally included with financial statements
prepared in accordance with generally accepted accounting principles. See Note
21 for a discussion of subsequent events.
 
                                 PARENT COMPANY
 
                  CONDENSED STATEMENTS OF FINANCIAL CONDITION
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  AT
                                                                MARCH        AT SEPTEMBER 30,
                                                                 31,       --------------------
                                                                 1996        1995        1994
                                                               --------    --------    --------
<S>                                                            <C>         <C>         <C>
ASSETS
Cash and cash equivalents...................................   $      1    $      1    $      1
Securities purchased under agreements to resell.............        682       2,121         710
Investment in Bank United...................................    640,955     609,178     560,834
Intangible assets...........................................      2,075       2,563       3,539
Other assets................................................      1,775       1,287       5,398
                                                               --------    --------    --------
TOTAL ASSETS................................................   $645,488    $615,150    $570,482
                                                               ========    ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Senior Notes................................................   $115,000    $115,000    $115,000
Other liabilities...........................................      4,047       4,047       4,120
                                                               --------    --------    --------
          Total liabilities.................................    119,047     119,047     119,120
                                                               --------    --------    --------
STOCKHOLDERS' EQUITY
Common stock
     Class A................................................          1           1           1
     Class C................................................          1           1           1
Paid-in capital.............................................    118,009     118,009     121,767
Retained earnings...........................................    411,498     384,739     343,020
Unrealized gains (losses) on subsidiary's securities and
  mortgage-backed securities available for sale, net of
  tax.......................................................     (3,068)     (6,647)    (13,427)
                                                               --------    --------    --------
          Total stockholders' equity........................    526,441     496,103     451,362
                                                               --------    --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................   $645,488    $615,150    $570,482
                                                               ========    ========    ========
</TABLE>
 
     These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-55
<PAGE>   188
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                                 PARENT COMPANY
                       CONDENSED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                 FOR THE SIX
                                                MONTHS ENDED
                                                  MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                              -----------------   ---------------------------------
                                               1996      1995      1995         1994         1993
                                              -------   -------   -------     --------     --------
<S>                                           <C>       <C>       <C>         <C>          <C>
INCOME
Dividends from the Bank...................... $ 3,810   $ 5,209   $ 6,409     $ 11,435     $ 15,224
Short-term interest-earning assets...........      29        31        88           21          107
                                              --------  --------  --------    --------     --------
          Total income.......................   3,839     5,240     6,497       11,456       15,331
                                              --------  --------  --------    --------     --------
EXPENSE
Interest expense -- note payable to related
  party......................................      --        --        --           --          601
Interest expense -- long-term debt...........      --        --        --           --       10,214
Interest expense -- Senior Notes.............   5,205     5,202    10,407       10,177        3,446
Amortization of intangibles..................     488       488       976          977          694
Other........................................      76       116       114          947          356
                                              --------  --------  --------    --------     --------
          Total expense......................   5,769     5,806    11,497       12,101       15,311
                                              --------  --------  --------    --------     --------
INCOME (LOSS) BEFORE UNDISTRIBUTED INCOME OF
  BANK, INCOME TAXES, AND EXTRAORDINARY
  LOSS.......................................  (1,930)     (566)   (5,000)        (645)          20
  Equity in undistributed income of the
     Bank....................................  28,198    23,675    45,322      104,316      141,910
                                              --------  --------  --------    --------     --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
  LOSS.......................................  26,268    23,109    40,322      103,671      141,930
  Income tax (benefit) expense...............    (491)     (550)   (1,397)      (5,299)          11
                                              --------  --------  --------    --------     --------
INCOME BEFORE EXTRAORDINARY LOSS.............  26,759    23,659    41,719      108,970      141,919
Extraordinary loss -- early extinguishment of
  debt.......................................      --        --        --           --      (14,549)
                                              --------  --------  --------    --------     --------
NET INCOME................................... $26,759   $23,659   $41,719     $108,970     $127,370
                                              ========  ========  ========    ========     ========
</TABLE>
 
     These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-56
<PAGE>   189
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                                 PARENT COMPANY
 
                       CONDENSED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                             FOR THE SIX MONTHS      FOR THE YEAR ENDED SEPTEMBER
                                               ENDED MARCH 31,                   30,
                                             -------------------    ------------------------------
                                               1996       1995        1995       1994       1993
                                             --------   --------    --------   --------   --------
<S>                                          <C>        <C>         <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................  $ 26,759   $ 23,659    $ 41,719   $108,970   $127,370
Adjustments to reconcile net income to net
  cash (used) provided by operating
  activities:
     Equity in undistributed income of the
       Bank................................   (28,198)   (23,675)    (45,322)  (104,316)  (141,910)
     Amortization of intangibles...........       488        488         976        977        694
     Change in other assets................      (488)     3,566       4,111     (5,393)    (1,594)
     Change in other liabilities...........        --         26         (73)       159      2,670
                                             --------   --------    --------   --------   --------
          Net cash (used) provided by
            operating activities...........    (1,439)     4,064       1,411        397    (12,770)
                                             --------   --------    --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under
  agreements to resell.....................     1,439     (4,064)     (1,411)      (397)      (313)
                                             --------   --------    --------   --------   --------
          Net cash provided (used) by
            investing activities...........     1,439     (4,064)     (1,411)      (397)      (313)
                                             --------   --------    --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
     Repayment of long-term debt and note
       payable to related party............        --         --          --         --   (106,090)
     Proceeds from issuance of Senior
       Notes...............................        --         --          --         --    115,000
                                             --------   --------    --------   --------   --------
          Net cash provided by financing
            activities.....................        --         --          --         --      8,910
                                             --------   --------    --------   --------   --------
NET DECREASE IN CASH AND CASH
  EQUIVALENTS..............................        --         --          --         --     (4,173)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
  PERIOD...................................         1          1           1          1      4,174
                                             --------   --------    --------   --------   --------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD...................................  $      1   $      1    $      1   $      1   $      1
                                             ========   ========    ========   ========   ========
</TABLE>
 
     These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-57
<PAGE>   190
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
21.  SUBSEQUENT EVENTS
 
     Name Change.  In June 1996, the Company changed its name from USAT Holdings
Inc. to Bank United Corp. and the Bank changed its name from Bank United of
Texas to Bank United.
 
     Dividend Payment.  On May 6, 1996, the Bank paid a $100 million dividend to
the Company on the Bank Common Stock and a related contractually required
payment to the FDIC in lieu of dividends in the amount of $5.9 million. On the
same day, the Company paid a dividend on its common stock in the amount of $100
million.
 
     Restructuring.  Prior to June 1996, the Company was a subsidiary of
Hyperion Holdings Inc., a Delaware corporation ("Hyperion Holdings"), which was
a subsidiary of Hyperion Partners L.P., a Delaware limited partnership
("Hyperion Partners"). In June 1996, the following actions were taken
(collectively, the "Restructuring"): (i) Hyperion Holdings exchanged shares of a
newly created class of its nonvoting common stock for certain shares of its
voting common stock held by Hyperion Partners; (ii) Hyperion Partners then
distributed the Hyperion Holdings common stock owned by it to its limited and
general partners in accordance with the terms of the limited partnership
agreement of Hyperion Partners (the "Distribution") and; (iii) following the
Distribution, Hyperion Holdings was merged with and into the Company (the
"Merger"). As a result of the Merger, the common stockholders of Hyperion
Holdings (i.e. the limited and general partners of Hyperion Partners) received
shares of Class A voting and Class B nonvoting Common Stock of the Company. As
of the date of the Merger, Hyperion Holdings had no significant assets,
liabilities or business other than its investment in the Company. The Merger was
accounted for in a manner similar to a pooling of interests. Due to the
immaterial nature of the assets, liabilities and operations of Hyperion Holdings
prior to the Merger, prior period results were not restated.
 
     Stock Conversion.  Prior to the Merger, the Company had outstanding 13,238
shares of Class A voting and 2,797 shares of Class C nonvoting Common Stock.
Subsequent to the Restructuring and an 1,800 to one stock conversion, the
Company had a total of 28,863,000 shares of Common Stock outstanding as follows:
Class A Common Stock (voting) -- 23,828,400 shares, Class B
(nonvoting) -- 5,034,600 shares, and no shares of Class C Common Stock (which
were cancelled upon their conversion to Class B Common Stock in the Merger). The
Company also filed a registration statement in June 1996 with the Securities and
Exchange Commission to offer           shares of the Class A Common Stock to the
public.
 
     Recognition of Tax Benefits.  The Parent Company's Certificate of
Incorporation and By-Laws were restated with the intent to preserve certain
beneficial tax attributes limiting disposition of Class A Common Stock and other
interests in the Parent Company by certain stockholders. These limitations
allowed the recognition of tax benefits in June 1996 for the expected
utilization of NOLs. These tax benefits were not recognized in prior periods due
to limitations on the utilization of NOLs if an ownership change had occurred.
In June 1996 the Parent Company and the Bank entered into a federal tax sharing
agreement. This agreement results in the recognition of a tax benefit for the
expected utilization of the Parent Company's NOLs by the Bank. A total tax
benefit of $101.7 million was recognized as a reduction of income tax expense
and an increase in the net deferred tax asset.
 
     Executive Management Compensation Plan.  In June 1996, the Company Board
approved an Executive Management Compensation Plan (the "Compensation Plan")
containing the following provisions: (i) a cash bonus of $  million payable by
     1996; (ii) the award of         shares of Company Class A Common Stock with
restrictions on its transferability for a period of three years from its
issuance; and (iii) issuance of           options for purchase of an equivalent
number of shares of Company Class A Common Stock; such options vest ratably over
three years from the date of grant. The options' exercise price approximates the
fair market value at the date of the grant and will expire if not exercised in
June 2003.
 
                                      F-58
<PAGE>   191
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Compensation expense totaling $10 million, $6.2 million net of tax, will be
recognized in the third quarter of 1996 for the cash bonus and the restricted
stock award. Since the stock options have an exercise price approximating the
fair value of the Parent Company's stock, compensation expense is not recognized
for their issuance.
 
     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.
 
                                      F-59
<PAGE>   192
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     These transactions are illustrated in the March 31, 1996 Pro Forma
Condensed Consolidated Statement of Financial Condition and the March 31, 1996
Pro Forma Condensed Consolidated Statement of Operations.
 
       PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                       PRO FORMA ADJUSTMENTS
                                           HISTORICAL     ------------------------------------------------     PRO FORMA
                                           MARCH 31,      DIVIDEND        TAX        ISSUANCE   COMPENSATION   MARCH 31,
                                              1996         PAYMENT      BENEFIT       COSTS        PLAN           1996
                                           ----------     ---------     --------     -------    ----------     ----------
<S>                                        <C>            <C>           <C>          <C>        <C>            <C>
                                           (UNAUDITED)
ASSETS
  Cash and cash equivalents..............  $  135,691     $      --     $     --     $    --     $     --      $  135,691
  Securities purchased under agreements
    to resell and federal funds sold.....     659,279      (105,900)          --      (2,000)      (4,000)        547,379
  Trading account assets.................       1,267            --           --          --           --           1,267
  Securities.............................      58,351            --           --          --           --          58,351
  Mortgage-backed securities.............   1,954,070            --           --          --           --       1,954,070
  Loans..................................   7,878,080            --           --          --           --       7,878,080
  Other assets...........................     579,898            --      101,700          --           --         681,598
                                           ----------     ---------     --------     -------    ----------     ----------
      Total Assets.......................  $11,266,636    $(105,900)    $101,700     $(2,000)    $ (4,000)     $11,256,436
                                           ==========     =========     ========     =======    ==========     ==========
LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY
LIABILITIES
  Deposits...............................  $4,963,321     $      --     $     --     $    --     $     --      $4,963,321
  Borrowings.............................   5,088,959            --           --          --           --       5,088,959
  Other liabilities......................     502,415            --           --          --       (3,800)        498,615
                                           ----------     ---------     --------     -------    ----------     ----------
      Total liabilities..................  10,554,695            --           --          --       (3,800)     10,550,895
MINORITY INTEREST
  Preferred stock issued by consolidated
    subsidiary...........................     185,500            --           --          --           --         185,500
STOCKHOLDERS' EQUITY.....................     526,441      (105,900)     101,700      (2,000)        (200)        520,041
                                           ----------     ---------     --------     -------    ----------     ----------
TOTAL LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY...................  $11,266,636    $(105,900)    $101,700     $(2,000)    $ (4,000)     $11,256,436
                                           ==========     =========     ========     =======    ==========     ==========
</TABLE>
 
                                      F-60
<PAGE>   193
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                       HISTORICAL                                                            PRO FORMA
                                      FOR THE SIX                    PRO FORMA ADJUSTMENTS                  FOR THE SIX
                                      MONTHS ENDED     -------------------------------------------------    MONTHS ENDED
                                       MARCH 31,       DIVIDEND        TAX        ISSUANCE   COMPENSATION    MARCH 31,
                                          1996          PAYMENT      BENEFIT       COSTS        PLAN            1996
                                     --------------    ---------     --------     -------    -----------   --------------
<S>                                  <C>               <C>           <C>          <C>        <C>           <C>
                                      (UNAUDITED)
INTEREST INCOME
  Interest income...................   $  421,221      $      --     $     --     $    --      $    --       $  421,221
  Interest expense..................      309,289             --           --          --           --          309,289
                                     --------------    ---------     --------     -------    -----------   --------------
      Net interest income...........      111,932             --           --          --           --          111,932
  Provision for credit losses.......        5,850             --           --          --           --            5,850
                                     --------------    ---------     --------     -------    -----------   --------------
      Net interest income after
        provision for credit
        losses......................      106,082             --           --          --           --          106,082
NON-INTEREST INCOME
  Net gains (losses)
    Sales of single family servicing
      rights and single family
      warehouse loans...............       19,157             --           --          --           --           19,157
    Securities and mortgage-backed
      securities....................        2,863             --           --          --           --            2,863
    Other loans.....................        3,485             --           --          --           --            3,485
    Loan servicing fees and
      charges.......................       22,107             --           --          --           --           22,107
    Other income....................        6,997             --           --          --           --            6,997
                                     --------------    ---------     --------     -------    -----------   --------------
      Total non-interest income.....       54,609             --           --          --           --           54,609
NON-INTEREST EXPENSE
  Compensation and benefits.........       39,898             --           --          --       10,000           49,898
  Occupancy.........................        9,439             --           --          --           --            9,439
  Data processing...................        8,120             --           --          --           --            8,120
  Amortization of intangibles.......        9,801             --           --          --           --            9,801
  Other.............................       32,046             --           --          --           --           32,046
                                     --------------    ---------     --------     -------    -----------   --------------
      Total non-interest expense....       99,304             --           --          --       10,000          109,304
                                     --------------    ---------     --------     -------    -----------   --------------
INCOME BEFORE TAXES AND MINORITY
  INTEREST..........................       61,387             --           --          --      (10,000)          51,387
Income tax expense (benefit)........       25,278             --     (101,700)         --       (3,800)         (80,222)
                                     --------------    ---------     --------     -------    -----------   --------------
Net Income Before Minority
  Interest..........................       36,109             --      101,700          --       (6,200)         131,609
  Less minority interest:
    Preferred Stock Dividends.......        9,126             --           --          --           --            9,126
    Payments in lieu of dividends...          224          5,900           --          --           --            6,124
                                     --------------    ---------     --------     -------    -----------   --------------
Net Income..........................   $   26,759      $  (5,900)    $101,700     $    --      $(6,200)      $  116,359
                                     ==============    =========     ========     =======    ===========   ==============
EARNINGS PER COMMON SHARE...........   $     0.87
                                     --------------
                                     --------------
</TABLE>
 
                                      F-61
<PAGE>   194
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The historical average number of common shares outstanding used in
computing earnings per common share for the six months ended March 31, 1996 were
28,863,000 and reflects the 1,800 to one stock conversion in June 1996. The pro
forma average number of common shares outstanding have been adjusted to give
effect to the shares of restricted stock issued in accordance with the
Compensation Plan, as though these shares were issued on October 1, 1995.
 
     The following table shows the Bank's regulatory capital ratios on a
historical and a pro forma basis:
 
<TABLE>
<CAPTION>
                                                                         MARCH 31,
                                                                   ----------------------
                                                                      1996        1996
                                                                   HISTORICAL   PRO FORMA
                                                                   ----------   ---------
        <S>                                                        <C>          <C>
        Tangible Capital..........................................     6.88%        5.89%
        Core Capital..............................................     6.96         5.97%
        Total Capital.............................................    14.20        12.12%
</TABLE>
 
     The Parent Company's and the Bank's dividend restrictions on a historical
and a pro forma basis follows:
 
<TABLE>
<CAPTION>
                                                                         MARCH 31,
                                                                   ----------------------
                                                                      1996        1996
                                                                   HISTORICAL   PRO FORMA
                                                                   ----------   ---------
        <S>                                                        <C>          <C>
        Parent Company
             Dividend Limitation-Senior Note Indenture............  $ 123,746   $  62,672
        Bank
             Dividend Limitation-OTS Regulations..................  $ 186,460   $ 159,577
</TABLE>
 
                                      F-62
<PAGE>   195
 
- ------------------------------------------------------
- ------------------------------------------------------
 
     NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
                            ------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................     3
Risk Factors..........................    11
The Company...........................    18
Use of Proceeds.......................    20
Dividend Policy.......................    20
Capitalization........................    21
Selected Consolidated Financial and
  Other Data..........................    23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................    26
Business..............................    52
Regulation............................    74
Description of Properties.............    96
Legal Proceedings.....................    96
Management............................    98
Selling Stockholders..................   117
Description of Capital Stock..........   120
Underwriting..........................   126
Legal Matters.........................   127
Experts...............................   127
Available Information.................   127
Index to Consolidated Financial
  Statements..........................   F-1
</TABLE>
 
     UNTIL                , 1996 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
 
                                             SHARES
 
                               BANK UNITED CORP.
 
                              CLASS A COMMON STOCK
                            ------------------------
 
                                   PROSPECTUS
                            ------------------------
 
                              MERRILL LYNCH & CO.
 
                                LEHMAN BROTHERS
 
                               SMITH BARNEY INC.
                                            , 1996
 
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>   196
 
                PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission (the "Commission") registration fee, the
National Association of Securities Dealers, Inc. ("NASD") filing fee and the
NASDAQ listing fee.
 
<TABLE>
<CAPTION>
                                                                            PAYABLE BY
                                                                          THE REGISTRANT
                                                                          --------------
        <S>                                                               <C>
        SEC registration fee............................................     $
        NASD filing fee.................................................
        NASDAQ listing fee..............................................
        Blue Sky fees and expenses......................................
        Accounting fees and expenses....................................
        Legal fees and expenses.........................................
        Printing and engraving expenses.................................
        Miscellaneous fees and expenses.................................
                                                                          --------------
                  Total.................................................     $
</TABLE>
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by them in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation, a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions, and the
statute requires court approval before there can be any indemnification where
the person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.
 
     The Restated Certificate of Incorporation of the Company (the
"Certificate") provides that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, will be indemnified and held harmless by
the Company to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss reasonably incurred or
suffered by such person in connection therewith. Such right to indemnification
includes the right to have the Company pay the expenses incurred in defending
any such proceeding in advance of its final disposition, subject to the
provisions of the DGCL. Such rights are not exclusive of any other right which
any person may have or thereafter acquire under any statute, provision of the
Certificate, By-Laws, agreement, vote of stockholders or disinterested directors
or otherwise. No repeal or modification of such provision will in any way
diminish or
 
                                      II-1
<PAGE>   197
 
adversely affect the rights of any director, officer, employee or agent of the
Company thereunder in respect of any occurrence or matter arising prior to any
such repeal or modification. The Certificate also specifically authorizes the
Company to maintain insurance and to grant similar indemnification rights to
employees or agents of the Company.
 
     The DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
 
     The Certificate provides that a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except, if required by the DGCL as
amended from time to time, for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the amendment
nor repeal of such provision will eliminate or reduce the effect of such
provision in respect of any matter occurring, or any cause of action, suit or
claim that, but for such provision, would accrue or arise prior to such
amendment or repeal.
 
     The Purchase Agreement provides for indemnification by the Underwriters of
the registrant, its Directors and officers, and by the registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act, and affords certain rights of contribution with respect thereto.
 
     In addition, Lewis S. Ranieri, Salvatore A. Ranieri, and Scott A. Shay, who
are directors of the Company, may be entitled to indemnification from Hyperion
Partners L.P. and Hyperion Ventures L.P., the former upstream affiliates of the
Company. Such former upstream affiliates, at their sole discretion, may elect to
indemnify other persons who serve as directors or officers of the Company.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     Not applicable.
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     (a) Exhibits. The following exhibits are filed as part of this Registration
Statement.
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
<S>              <C>
   1.1*          -- Underwriting Agreement.
   2.1           -- Form of Letter Agreement, by and among the general and limited partners of
                    Hyperion Partners, L.P., dated as of June 17, 1996, relating to certain
                    transactions consummated prior to the Offering.
   2.2*          -- Merger Agreement, dated as of June 17, 1996, by and between the Company and
                    Hyperion Holdings relating to the Merger.
   3.1           -- Form of Restated Certificate of Incorporation of the Registrant, as amended.
   3.2           -- Form of By-Laws of the Registrant.
   4.1           -- Indenture, dated as of May 15, 1993, between the Registrant and Bank of New
                    York, as Trustee, relating to the Registrant's 8.05% Senior Notes due May
                    15, 1998.
   4.2           -- Form of 8.05% Senior Note due May 15, 1998 (included in the Indenture filed
                    as Exhibit 4.1 hereto).
   4.3           -- Exchange and Registration Rights relating to Registrant's 8.05% Senior Notes
                    due May 15, 1998.
</TABLE>
 
                                      II-2
<PAGE>   198
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
<S>              <C>
   4.4           -- First Supplemental Indenture, dated as of January 23, 1995, between the
                    Registrant and the Bank of New York, as Trustee, relating to Registrant's
                    8.05% Senior Notes due May 15, 1998.
   5.1*          -- Opinion and consent of  ______________ .
   8*            -- Opinion and consent of  ______________ (Federal Tax Matters).
  10.1           -- Assistance Agreement, dated December 30, 1988, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC.
  10.1a          -- Settlement and Termination Agreement, dated as of December 23, 1993, among
                    the Bank, the Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.
  10.1b          -- Tax Benefits Agreement, dated December 28, 1993, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.
  10.2           -- Acquisition Agreement, dated December 30, 1988, between the Bank and the
                    FSLIC.
  10.3           -- Warrant Agreement, dated December 30, 1988, between the Bank and the FSLIC.
  10.3a          -- Amended and Restated Warrant Agreement dated December 28, 1993, between the
                    Bank and the FDIC.
  10.4           -- Regulatory Capital Maintenance Agreement, dated December 30, 1988 among the
                    Bank, the Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC
                    (terminated).
  10.5           -- Federal Stock Charter of the Bank and First Amendment to charter approved on
                    August 26, 1992.
  10.6           -- Amended and Restated Federal Stock Charter of the Bank and Second Amendment
                    approved on October 30, 1992.
  10.6a          -- Third Amendment to the Federal Stock Charter of the Bank approved on April
                    23, 1996.
  10.6b          -- Amended and Restated Bylaws of the Bank.
  10.7           -- Specimen Preferred Stock, Series A, certificate, $25.00 per share stated
                    value of the Bank.
  10.7a          -- Certificate of Designation of Noncumulative Preferred Stock, Series A, of
                    the Bank.
  10.7b          -- Specimen Preferred Stock, Series B, certificate, $25.00 per share stated
                    value, of the Bank.
  10.7c          -- Certificate of Designation of Noncumulative Preferred Stock, Series B, of
                    the Bank.
  10.8           -- Data Processing Agreement, dated January 1, 1992, between the Bank and
                    Systematics Financial Services, Inc., and First Amendment (dated October 28,
                    1992) and Second Amendment (dated September 1, 1992).
  10.8a          -- Third Amendment, dated December 17, 1993, to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.8b          -- Fourth Amendment, dated March 28, 1994, to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.8c          -- Fifth Amendment, dated April 1, 1994 to the Data Processing Agreement, dated
                    January 1, 1992, between the Bank and Systematics Financial Services, Inc.
  10.8d          -- Sixth Amendment, dated February 26, 1996 to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.9           -- Management and Consulting Services Agreement, dated January 1, 1992, between
                    the Bank and Systematics Financial Services, Inc., and First Amendment
                    (dated March 18, 1992) and Second Amendment (dated September 1, 1992).
  10.10          -- Lease Agreement, dated April 1, 1989, between the Bank and Homart
                    Development Co. (Leased premises at 3200 Southwest Freeway) and First
                    Amendment thereto dated January 31, 1990.
  10.10a         -- Second Amendment, dated November 14, 1994 to Lease Agreement dated April 1,
                    1989, between the Bank and Homart Development Co. (assigned to HD Delaware
                    Properties, Inc.).
  10.10b         -- Third Amendment, dated January 8, 1996 to Lease Agreement dated April 1,
                    1989 between the Bank and Homart Development Co. (predecessor in interest of
                    HMS Office, L.P.).
</TABLE>
 
                                      II-3
<PAGE>   199
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
<S>              <C>
  10.11          -- Lease Agreement, dated November 20, 1990, between the Bank and Greenway
                    Plaza, LTD. (Leased premises at 3800 Buffalo Speedway).
  10.12          -- Employment Agreement, dated March 18, 1991, between the Bank and Barry C.
                    Burkholder.
  10.12a         -- Amendment, dated April 10, 1996, to the Employment Agreement between the
                    Bank and Barry C. Burkholder.
  10.13          -- Letter Agreement Related to Employment, dated April 4, 1990, between the
                    Bank and Anthony J. Nocella.
  10.14          -- Letter Agreement Related to Employment, dated June 18, 1990 between the Bank
                    and George R. Bender.
  10.15          -- Letter Agreement Related to Employment, dated April 6, 1990, between the
                    Bank and Jonathon K. Heffron.
  10.16          -- Letter Agreement Related to Employment, dated May 10, 1991, between the Bank
                    and Leslie H. Green.
  10.17          -- Management Incentive Plan, dated April 20, 1992.
  10.18          -- Letter Agreement, dated January 5, 1990, between Hyperion Partners and
                    certain shareholders of the Registrant with respect to the provision of
                    managerial assistance to the Registrant.
  10.22          -- Supplemental Executive Savings Plan of the Bank.
  10.23          -- Directors Supplemental Savings Plan of the Bank.
  12*            -- Statement re: Calculation of Ratios of Earnings to Fixed Charges.
  21*            -- Subsidiaries of the Registrant.
  23.1*          -- Consent of Bryan Cave LLP (included in Exhibit 5.1).
  23.2*          -- Consent of Deloitte & Touche LLP, independent auditors.
  24             -- Powers of Attorney (see the signature pages to the Form S-4 Registration
                    Statement).
  26*            -- Statement of Eligibility and Qualification of Trustee on Form T-1 of the
                    Bank of New York under the Trust Indenture Act of 1939.
  99.2*          -- Exchange Agent Agreement between Registrant and Bank of New York, as
                    Exchange Agent.
  99.3           -- Complaint filed by the Registrant and certain of its affiliates against the
                    FDIC and certain other governmental agencies in the Southern District of
                    Texas, Galveston Division, C.A. No. G-93-461.
</TABLE>
 
- ---------------
 
  * To be filed by amendment.
 
     (b) Financial Statement Schedules.
 
     The Consolidated Financial Statements listed in the Index to Consolidated
Financial Statements contained in the Offering Circular are hereby incorporated
herein by reference.
 
     Schedules to the Consolidated Financial Statements are not required under
the related instructions or are inapplicable, and therefore have been omitted.
 
ITEM 17.  UNDERTAKINGS.
 
     The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing of the Offering specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy
 
                                      II-4
<PAGE>   200
 
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
 
     The undersigned registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new Registration Statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-5
<PAGE>   201
 
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 18TH DAY OF
JUNE, 1996.
                                          BANK UNITED CORP.
 
                                          By    /s/  BARRY C. BURKHOLDER
 
                                            ------------------------------------
                                            CHAIRMAN OF THE BOARD, PRESIDENT AND
                                                  CHIEF EXECUTIVE OFFICER
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT HAS BEEN
SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE DATES
INDICATED BELOW.
 
<TABLE>
<CAPTION>
                 SIGNATURES                                  TITLE                     DATE
- ---------------------------------------------   -------------------------------   ---------------
<S>                                             <C>                               <C>
(1)  Principal Executive Officer:
                     /s/  LEWIS S.                  Chairman of the Board,          June 18, 1996
                    RANIERI                              President and
- ---------------------------------------------       Chief Executive Officer
              Lewis S. Ranieri
(2)  Principal Financial and Accounting
  Officer:
            /s/  ROBERT A. PERRO                      Vice President and            June 18, 1996
- ---------------------------------------------       Chief Financial Officer
               Robert A. Perro
(3)  Directors:
            /s/  LEWIS S. RANIERI                          Director                 June 18, 1996
- ---------------------------------------------
              Lewis S. Ranieri
          /s/  SALVATORE A. RANIERI                        Director                 June 18, 1996
- ---------------------------------------------
            Salvatore A. Ranieri
             /s/  SCOTT A. SHAY                            Director                 June 18, 1996
- ---------------------------------------------
                Scott A. Shay
</TABLE>
 
                                      II-6
<PAGE>   202
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
<S>              <C>                                                                        <C>
   1.1*          -- Underwriting Agreement................................................
   2.1           -- Form of Letter Agreement, by and among the general and limited
                    partners of Hyperion Partners, L.P., dated as of June 17, 1996,
                    relating to certain transactions consummated prior to the Offering....
   2.2*          -- Merger Agreement, dated as of June 17, 1996, by and between the
                    Company and Hyperion Holdings relating to the Merger..................
   3.1           -- Form of Restated Certificate of Incorporation of the Registrant, as
                    amended...............................................................
   3.2           -- Form of By-Laws of the Registrant.....................................
   4.1           -- Indenture, dated as of May 15, 1993, between the Registrant and Bank
                    of New York, as Trustee, relating to the Registrant's 8.05% Senior
                    Notes due May 15, 1998................................................
   4.2           -- Form of 8.05% Senior Note due May 15, 1998 (included in the Indenture
                    filed as Exhibit 4.1 hereto)..........................................
   4.3           -- Exchange and Registration Rights relating to Registrant's 8.05% Senior
                    Notes due May 15, 1998................................................
   4.4           -- First Supplemental Indenture, dated as of January 23, 1995, between
                    the Registrant and the Bank of New York, as Trustee, relating to
                    Registrant's 8.05% Senior Notes due May 15, 1998......................
   5.1*          -- Opinion and consent of  ______________ ...............................
   8*            -- Opinion and consent of  ______________ (Federal Tax Matters)..........
  10.1           -- Assistance Agreement, dated December 30, 1988, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC.......
  10.1a          -- Settlement and Termination Agreement, dated as of December 23, 1993,
                    among the Bank, the Registrant, Hyperion Holdings, Hyperion Partners
                    and the FDIC..........................................................
  10.1b          -- Tax Benefits Agreement, dated December 28, 1993, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.........
  10.2           -- Acquisition Agreement, dated December 30, 1988, between the Bank and
                    the FSLIC.............................................................
  10.3           -- Warrant Agreement, dated December 30, 1988, between the Bank and the
                    FSLIC.................................................................
  10.3a          -- Amended and Restated Warrant Agreement dated December 28, 1993,
                    between the Bank and the FDIC.........................................
  10.4           -- Regulatory Capital Maintenance Agreement, dated December 30, 1988
                    among the Bank, the Registrant, Hyperion Holdings, Hyperion Partners,
                    and the FSLIC (terminated)............................................
  10.5           -- Federal Stock Charter of the Bank and First Amendment to charter
                    approved on August 26, 1992...........................................
  10.6           -- Amended and Restated Federal Stock Charter of the Bank and Second
                    Amendment approved on October 30, 1992................................
  10.6a          -- Third Amendment to the Federal Stock Charter of the Bank approved on
                    April 23, 1996........................................................
  10.6b          -- Amended and Restated Bylaws of the Bank...............................
  10.7           -- Specimen Preferred Stock, Series A, certificate, $25.00 per share
                    stated value of the Bank..............................................
  10.7a          -- Certificate of Designation of Noncumulative Preferred Stock, Series A,
                    of the Bank...........................................................
  10.7b          -- Specimen Preferred Stock, Series B, certificate, $25.00 per share
                    stated value, of the Bank.............................................
  10.7c          -- Certificate of Designation of Noncumulative Preferred Stock, Series B,
                    of the Bank...........................................................
</TABLE>
<PAGE>   203
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
<S>              <C>                                                                        <C>
  10.8           -- Data Processing Agreement, dated January 1, 1992, between the Bank and
                    Systematics Financial Services, Inc., and First Amendment (dated
                    October 28, 1992) and Second Amendment (dated September 1, 1992)......
  10.8a          -- Third Amendment, dated December 17, 1993, to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.8b          -- Fourth Amendment, dated March 28, 1994, to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.8c          -- Fifth Amendment, dated April 1, 1994 to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial
                    Services, Inc.........................................................
  10.8d          -- Sixth Amendment, dated February 26, 1996 to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.9           -- Management and Consulting Services Agreement, dated January 1, 1992,
                    between the Bank and Systematics Financial Services, Inc., and First
                    Amendment (dated March 18, 1992) and Second Amendment (dated September
                    1, 1992)..............................................................
  10.10          -- Lease Agreement, dated April 1, 1989, between the Bank and Homart
                    Development Co. (Leased premises at 3200 Southwest Freeway) and First
                    Amendment thereto dated January 31, 1990..............................
  10.10a         -- Second Amendment, dated November 14, 1994 to Lease Agreement dated
                    April 1, 1989, between the Bank and Homart Development Co. (assigned
                    to HD Delaware Properties, Inc.)......................................
  10.10b         -- Third Amendment, dated January 8, 1996 to Lease Agreement dated April
                    1, 1989 between the Bank and Homart Development Co. (predecessor in
                    interest of HMS Office, L.P.).........................................
  10.11          -- Lease Agreement, dated November 20, 1990, between the Bank and
                    Greenway Plaza, LTD. (Leased premises at 3800 Buffalo Speedway).......
  10.12          -- Employment Agreement, dated March 18, 1991, between the Bank and Barry
                    C. Burkholder.........................................................
  10.12a         -- Amendment, dated April 10, 1996, to the Employment Agreement between
                    the Bank and Barry C. Burkholder......................................
  10.13          -- Letter Agreement Related to Employment, dated April 4, 1990, between
                    the Bank and Anthony J. Nocella.......................................
  10.14          -- Letter Agreement Related to Employment, dated June 18, 1990 between
                    the Bank and George R. Bender.........................................
  10.15          -- Letter Agreement Related to Employment, dated April 6, 1990, between
                    the Bank and Jonathon K. Heffron......................................
  10.16          -- Letter Agreement Related to Employment, dated May 10, 1991, between
                    the Bank and Leslie H. Green..........................................
  10.17          -- Management Incentive Plan, dated April 20, 1992.......................
  10.18          -- Letter Agreement, dated January 5, 1990, between Hyperion Partners and
                    certain shareholders of the Registrant with respect to the provision
                    of managerial assistance to the Registrant............................
  10.22          -- Supplemental Executive Savings Plan of the Bank.......................
  10.23          -- Directors Supplemental Savings Plan of the Bank.......................
  12*            -- Statement re: Calculation of Ratios of Earnings to Fixed Charges......
  21*            -- Subsidiaries of the Registrant........................................
  23.1*          -- Consent of Bryan Cave LLP (included in Exhibit 5.1)...................
  23.2*          -- Consent of Deloitte & Touche LLP, independent auditors................
  24             -- Powers of Attorney (see the signature pages to the Form S-4
                    Registration Statement)...............................................
</TABLE>
<PAGE>   204
 
<TABLE>
<CAPTION>
   ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
<S>              <C>                                                                        <C>
  26*            -- Statement of Eligibility and Qualification of Trustee on Form T-1 of
                    the Bank of New York under the Trust Indenture Act of 1939............
  99.2*          -- Exchange Agent Agreement between Registrant and Bank of New York, as
                    Exchange Agent........................................................
  99.3           -- Complaint filed by the Registrant and certain of its affiliates
                    against the FDIC and certain other governmental agencies in the
                    Southern District of Texas, Galveston Division, C.A. No. G-93-461.....
</TABLE>
 
- ---------------
* To be filed by amendment.
[{"type": "S-1", "sequence": "1", "description": "BANK UNITED CORP FORM S-1", "secsgml_size_bytes": 920814}]
{"company-data": {"conformed-name": "BANK UNITED CORP", "cik": "0000906420", "assigned-sic": "6035", "irs-number": "133528556", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-06229", "film-number": "96582640"}, "business-address": {"street1": "50 VHARLES LINDBERG BLVD SUITE 500", "city": "UNIONDALE", "state": "NY", "zip": "11553", "phone": "5167456644"}, "former-company": {"former-conformed-name": "USAT HOLDINGS INC", "date-changed": "19930603"}}
1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996
 
                                                      REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------
 
                               BANK UNITED CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                              6711                             13-3528556
      (STATE OF INCORPORATION)          (PRIMARY STANDARD INDUSTRIAL              (I.R.S. EMPLOYER
                                        CLASSIFICATION CODE NUMBER)             IDENTIFICATION NO.)
SUITE 500
                           50 CHARLES LINDBERGH BLVD.
                              UNIONDALE, NY 11553
                                 (516) 745-6644
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                           SALVATORE A. RANIERI, ESQ.
                       VICE PRESIDENT AND GENERAL COUNSEL
                                   SUITE 500
                           50 CHARLES LINDBERGH BLVD.
                              UNIONDALE, NY 11553
                                 (516) 745-6644
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------
 
                                   Copies to:
WILLIAM F. BAVINGER, ESQ.            CRAIG M. WASSERMAN, ESQ.             JAMES F. MUNSELL, ESQ.
           BRYAN CAVE LLP              WACHTELL, LIPTON, ROSEN & KATZ    CLEARY, GOTTLIEB, STEEN & HAMILTON
       700 THIRTEENTH STREET                51 WEST 52ND STREET                  ONE LIBERTY PLAZA
       WASHINGTON, D.C. 20005                NEW YORK, NY 10019                  NEW YORK, NY 10006
           (202) 508-6037                      (212) 403-1000                      (212) 225-2000
------------------------
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after the effective date of this Registration Statement.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  / /
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:  / / ________
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(e)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  / / ________
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:  / /
 
                        CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
                                                                               PROPOSED MAXIMUM
                                                              PROPOSED MAXIMUM    AGGREGATE
     TITLE OF EACH CLASS OF SECURITIES         AMOUNT TO BE    OFFERING PRICE      OFFERING        AMOUNT OF
              TO BE REGISTERED                REGISTERED(1)     PER SHARE(2)       PRICE(2)     REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Class A Common Stock, $0.01 par value per
  share.....................................      shares             $           $100,000,000       $34,483
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
(1) Includes           shares of Class A Common Stock that the Underwriters have
    options to purchase to cover over-allotments, if any.
 
(2) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457 under the Securities Act of 1933, as amended.
                            ------------------------
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
 
                               BANK UNITED CORP.
 
         CROSS-REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B)
ITEM
 NO.                                                          LOCATION IN PROSPECTUS
- -----                                               ------------------------------------------
I.   Forepart of the Registration Statement and
        Outside Front Cover Page of Prospectus....  Outside Front Cover Page
  II.   Inside Front and Outside Back Cover Pages
        of Prospectus.............................  Inside Front Cover Page; Table of Contents
 III.   Summary Information, Risk Factors and
        Ratio of Earnings to Fixed Charges........  Prospectus Summary; Risk Factors; The
                                                    Company
  IV.   Use of Proceeds...........................  Use of Proceeds
   V.   Determination of Offering Price...........  Underwriting
  VI.   Dilution..................................  Not Applicable
 VII.   Selling Security Holders..................  Selling Stockholders
VIII.   Plan of Distribution......................  Outside Front Cover Page; Underwriting
  IX.   Description of Securities to be
        Registered................................  Outside Front Cover Page; Inside Front
                                                    Cover Page; Description of Capital Stock
   X.   Interests of Named Experts and Counsel....  Not Applicable
  XI.   Information with respect to the
        Registrant................................  Outside Front Cover Page; Prospectus
                                                    Summary; Risk Factors; The Company; Use of
                                                    Proceeds; Dividend Policy; Capitalization;
                                                    Selected Consolidated Financial and Other
                                                    Data; Management's Discussion and Analysis
                                                    of Financial Condition and Results of
                                                    Operations; Business; Regulation;
                                                    Description of Properties; Legal
                                                    Proceedings; Management; Selling
                                                    Stockholders; Description of Capital
                                                    Stock; Underwriting; Legal Matters;
                                                    Experts; Available Information; Financial
                                                    Statements
 XII.   Disclosure of Commission Position on
        Indemnification for Securities Act
        Liabilities...............................  Not Applicable
3
 
                             SUBJECT TO COMPLETION
                PRELIMINARY PROSPECTUS DATED             , 1996
PROSPECTUS
                            [              ] SHARES
 
                               BANK UNITED CORP.
[LOGO]                        CLASS A COMMON STOCK
                            ------------------------
 
    All of the shares of Class A common stock, par value $0.01 per share ("Class
A Common Stock"), of Bank United Corp. (the "Company") offered hereby are being
sold by certain of the limited and general partners of Hyperion Partners L.P., a
Delaware Limited Partnership ("Hyperion Partners") as well as three other
entities with which an affiliate of Hyperion Partners has a fiduciary
relationship (collectively, the "Selling Stockholders"). See "Selling
Stockholders". Prior to this offering (the "Offering"), there has been no public
market for the Class A Common Stock. The Company will not receive any of the
proceeds from the sale of the shares by the Selling Stockholders. It is
currently anticipated that the initial public offering price for Class A Common
Stock will be between $ .00 and $ .00 per share. See "Underwriting" for
information relating to determination of the initial public offering price.
 
    The Company has two classes of authorized common stock: Class A Common Stock
and Class B common stock, par value $0.01 per share ("Class B Common Stock" and
together with the Class A Common Stock, the "Common Stock"). Both classes of
Common Stock have identical dividend and other rights, except that the Class B
Common Stock is non-voting Common Stock which 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. See "Description of Capital
Stock". Therefore, shares of Common Stock transferred to a purchaser pursuant to
the Offering will be shares of Class A Common Stock after such transfer, whether
or not such shares were Class A Common Stock or Class B Common Stock while held
by a Selling Stockholder.
 
    Application will be made to have the Class A Common Stock quoted on the
NASDAQ Stock Market ("NASDAQ") under the symbol "    ".
 
    Shares of Class A Common Stock offered hereby are being reserved for sale to
certain employees and retirees of the Company and its affiliates at the initial
public offering price. See "Underwriting". Such employees and retirees will
purchase, in the aggregate, less than 10% of the Class A Common Stock offered in
the Offering.
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 11 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 (THE "FDIC"), THE OFFICE OF THRIFT SUPERVISION (THE "OTS") OR
  ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION, THE FDIC, THE OTS
   OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
     OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
     OFFENSE.
 
THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
     ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
     ASSOCIATION, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
        GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
                                                                                               PROCEEDS
                                             PRICE TO               UNDERWRITING              TO SELLING
                                              PUBLIC                DISCOUNT(1)            STOCKHOLDERS(2)
- --------------------------------------------------------------------------------------------------------------
Per Share..........................             $                        $                        $
- --------------------------------------------------------------------------------------------------------------
Total(3)...........................             $                        $                        $
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have severally agreed to indemnify
    the Underwriters against certain liabilities, including liabilities under
    the Securities Act of 1933, as amended (the "Securities Act"). See
    "Underwriting".
 
(2) Before deducting expenses payable by the Company estimated to be $2,000,000.
 
(3) The Selling Stockholders have granted to the Underwriters an option,
    exercisable within 30 days after the date hereof, to purchase up to
    additional shares of Class A Common Stock on the same terms and conditions
    as set forth above to cover over-allotments, if any. If such option is
    exercised in full, the total Price to Public, Underwriting Discount and
    Proceeds to the Selling Stockholders will be $       , $       and $       ,
    respectively. See "Underwriting".
                            ------------------------
 
    The shares of Class A Common Stock are being offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Class A Common Stock will be made
in New York, New York on or about          , 1996.
                            ------------------------
 
MERRILL LYNCH & CO.
                              LEHMAN BROTHERS
 
                                                    SMITH BARNEY INC.
 
                            ------------------------
                  The date of this Prospectus is      , 1996.
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
     MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
     SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
     UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
     OF ANY SUCH STATE.
4
 
                               BANK UNITED CORP.
 
                                BANKING NETWORK
 
                                      LOGO
 
                            ------------------------
                           United States Map Showing
                          Community Banking Branches,
                         Commercial Banking Offices and
                    States in which mortgages are originated
 
     IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET, ON THE NASDAQ OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                            ------------------------
 
                                        2
5
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the detailed
information, definitions and financial statements appearing elsewhere herein.
Investors should carefully review the entire Prospectus. The fiscal year for
Bank United Corp. and its wholly owned subsidiary, Bank United (the "Bank"),
ends September 30, and, unless otherwise indicated, references to particular
years are to fiscal years ending September 30 of the year indicated. As used
herein, the term "Company" refers to Bank United Corp. and its predecessors, and
its consolidated subsidiaries, unless the context otherwise requires. See page
129 for the Index of Defined Terms used in this Prospectus.
 
                                  THE COMPANY
 
     Bank United Corp. is a broad-based financial services provider to consumers
and businesses in Texas and other selected regional markets throughout the
United States. Through the Bank, its principal subsidiary, the Company operates
67 Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3 
billion, total deposits of $5.0 billion and total stockholders' equity of 
$526.4 million. Upon completion of the Offering, the Company will be the 
largest publicly traded depository institution headquartered in Texas, in terms
of both assets and deposits.
 
     The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. The Bank is a federally chartered savings bank,
the deposits of which are insured by the Savings Association Insurance Fund (the
"SAIF") which is administered by the FDIC. The Company has no significant assets
other than its equity interest in the Bank. In June 1996, the Company changed
its name to Bank United Corp.
 
                               BUSINESS STRATEGY
 
     From its incorporation in December 1988 until the early 1990's, the
Company's operations were designed to minimize interest rate and credit risk
while maximizing the net value of the Company's assets and liabilities. To this
end, Company management's strategy focused on traditional thrift and mortgage
banking activities, certain wholesale activities (primarily related to
mortgage-backed securities ("MBS") and mortgage servicing rights ("MSRs")) and
internal as well as external growth. In addition, over this period the Company
benefited substantially from certain federal financial assistance and tax
benefits received and recorded in connection with its acquisitions of certain
assets and certain liabilities of failed thrift institutions during the period
1988-1992. As of March 31, 1996, the Company's stockholders' equity was $526.4
million (not adjusted for the dividend paid and related contractual payments
made to the FDIC in May 1996), a more than fourfold increase from $118.0
million, which represents total stockholders' equity at December 1988, adjusted
for subsequent capital contributions totaling $57.9 million.
 
     Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lending lines of business. During this time, the Company increased its
originations and the size of its portfolio of multi-family, residential
construction, consumer and commercial loans as well as the level of lower cost
transaction and commercial deposit accounts. To support this strategy, the
Company has hired experienced commercial banking professionals and has engaged
in more aggressive marketing campaigns. In addition to its efforts to increase
originations of commercial and consumer loans, the Company plans to increase the
retention of higher yielding single family and multi-family mortgage loans that,
in the past, may have been sold or securitized.
 
                                        3
6
 
                              OPERATIONAL OVERVIEW
 
     The Company's operating structure reflects its current strategy, with four
business groups in two business segments.
 
                        [Chart showing Business Groups]

     - Community Banking Group.  The Community Banking Group's principal
       activities include deposit gathering, consumer lending, small-business
       banking and investment product sales. The Community Banking Group, which
       has marketed itself under the name "Bank United" since 1993, operates a
       67 branch community banking network, a 24-hour telephone banking center
       and a 62-unit ATM network, which together serve as the platform for the
       Company's consumer and small business banking activities. The Company's
       branch network includes 34 branches in the greater Houston area, 29
       branches in the Dallas/Ft. Worth metropolitan area, and two branches each
       in Austin and San Antonio. In addition, the Company plans to open at
       least three supermarket-based banking branches in 1996. Through its
       branch network, the Company maintains more than 400,000 accounts with an
       estimated 182,000 households and businesses.
 
     - Commercial Banking Group.  The Commercial Banking Group provides credit
       and a variety of cash management and other services to certain real
       estate and real estate related businesses. The Commercial Banking Group
       conducts its activities through four units: Mortgage Banker Finance
       ("MBF"), a financial services provider to small- to medium-sized mortgage
       companies; Multi-Family Lending; Residential Construction Lending; and
       Commercial Real Estate Lending. Business is solicited in Texas and in
       targeted regional markets throughout the United States. The Commercial
       Banking Group is expanding its products and industry specialties to
       include health care lending, asset-based lending and other commercial and
       industrial loan products.
 
     - Financial Markets Group.  The Financial Markets Group manages the
       Company's asset portfolio activities, including loan acquisition and
       management and the securitization of whole loans. Additionally, under the
       supervision of the Bank's Asset and Liability Committee (the "ALCO"), the
       Financial
 
                                        4
7
 
Markets Group is responsible for the Company's investment portfolio, for
interest rate risk hedging strategies, and for securing funding sources other
than consumer and commercial deposits.
 
     - Mortgage Banking Group.  The Mortgage Banking Group principally engages
       in three activities: retail mortgage originations, wholesale mortgage
       originations and mortgage servicing. The Mortgage Banking Group
       originates and services first mortgage loans for single family residences
       for both the Company's portfolio and for sale to investors. At December
       31, 1995, the Company, with originations of $3.4 billion in fiscal 1995,
       was ranked by the American Banker as among the 30 largest originators of
       single family loans in the nation. In addition, the Company was ranked by
       the American Banker as one of the 40 largest single family loan servicers
       in the nation at December 31, 1995. The Company had an $11.6 billion
       servicing portfolio at March 31, 1996. The Mortgage Banking Group
       operates under the names "Bank United Mortgage" in Texas and Virginia and
       "Commonwealth United Mortgage" elsewhere in the United States.
 
                           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 1988 has served as Chairman of the Board of the Company and,
until June   , 1996, also as President and Chief Executive Officer ("CEO") of
the Company and Chairman of the Board of the Bank.
 
  Dividend Distribution and Restructuring
 
     In May 1996, the Company paid a dividend of $100 million on its common
stock to Hyperion Holdings and other holders of its common stock. The proceeds
of this dividend received by Hyperion Holdings were distributed by Hyperion
Partners to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners. During June 1996, the following
actions were taken in the order indicated (collectively, the "Restructuring"):
(i) Hyperion Holdings exchanged shares of a newly created class of its
non-voting common stock for certain shares of its voting common stock held by
Hyperion Partners; (ii) Hyperion Partners then distributed the Hyperion Holdings
common stock to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners (the "Distribution"); and (iii)
following the Distribution, Hyperion Holdings was merged with and into the
Company (the "Merger"), with the result that holders of Hyperion Holdings voting
and nonvoting common stock received shares of Class A Common Stock and Class B
Common Stock and the holders of Class C Common Stock (as defined below) received
shares of Class B Common Stock as set forth under "Selling Stockholders". As
part of the Restructuring, the common stock of Hyperion Holdings and the Class C
Common Stock were converted 1,800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Offering is intended to establish a public market for the
Class A Common Stock while providing the Selling Stockholders with liquidity for
their current holdings in the Company.
 
  Management
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Restructuring and the
Offering, Mr. Burkholder will also become Chairman of the Board of the Bank as
well as President and CEO of the Company. The executive management group of the
Bank consists of seven individuals who have worked together for the past six
years, giving them a thorough understanding of the businesses they have
developed together. They average more than 20 years of related industry
experience, the majority of which comes from commercial banking. As a team, they
have brought the discipline and sophistication of commercial banking to the
Bank. The next level of senior management is composed of 42 executives, a third
of whom were hired directly from commercial banks. The balance of the senior
management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".
 
                                        5
8
 
     Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company as well as President and CEO of the
Company, and will continue, after the Offering, to serve as Chairman of the
Board of the Company. The Company is contemplating entering into a consulting
agreement with Mr. Ranieri pursuant to which he would serve as a consultant to
the Company for a three year period. See "Business -- Management" and
"Management -- Certain Relationships and Related Transactions".
 
  Future Tax Benefits
 
     In connection with the acquisition from the Federal Savings and Loan
Insurance Corporation (the "FSLIC") of certain of the assets and the assumption
of all the deposits and certain other liabilities of United Savings Association
of Texas ("Old USAT"), an insolvent thrift (the "Acquisition"), and the related
Assistance Agreement (as defined below), the Company succeeded to and recorded
substantial net operating loss carryforwards ("NOLs") which have resulted in
certain tax benefits. As of March 31, 1996, the Company had NOLs of $808.0
million available to reduce taxable income in future years. Pursuant to the Tax
Benefits Agreement (as defined below), the Bank is required to pay to the FSLIC
Resolution Fund ("FRF") a specified portion of net tax benefits obtained through
the taxable year ending nearest to September 30, 2003. See
"Regulation -- Taxation -- FSLIC Assistance".
 
     The Offering is structured with the intent to preserve the beneficial tax
attributes of the Company as described above. See "Regulation -- Taxation".
Accordingly, certain of the Selling Stockholders and other holders of the Common
Stock have agreed to limit their further disposition of Common Stock for up to
three years following the Offering except with the approval of the Board of
Directors of the Company (the "Company Board"). See "Description of Capital
Stock -- Common Stock". The limitations on transfers will allow the Company to
record a $101.7 million tax benefit in the quarter ended June 30, 1996. See
"Risk Factors -- Limitations on Use of Tax Losses; Restrictions on Transfers of
Stock" and Note 21 to the Consolidated Financial Statements. Pro forma for the
$100 million dividend, the related contractually required payment to the FDIC of
$5.9 million, the Restructuring and the recognition of the $101.7 million tax
benefit, stockholders' equity would have been $520.0 million as of March 31,
1996. See "Capitalization".
 
  Claims Related to Forebearance Agreements
 
     In connection with the original acquisition of the Bank by the Company, the
Federal Home Loan Bank (the "FHLB") approved a forbearance letter, issued on
February 15, 1989 (the "Forbearance Agreement"). Under the terms of the
Forbearance Agreement, the FSLIC agreed to waive or forbear from the enforcement
of certain regulatory provisions with respect to regulatory capital
requirements, liquidity requirements, accounting requirements and other matters.
After the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), the OTS took the position that the capital
standards set forth in FIRREA apply to all savings institutions, including those
institutions that had been operating under previously granted capital and
accounting forbearances, and that FIRREA eliminated these forbearances. On July
25, 1995, the Bank, the Company, and certain of their then-direct and indirect
parent entities filed suit against the United States in the Court of Federal
Claims for alleged failures of the United States to honor certain contractual
obligations, including obligations related to the Forbearance Agreement. The
lawsuit is in a preliminary stage. Discovery has been stayed pending the United
States Supreme Court's review of United States v. Winstar Corp., an action by
another thrift raising similar issues. The Company is unable to predict the
outcome of its suit against the United States and the amount of judgment for
damages, if any, that may be entered in favor of the Company. Consequently, no
assurances can be given as to the results of this suit. See "Legal Proceedings".
 
  Senior Note Exchange
 
     Substantially simultaneously with the consummation of the Offering, the
Company intends to commence an exchange offer (the "Exchange Offer") for its
outstanding Senior Notes due May 15, 1998 (the "Senior Notes"). The Exchange
Offer is intended to satisfy the condition of the Senior Notes pursuant to which
the interest rate on the Senior Notes will revert from 9.05% to 8.05% per annum
commencing with and including the date on which the Exchange Offer is
consummated. See Note 11 to the Consolidated Financial Statements.
 
                                        6
9
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
 
     The following table presents summary selected historical financial data of
the Company. The information set forth below should be read in conjunction with
the consolidated financial statements of the Company and the Notes thereto set
forth elsewhere herein (the "Consolidated Financial Statements") and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The statement of operations data set forth below for each of the
three years ended September 30, 1995, 1994 and 1993 and the statement of
financial condition data at September 30, 1995 and 1994 are derived from, and
are qualified by reference to, the audited Consolidated Financial Statements.
The statement of operations data set forth below for each of the two years ended
September 30, 1992 and 1991 and the statement of financial condition data at
September 30, 1993, 1992 and 1991 are derived from the Company's audited
consolidated financial statements. Information at or for the six months ended
March 31, 1996 and 1995 is not audited, but, in the opinion of management,
includes all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of operations and financial condition for
those periods. Results of operations for the six months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.
AT OR FOR THE
                                         SIX MONTHS ENDED
                                             MARCH 31,                       AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                     -------------------------   ---------------------------------------------------------------
                                        1996          1995          1995          1994         1993       1992(1)      1991(1)
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
STATEMENT OF FINANCIAL CONDITION
  DATA:(2)
Total assets........................ $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
Loans...............................   7,878,080     6,161,432     8,260,240    5,046,174    4,862,379    4,101,716    3,431,154
Mortgage-backed securities..........   1,954,070     2,600,876     2,398,263    2,828,903    2,175,925      833,425      419,064
Deposits............................   4,963,321     5,015,713     5,182,220    4,764,204    4,839,388    4,910,760    6,054,474
FHLB advances.......................   4,139,023     3,284,373     4,383,895    2,620,329    2,185,445      632,345      287,345
Securities sold under agreements to
  repurchase........................     949,936       839,939     1,172,533      553,000      310,000           --           --
Minority interest -- Bank Preferred
  Stock(3)..........................     185,500        85,500       185,500       85,500       85,500           --           --
Total stockholders' equity..........     526,441       476,693       496,103      451,362      389,203      232,373      161,760
Book value per common share(4)...... $     18.24   $     16.52   $     17.19   $    15.64   $    13.48   $     8.19   $     6.87
STATEMENT OF OPERATIONS DATA:(2)
Interest income..................... $   421,221   $   327,586   $   746,759   $  494,706   $  482,490   $  502,854   $  422,184
Interest expense....................     309,289       239,960       552,760      320,924      300,831      348,291      330,659
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net interest income...............     111,932        87,626       193,999      173,782      181,659      154,563       91,525
Provision for credit losses.........       5,850         4,157        24,293        6,997        4,083       21,133        4,122
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net interest income after
    provision for credit losses.....     106,082        83,469       169,706      166,785      177,576      133,430       87,403
Non-interest income.................      54,609        66,653       114,981      118,889      146,691      103,790       44,930
Non-interest expense................      99,304       101,645       194,576      199,593      201,964      180,415      113,627
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Income before income taxes,
    minority interest and
    extraordinary loss..............      61,387        48,477        90,111       86,081      122,303       56,805       18,706
Income tax expense (benefit)........      25,278        20,186        37,415      (31,899)     (26,153)         200         (409)
Less minority interest(3)(5)........       9,350         4,632        10,977        9,010        6,537           --           --
Extraordinary loss(6)...............          --            --            --           --       14,549           --           --
                                     -----------   -----------   -----------   ----------   ----------   ----------   ----------
  Net income........................ $    26,759   $    23,659   $    41,719   $  108,970   $  127,370   $   56,605   $   19,115
                                     ===========   ===========   ===========   ==========   ==========   ==========   ==========
Operating earnings(7)............... $    55,039   $    48,849   $    91,295   $   75,514   $   77,105   $   50,024   $   16,510
Earnings per common share(4)........ $      0.87   $      0.76   $      1.35   $     3.55   $     4.11   $     1.85   $     0.71
CERTAIN RATIOS AND OTHER DATA:(2)(8)
Return on average assets............        0.46%         0.50%         0.40%        1.32%        1.74%        0.89%        0.42%
Return on average common equity.....       10.45         10.23          8.77        26.32        44.87        28.18        13.95
Stockholders' equity to assets......        4.67          4.70          4.14         5.07         4.61         3.71         2.35
Tangible stockholders' equity to
  tangible assets...................        4.48          4.40          3.93         4.68         4.14         2.58         1.10
Net yield on interest-earning
  assets............................        2.00          1.92          1.92         2.20         2.61         2.60         2.16
Non-interest expense to average
  total assets......................        1.72          2.13          1.86         2.41         2.76         2.85         2.50
Efficiency ratio(9).................       60.16         62.45         59.50        66.38        65.11        63.98        75.14
Allowance for credit losses to net
  nonaccrual loans..................       38.00         31.43         48.74        30.73        71.71        74.04        30.00
Allowance for credit losses to total
  loans.............................        0.46          0.40          0.44         0.46         0.61         0.68         0.29
Net loan charge-offs to average
  loans.............................        0.15          0.09          0.16         0.30         0.05         0.07         0.04
Nonperforming assets to total
  assets............................        1.10          1.04          0.84         1.09         0.72         0.89         0.59
REGULATORY CAPITAL RATIOS OF THE
  BANK:(2)(10)
  Tangible Capital..................        6.88%         5.65%         6.20%        6.01%        6.17%        4.24%        2.64%
  Core Capital......................        6.96          5.77          6.29         6.17         6.43         5.04         3.59
  Total Risk-Based Capital..........       14.20         12.43         13.45        14.02        14.87        12.19         9.37
7
10
AT OR FOR THE
                                        SIX MONTHS ENDED
                                            MARCH 31,                       AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                    -------------------------   ---------------------------------------------------------------
                                       1996          1995          1995          1994         1993       1992(1)      1991(1)
                                    -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
OTHER DATA:
Number of Community Banking Group
  branches(1).....................           67            64            65           62           62           65           74
Number of Commercial Banking Group
  origination offices.............            9             8             9            5            3            2            1
Number of Mortgage Banking Group
  origination offices.............          112           131           122          145          109           93           72
Mortgage Banking Group servicing
  portfolio.......................  $11,594,485   $12,031,533   $12,532,472   $8,920,760   $8,073,226   $7,187,000   $4,681,712
Mortgage Banking Group
  originations....................    2,021,127     1,553,255     3,447,250    5,484,111    6,737,762    6,118,363    3,195,873
Financial Markets Group loans
  purchased.......................       80,948       769,995     2,640,755    1,312,827    1,202,970      912,847    1,885,956
- ---------------
 (1) The Bank acquired from the Resolution Trust Company ("RTC") $2.2 billion in
     deposit liabilities during fiscal 1991. Pursuant to the Bank's plan of
     acquisition, rates on these deposits were reduced after acquisition and, as
     expected, approximately $766 million of deposits were withdrawn from the
     Bank during fiscal 1992. Also, the Bank consolidated overlapping branch
     locations that resulted from these acquisitions. See "The
     Company -- History".
 
 (2) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events and see "Capitalization". On a pro forma basis,
     stockholder's equity would have been $520.0 million as of March 31, 1996.
 
 (3) During fiscal 1993, the Bank issued its 10.12% Noncumulative Preferred
     Stock, Series A, and, during fiscal 1995, the Bank issued its 9.60%
     Noncumulative Preferred Stock, Series B (the Preferred Stock, Series A and
     Series B, is collectively referred to as the "Bank Preferred Stock"). None
     of the shares of Bank Preferred Stock are owned by the Company. Certain
     Selling Stockholders and directors and managers of the Company own shares
     of the Bank Preferred Stock. See "Management -- Security Ownership of
     Certain Beneficial Owners and Management -- Principal Stockholders, Bank
     Preferred Stock".
 
 (4) Per share results have been restated to reflect an 1,800 to one stock
     conversion effective June 1996 in connection with the Restructuring. See
     Note 21 to the Consolidated Financial Statements.
 
 (5) All of the outstanding shares of common stock, par value $0.01, of the Bank
     (the "Bank Common Stock") are currently owned by the Company. The Bank has
     issued to the FDIC warrants (the "Warrants") to acquire 158,823 shares of
     Bank Common Stock (representing 5.56% of the Bank Common Stock as of March
     31, 1996 and September 30, 1995, assuming exercise of the Warrants), for an
     exercise price of $0.01 per share. See "Business -- The Assistance
     Agreement -- Warrant Agreement" and Note 16 to the Consolidated Financial
     Statements.
 
 (6) Reflects costs and charges associated with the issuance of the Senior
     Notes. See Note 11 to the Consolidated Financial Statements.
 
 (7) Operating earnings represents income before taxes, minority interest, and
     extraordinary loss and excludes net gains (losses) on securities, MBS, and
     other loans.
 
 (8) Ratio, yield, and rate information are based on weighted average daily
     balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
     1994, and 1993 and average monthly balances for prior periods, with the
     exception of return on average common equity which is based on average
     monthly balances for all periods presented. Interim rates and yields are
     annualized.
 
 (9) Efficiency ratio represents non-interest expenses (excluding goodwill
     amortization) divided by net interest income plus non-interest income,
     excluding net gains (losses) on securities, MBS, and other loans.
 
(10) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events. On a pro forma basis, the regulatory ratios for tangible
     capital, core capital and total risk-based capital would have been 5.89%,
     5.97% and 12.12%, respectively, as of March 31, 1996.
 
                                        8
11
 
                                    THE OFFERING
Class A Common Stock offered by the
  Selling Stockholders...............  shares Class A Common Stock(1)
Common Stock to be Outstanding after
  the Offering.......................  shares Class A Common Stock(2)
                                       shares Class B Common Stock
       Total.........................  shares of Common Stock(3)
Use of Proceeds......................  All of the shares of Class A Common Stock are being
                                       offered by the Selling Stockholders. The Company will
                                       not receive any of the proceeds from the Offering.
Dividend Policy......................  The Company intends, subject to its financial results,
                                       contractual, legal and regulatory restrictions, and
                                       other factors that the Company Board may deem
                                       relevant, to declare and pay a quarterly dividend of
                                       $          per share of Common Stock beginning in the
                                                   quarter of 199  . The declaration of
                                       dividends by the Company and the amount thereof,
                                       however, will be at the discretion of the Company
                                       Board.
Proposed NASDAQ Symbol...............
- ---------------
(1) Excludes        shares of Class A Common Stock that the Underwriters have
    the option to purchase to cover over-allotments, if any. The Offering will
    include shares of Class B Common Stock that will convert automatically to
    shares of Class A Common Stock in the Offering.
 
(2) Excludes shares issuable upon exercise of options to be issued to employees
    of the Company and shares to be issued, or issuable upon exercise of options
    to be issued, to non-employee directors of the Company. See
    "Management -- Executive Management Compensation Plans" and "-- Compensation
    of Directors".
 
(3) 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 at the election of the holders, subject to certain
    restrictions. See "Description of Capital Stock".
 
                                SELLING STOCKHOLDERS
 
     The outstanding shares of Class A Common Stock and Class B Common Stock are
primarily owned by the limited and general partners of Hyperion Partners as
described more fully under "Selling Stockholders". The following table sets
forth information concerning each person who, following the Offering, will
beneficially own (within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) more than 5% of the total number
of outstanding shares of Class A Common Stock and Class B Common Stock:
SHARES OF                         SHARES OF                                           SHARES OF
                     CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                     COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                   STOCK OWNED     PERCENT OWNED     STOCK OWNED     PERCENT OWNED    STOCK OFFERED      STOCK OWNED
      NAME       BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                 ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
SHARES OF       CLASS B
                                      CLASS B        COMMON
                      CLASS A          COMMON        STOCK--
                   COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                   PERCENT OWNED       AFTER          AFTER
      NAME         AFTER OFFERING     OFFERING      OFFERING
                  ----------------  ------------  -------------
In connection with the preservation of the Company's NOLs, each of the
Selling Stockholders and each of LW-SP1 (as defined below) and LW-SP2 (as
defined below) has agreed to hold its Common Stock pursuant to the Letter
Agreement (as defined below). Among other things, each 5% Stockholder (as
defined below) may sell only up to 45% of its shares of Common Stock in the
Offering, with the exception of LW-SP1
 
                                        9
12
 
and LW-SP2, affiliates of Lehman Brothers Inc., which are prohibited from
selling any shares until after August 8, 1998, and each other Selling
Stockholder may sell up to 16% of its shares in the Offering (subject to
increase under certain conditions). Selling Stockholders have also agreed to
refrain from selling any shares of Common Stock for (i) one year or (ii) six
months after the Offering, in the case of such shares that were received in
respect of (i) general partnership interests or (ii) limited partnership
interests in Hyperion Partners, respectively. Additionally, the Company's
Restated Certificate of Incorporation (the "Certificate") and By-Laws (the
"By-Laws") prohibit the acquisition or transfer of shares of Common Stock held
by 5% Stockholders for three years following the Offering unless the Company
Board earlier determines that such acquisition or transfer would not be
reasonably likely to have a material adverse effect on the tax position of the
Company. Moreover, the Company Board has the discretion to waive these
limitations or take certain other actions that could trigger an Ownership Change
(as defined below). See "Selling Stockholders -- Selling Stockholder Letter
Agreements", "Risk Factors -- Limitations on Use of Tax Losses; Restrictions or
Transfers of Stock" and "Description of Capital Stock -- Common
Stock -- Restrictions on Transfers of Stock".
 
                                       10
13
 
                                  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 is
subject may become more acute in periods of economic slowdown or recession.
During such periods, payment delinquencies and foreclosures generally increase
and could result in an increased incidence of claims and legal actions against
the Company. In addition, such conditions could lead to a potential decline in
demand for the Company's products and services.
 
EVOLUTION OF BUSINESS
 
     The Company's strategy in recent years has been to emphasize and grow its
Community Banking Group and Commercial Banking Group and to reduce the
significance over time of its residential mortgage lending business. See
"Business -- Business Strategy". The Community Banking Group and Commercial
Banking Group are expected to continue to represent a growing portion of the
Company's business. This strategic shift has occurred at a time of increasing
competitive pressures in the mortgage banking business. Community and commercial
banking activities, while potentially more profitable, generally entail a
greater degree of credit risk than does single family lending, the historical
focus of the Company.
 
     In furtherance of the increasing emphasis on its community and commercial
banking businesses, the Company is in the process of evaluating its strategic
alternatives with respect to its mortgage banking business, including a sale or
restructuring of all or part of its mortgage origination business. No assurances
can be given regarding the timing or impact of any such sale or restructuring on
the Company's residential mortgage lending business.
 
     Consistent with the Company's current business strategy, the Bank has
applied to establish a national bank subsidiary. If the Bank were to establish a
national bank subsidiary, the Company would become subject to regulation as a
bank holding company by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). Current rules and regulations of the Federal
Reserve Board would subject the Company to capital requirements that are not
currently applicable to the Company as a savings and loan holding company, and
would impose statutory limitations on the type of business activities in which
the Company may engage at the holding company level, which activities currently
are not restricted.
 
INTEREST RATE RISK
 
     The Company's net interest income is the differential or "spread" between
the interest earned on loans and investments and the interest paid on deposits,
borrowings and notes payable. The Company has traditionally managed its business
to limit its overall exposure to changes in interest rates; however, under the
Company Board's current policies, management has more latitude to increase the
Company's interest rate sensitivity position within certain limits. See
"Business -- Business Strategy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". As a result, changes in market
interest rates may have a greater impact on the Company's financial performance
in the future than they have had historically.
 
     An increase in the general level of interest rates may affect the Company's
net interest spread due to the periodic caps which limit the interest rate
change on the Company's MBS and loans that pay interest at adjustable rates.
Additionally, an increase in interest rates may, among other things, reduce the
demand for loans and the Company's ability to originate loans. A decrease in the
general level of interest rates may affect the Company through, among other
things, increased prepayments on its loan and servicing portfolios and increased
competition for deposits. Accordingly, changes in the level of market interest
rates affect the
 
                                       11
14
 
Company's net interest spread, loan origination volume, loan and servicing
portfolios, and the overall results of the Company.
 
COMPETITION
 
     The Company experiences substantial competition both in attracting and
retaining deposits and in making loans. Its most direct competition for deposits
historically has come from other thrift institutions, commercial banks and
credit unions doing business in the Houston and Dallas/Fort Worth metropolitan
areas. In addition, as with all banking organizations, the Company has
experienced increasing competition from nonbanking sources. For example, the
Company also competes for funds with full service and discount broker-dealers
and with other investment alternatives, such as mutual funds and corporate and
governmental debt securities. The Company's competition for loans comes
principally from other thrift institutions, commercial banks, mortgage banking
companies, consumer finance companies, insurance companies and other
institutional lenders. A number of institutions with which the Company competes
for deposits and loans have significantly greater assets and capital than the
Company.
 
FUNDING AND LIQUIDITY
 
     In recent years, the Company has relied primarily on collateralized
borrowings (borrowings from FHLB of Dallas ("FHLB Dallas") and borrowings on
securities sold under agreement to repurchase ("reverse repurchase agreement"))
to fund its asset growth. At March 31, 1996, such borrowings funded 45% of the
Company's assets. The Company's collateralized borrowings have an average
maturity of approximately six months.
 
     The Company borrows funds from the FHLB Dallas under a security and pledge
agreement that restricts the amount of such borrowings to 65% of fully disbursed
single family loans, unless assets are physically pledged to the FHLB Dallas,
not to exceed 45% of total assets in any event. At March 31, 1996, the amounts
available under these restrictions were $4.7 billion and $5.1 billion,
respectively. The Company had $4.1 billion of outstanding advances at March 31,
1996.
 
     The Company's ability to borrow on reverse repurchase agreements is limited
to the amount and market value of collateral that is available to collateralize
through reverse repurchase agreements. At March 31, 1996, the Company had $1.2
billion in such collateral, $995 million of which was collateralizing such
reverse repurchase agreements. See "-- Interest Rate Risk". There can be no
assurance that the Company will continue to be able to arrange collateralized
borrowings or other borrowing arrangements to fund continued growth in its
assets.
 
CONCENTRATION OF LOAN PORTFOLIO
 
     The Company's current single family mortgage loan portfolio is concentrated
in certain geographical regions, particularly California. The performance of
such loans may be affected by changes in local economic and business conditions.
The California economy since the early 1990s has experienced an economic
recession, although the economy has recently shown signs of improvement.
Unfavorable or worsened economic conditions in California could have a material
adverse effect on the Company's financial condition and results of operations.
 
ACTIVE PURCHASER OF LOAN PORTFOLIOS
 
     The Company has been an active purchaser and securitizer of residential
mortgage loans originated by other financial institutions. See
"Business -- Financial Markets Group". While the Company intends to continue to
pursue this strategy on a selective basis, no assurance can be given as to the
continued availability of portfolio acquisition opportunities or the Company's
ability to obtain such portfolios on favorable terms.
 
     When purchased by the Company, loan portfolios generally do not contain
delinquent or defaulted loans and may contain loans that have been outstanding
for a relatively short period of time. Consequently, the
 
                                       12
15
 
delinquency and loss experience of the Company's loan portfolios to date are not
necessarily indicative of future results.
 
LIMITATIONS ON USE OF TAX LOSSES; RESTRICTIONS ON TRANSFERS OF STOCK
 
     As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. Such tax deductions would be subject to
significant limitation under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code") if the Company undergoes an ownership change (as defined
below, an "Ownership Change"). In the event of an Ownership Change, Section 382
of the Code imposes an annual limitation on the amount of taxable income a
corporation may offset with NOLs and certain recognized built-in losses. The
limitation imposed by Section 382 of the Code for any post-change year would be
determined by multiplying the value of the Company's stock (including both
Common Stock and preferred stock) at the time of the Ownership Change by the
applicable long-term tax exempt rate (which was 5.78% for June 1996). Any unused
annual limitation may be carried over to later years, and the limitation may
under certain circumstances be increased by the built-in gains in assets held by
the Company at the time of the change that are recognized in the five-year
period after the change. Under current conditions, if an Ownership Change were
to occur, the Company's annual NOL utilization would be limited to a minimum of
approximately $31.8 million.
 
     The Company would undergo an Ownership Change if, among other things, the
stockholders who own or have owned, directly or indirectly, 5% or more of the
Common Stock or are otherwise treated as 5% stockholders or a "higher tier
entity" under Section 382 of the Code and the regulations promulgated thereunder
("5% Stockholders"), increase their aggregate percentage ownership of such stock
by more than 50 percentage points over the lowest percentage of such stock owned
by such stockholders at any time during the Testing Period (generally the
preceding three years). In applying Section 382 of the Code, at least a portion
of the stock sold pursuant to the Offering would be considered to be acquired by
a new 5% stockholder even if no person acquiring the stock in fact owns as much
as 5% of the Company's stock. While the application of Section 382 of the Code
is highly complex and uncertain in some respects, the sale of shares of Class A
Common Stock as contemplated by this Prospectus is not expected to cause an
Ownership Change. In addition, events could occur prior to or after the Offering
that are beyond the control of the Company which could result in an Ownership
Change. See "Regulation -- Taxation -- Net Operating Loss Limitations".
 
     In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Offering
of shares of Common Stock that would either cause a person or entity to become a
5% Stockholder or increase a 5% Stockholder's percentage ownership interest.
"Transfers" are defined to include any sale, transfer, assignment, conveyance,
pledge, hedge, short sale, hypothecation or other disposition or the issuance of
any option to sell, transfer, assign, convey, pledge or otherwise dispose. While
such Transfers are deemed prohibited by the Certificate and the Company is
authorized not to recognize any transferee of such a Transfer as a stockholder
to the extent of such Transfer, these restrictions are incomplete since the
Company cannot, consistent with NASDAQ requirements, prevent the settlement of
transactions through NASDAQ, and because the prohibition on Transfers by 5%
Stockholders does not limit transactions in the securities of such 5%
Stockholders that could give rise to ownership shifts within the meaning of the
applicable Section 382 rules. Moreover, the Company Board retains the discretion
to waive these limitations or to take certain other actions that could trigger
an Ownership Change, including through the issuance of additional shares of
Common Stock in subsequent public or private offerings or through subsequent
merger or acquisition transactions.
 
     Because the Company will have utilized a substantial portion of its
available ownership limitation in connection with the Offering, the Company may
not be able to engage in significant transactions that would create a further
shift in ownership within the meaning of Section 382 of the Code within the
following three-year period without triggering an Ownership Change. There can be
no assurance that future actions on the part of the Company's stockholders or
the Company itself will not result in the occurrence of an Ownership Change. See
"Regulation -- Taxation -- Net Operating Loss Limitations".
 
                                       13
16
 
HOLDING COMPANY STRUCTURE; ABILITY TO PAY DIVIDENDS
 
     As a holding company without significant assets other than the Bank Common
Stock, the Company's ability to pay dividends on the Common Stock and to meet
its other cash obligations, including debt service on the Senior Notes and its
other debt obligations, is dependent upon the receipt of dividends from the Bank
on the Bank Common Stock. The declaration of dividends by the Bank on all
classes of its capital stock is subject to the discretion of the Board of
Directors of the Bank, the terms of the Bank Preferred Stock, applicable
regulatory requirements and compliance with the covenants of the Senior Notes.
In addition, the ability of the Company to pay dividends on the Common Stock is
subject to the terms 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 with the cash flow necessary to meet its debt service
obligations in respect of the Senior Notes and to pay dividends to the holders
of Common Stock, subject to applicable regulatory restrictions, no assurance can
be given that future circumstances might not exist which would limit or preclude
the declaration of such dividends. After giving effect to a dividend paid, a tax
benefit recorded and other subsequent events which occurred during the third
quarter of fiscal 1996, pro forma as of March 31, 1996, the Bank would be
permitted to pay $159.6 million of dividends on its capital stock without prior
approval of the OTS, and the Company would be able to pay $62.7 million of
dividends on its Common Stock under the covenants of the Senior Notes. See
"Regulation -- Safety and Soundness Regulations -- Capital
Requirements -- Capital Distributions", "Dividend Policy", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity" and Notes 11, 15, 16 and 21 to
the Consolidated Financial Statements.
 
REGULATION
 
     Both the Company, as a savings and loan holding company, and the Bank, as a
federal stock savings bank, are subject to significant regulation. Statutes and
regulations now affecting the Company and the Bank, respectively, may be changed
at any time, and the interpretation of these statutes and regulations by
examining authorities is also subject to change. There can be no assurance that
future changes in the regulations or in their interpretation will not adversely
affect the business of the Company. As a savings and loan holding company, the
Company is subject to regulation and examination by the OTS. As a federal
savings bank, the Bank is subject to examination from time to time by the OTS,
its primary regulator, and the FDIC, as administrator of the Bank Insurance Fund
(the "BIF") and the SAIF. There can be no assurance that the OTS or the FDIC
will not, as a result of such examinations or otherwise, impose various
requirements or regulatory sanctions upon the Bank or the Company respectively.
See "Regulation". As indicated above under "-- Evolution of Business", the Bank
has applied to establish a national bank subsidiary, which, if established,
would subject such subsidiary, the Bank and the Company to significant
additional regulation under various federal bank statutes.
 
RECAPITALIZATION OF THE SAIF AND ITS IMPACT ON SAIF PREMIUMS; OTHER LEGISLATIVE
PROPOSALS
 
     Deposits of the Bank are currently insured by the SAIF, which is
administered by the FDIC. Both the SAIF and the BIF, the deposit insurance fund
that covers most commercial bank deposits, are statutorily required to achieve
and maintain a reserve ratio equal to 1.25% of estimated insured deposits. As a
result of the BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered
the deposit insurance premium assessment rate for BIF members to between 0.04%
and 0.31% of insured deposits, while retaining the existing assessment rate of
0.23% to 0.31% of insured deposits for members of the SAIF. On November 14,
1995, the FDIC further reduced insurance premiums on BIF deposits by 0.04% of
insured deposits, creating an assessment range of 0% to 0.27% of insured
deposits, subject to a statutory requirement that all institutions pay at least
$2,000 annually. Approximately 92% of BIF members qualify for the lowest
assessment rate. As a result of the significant disparity in the deposit
insurance premiums paid by "well-capitalized" SAIF members, such as the Bank,
and well-capitalized BIF members, SAIF members are at a competitive disadvantage
to BIF members with respect to the pricing of loans and deposits and the ability
to achieve lower operating costs.
 
                                       14
17
 
     Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. These proposals feature a one-time assessment (which
reports estimate from 0.75% of deposits to 0.90% of deposits) on SAIF-insured
institutions with the aim of fully recapitalizing the SAIF. Such an assessment
could result in an amount payable by the Bank, net of tax, of as much as $23.7
million to $28.5 million. See "Regulation". At this time, no assurance can be
given as to whether any BIF/SAIF legislative alternatives will become law.
 
     Members of Congress have expressed their intention to consider legislation
in 1996 that generally would require federal savings associations, such as the
Bank, to convert to a national bank charter (or a state charter), and
legislation has been proposed in Congress that envisions such action as part of
a BIF/SAIF recapitalization package. It is uncertain to what extent, if at all,
the existing branch and investment powers of federal savings associations, such
as the Bank, that are impermissible for national banks would be grandfathered.
In addition, the proposals express the intent that savings and loan holding
companies such as the Company, convert to bank holding companies. It is also
uncertain to what extent, if at all, the existing powers of savings and loan
holding companies that are impermissible for bank holding companies, would be
grandfathered. None of the present activities of the Company would be
impermissible if the Company were to convert to a bank holding company or to
establish a national bank subsidiary. In addition, unless such legislation
provides grandfathering or other remedial provisions, a charter conversion could
result in recapture of deductions for bad debts previously taken by a thrift for
tax purposes. If this legislation requires the recapture of the pre-1988 tax bad
debt reserve, the Bank would be required to record an after-tax charge to
earnings of approximately $18 million. Other legislation, which has been passed
by each house of Congress, would require recapture of a thrift's post-1987 bad
debt reserve over a six taxable-year period with the opportunity to defer
recapture for up to two years if certain residential loan requirements are met.
There would be no financial statement impact from the recapture of the post-1987
tax bad debt reserves, because the Bank has already provided for this liability.
There can be no assurance as to the outcome of these various legislative
proposals, the effect of which could be material to the financial condition and
results of operations of the Company and the Bank.
 
FEDERAL PROGRAMS
 
     The continuation of programs administered by the Federal National Mortgage
Association (the "FNMA"), the Federal Home Loan Mortgage Corporation (the
"FHLMC") and the Government National Mortgage Association (the "GNMA"), which
facilitate the issuance of MBS, as well as the Company's continued eligibility
to participate in such programs, enhances the Company's ability to generate
funds by sales of mortgage loans or MBS. A portion of the Company's business is
also dependent upon the continuation of various programs administered by the
Federal Housing Administration (the "FHA"), which insures mortgage loans, and
the Department of Veterans' Affairs (the "VA"), which partially guarantees
mortgage loans.
 
     Any discontinuation of, or significant reduction in, the operation of such
programs would have a material adverse effect on the Company's mortgage banking
operations. The Company expects to remain eligible to participate in such
programs; however, any significant impairment of its eligibility could have a
material adverse impact on its operations. See "Business -- Mortgage Banking
Group".
 
LIMITATIONS ON STOCK OWNERSHIP
 
     In addition to restrictions on Common Stock ownership necessary to avoid an
Ownership Change and preserve the Company's NOLs, see " --Limitations on Use of
Tax Losses; Restrictions on Transfers of Stock", with certain limited
exceptions, federal regulations prohibit a person or company or a group of
persons deemed to be acting in concert from, directly or indirectly, acquiring
more than 10% of any class of voting stock or obtaining the ability to control
in any manner the election of a majority of the directors or otherwise direct
the management or policies of a savings institution, such as the Bank, without
prior notice or application to and the approval of the OTS. See
"Regulation -- Regulation of Savings and Loan Holding Companies".
 
                                       15
18
 
ANTI-TAKEOVER PROVISIONS
 
     The Certificate and the By-Laws, and applicable provisions of the Delaware
General Corporation Law (the "DGCL"), contain several provisions that may make
more difficult the acquisition of control of the Company without the approval of
the Company Board. Certain provisions of the Certificate and the By-Laws, among
other things, (i) authorize the issuance of additional shares of Common Stock
and shares of "blank check" Preferred Stock; (ii) classify the Company Board
into three classes, each of which (after an initial transition period) will
serve for staggered three year periods; (iii) provide that a director of the
Company may be removed by the stockholders only for cause; (iv) provide that
only the Company Board or the Chairman of the Board of the Company may call
special meetings of the stockholders; (v) provide that the stockholders may take
action only at a meeting of the stockholders or by unanimous written consent;
(vi) provide that stockholders must comply with certain advance notice
procedures in order to nominate candidates for election to the Company Board or
to place stockholders' proposals on the agenda for consideration at meetings of
the stockholders; and (vii) provide that the stockholders may amend or repeal
any of the foregoing provisions of the Certificate or the By-Laws only by a vote
of 80% of the stock entitled to vote generally in the election of directors (the
"Voting Stock"). With certain exceptions, Section 203 of the DGCL ("Section
203") imposes certain restrictions on mergers and other business combinations
between the Company and any holder of 15% or more of the Common Stock. See
"Description of Capital Stock -- Certain Provisions of the Certificate and
By-Laws; Anti-takeover Effects" and "-- Delaware Business Combination Statute".
 
CONCENTRATION OF OWNERSHIP
 
     Prior to June 18, 1996, the Company was indirectly owned by Hyperion
Partners, the general partner of which is indirectly controlled by three
individuals, including Lewis S. Ranieri, who served as Chairman of the Board,
President and CEO of the Company and Chairman of the Board of the Bank. As a
result of the Restructuring the limited and general partners of Hyperion
Partners primarily hold the outstanding Common Stock. See "The
Company -- Background of the Offering" and "Selling Stockholders". While it is
anticipated that no single stockholder of the Company will own in excess of 10%
of the voting stock of the Company immediately following the Offering, the
Selling Stockholders will continue to hold a significant ownership interest in
the Company, and certain Selling Stockholders have agreed to limit their further
disposition of Class A Common Stock. Following the consummation of the Offering,
Lewis S. Ranieri will serve as non-executive Chairman of the Board of the
Company, and Barry C. Burkholder, who is currently President and CEO of the
Bank, will also become Chairman of the Board of the Bank as well as the
President and CEO of the Company. While the Company is contemplating entering
into a consulting agreement with Mr. Ranieri pursuant to which he will serve as
a consultant to the Company for a period of three years, he may devote a
substantial amount of time to other business ventures, including competitive
activities through Hyperion Partners II, L.P. ("Hyperion Partners II") and its
affiliates.
 
CONVERSION OF CLASS B COMMON STOCK; DILUTION OF VOTING POWER
 
     Certain Selling Stockholders will retain shares of Class B Common Stock
(which have no voting rights) which they may elect to convert to Class A Common
Stock subject to certain restrictions. See "Description of Capital
Stock -- Common Stock -- Conversion". Class B Common Stock is also converted to
Class A Common Stock automatically upon transfer to a person who is not an
affiliate of the holder, including in any such transfer effected pursuant to the
Offering. Transfers of Class B Common Stock by certain persons are subject to
certain restrictions. See "Description of Capital Stock -- Common
Stock -- Restrictions on Transfers of Stock".
 
NO PRIOR MARKET FOR THE CLASS A COMMON STOCK
 
     Prior to the Offering, there was no public market for the Class A Common
Stock. The initial public offering price of the Class A Common Stock will be
determined through negotiations between the Company and the Underwriters, and
may not be indicative of the market price for the Class A Common Stock after the
Offering. The Company believes that certain factors, such as fluctuations in
operating results of the Company or of its competitors and market conditions
generally for similar stocks, could cause the market price of the
 
                                       16
19
 
Class A Common Stock to fluctuate substantially. Such market volatility may
adversely affect the market price of the Class A Common Stock. Although the
Company intends to have the Class A Common Stock quoted on NASDAQ, there can be
no assurance that an active public market will develop for such stock or, if
developed, will be sustained following the Offering. See "Underwriting".
 
LIABILITY UNDER REPRESENTATIONS AND WARRANTIES AND OTHER CREDIT RISKS
 
     In the ordinary course of business, the Company has liability under
representations and warranties made to purchasers and insurers of mortgage loans
and to purchasers of MSRs. In connection with MSRs that the Company purchases,
it may have liability as a successor to third-party originators' representations
and warranties. Under certain circumstances, the Company may become liable for
the unpaid principal and interest on defaulted loans if there has been a breach
of representations or warranties. In the case of any mortgage loans found to be
defective with respect to representations or warranties made or succeeded to by
the Company, the Company may be required to repurchase such mortgage loans, with
any subsequent loss on resale or foreclosure being borne by the Company. The
Company's losses from breaches of representations and warranties have not been
material to date.
 
LITIGATION
 
     The operations of financial institutions, such as the Company, are subject
to substantial statutory and regulatory compliance obligations. These
requirements are complex, and even inadvertent noncompliance could result in
liability. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, alleging violations of various statutory and regulatory provisions
relating to mortgage lending and servicing, including the Truth-in-Lending Act
(the "TILA"), the Real Estate Settlement Procedures Act (the "RESPA"), the Equal
Credit Opportunity Act (the "ECOA"), the Fair Housing Act (the "FH Act") and
various state laws. While the Company has had various claims asserted against it
under these statutes, management does not expect these claims to have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.
 
     Maxxam, Inc. ("Maxxam") has filed a petition for review in a Federal
appeals court and a motion to intervene in Federal District Court, each
challenging the December 30, 1988 order of the FSLIC approving the Acquisition.
See "The Company -- History". Maxxam contends that it should have been selected
as the winning bidder. Management of the Company believes, after consultation
with legal counsel, that these claims are barred by applicable time limits, have
no basis under existing law, and will not have a material adverse effect on the
Bank's or the Company's financial condition, results of operations or liquidity.
See "Legal Proceedings".
 
                                       17
20
 
                                  THE COMPANY
 
GENERAL
 
     The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Offering, the Company will be the largest
publicly traded depository institution headquartered in Texas, in terms of both
assets and deposits.
 
     The Bank is a federally chartered savings bank, the deposits of which are
insured by the SAIF, which is administered by the FDIC. The Company has no
significant assets other than its equity interest in the Bank. In June 1996, the
Company changed its name to Bank United Corp. The Company's address is 50
Charles Lindbergh Blvd., Uniondale, NY 11553, and its phone number is (516)
745-6644.
 
HISTORY
 
     The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. In the Acquisition, the Company initially
acquired from the FSLIC certain of the assets and assumed all the deposits and
certain other liabilities of Old USAT, an insolvent thrift. In connection with
the Acquisition, the Company entered into an Assistance Agreement which, among
other things, provided for federal financial assistance to the Bank. On December
23, 1993, the Company and the FDIC entered into an agreement providing for the
termination of the Assistance Agreement. See "Business -- The Assistance
Agreement".
 
     Immediately after the Acquisition, the Bank operated 19 banking branches,
primarily in the greater Houston metropolitan area, with no significant loan
origination capabilities. Through both acquisitions and internal growth, the
Bank has substantially expanded its Texas community banking branch network,
built a nationwide mortgage banking business, and established itself as a
provider of a broad array of financial products, including commercial banking
services and products. In 1990, 1991, and 1992, the Bank entered into various
agreements with the RTC, whereby the Bank purchased certain assets and assumed
certain liabilities, primarily deposit liabilities, of six thrift institutions
in RTC receivership. In connection with these acquisitions, the Bank received
cash from the RTC. The amount of cash received from the RTC was based on the
amount by which the sum of the liabilities assumed exceeded the sum of the
market values of the assets purchased, less a purchase premium. In 1990, the
Bank consummated its agreement to purchase certain assets and assume certain
liabilities relating to the loan origination operations of Commonwealth Mortgage
of America, L.P. Since July 1992, and particularly in 1994, the Bank has entered
into agreements to purchase several mortgage origination networks.
 
BACKGROUND OF THE OFFERING
 
     The Company was organized, and through June 17, 1996 operated, as a
subsidiary of Hyperion Holdings. During that period, all of the outstanding
shares of Hyperion Holdings were owned by Hyperion Partners. The general partner
of Hyperion Partners is indirectly controlled by three individuals, including
Lewis S. Ranieri, who, from December 1988, has served as Chairman of the Company
Board and, until June   , 1996, also as President and CEO of the Company and
Chairman of the Board of the Bank.
 
     Dividend Distribution and Restructuring
 
     During May 1996, the Company paid a dividend of $100 million on its Common
Stock to Hyperion Holdings and other holders of its Common Stock. The proceeds
of this dividend received by Hyperion Holdings were distributed by Hyperion
Partners to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners. During June 1996, the Restructuring
was effected as follows: (i) Hyperion Holdings exchanged shares of a newly
created class of its nonvoting common stock for certain shares of its voting
common stock held by Hyperion Partners; (ii) Hyperion Partners then distributed
 
                                       18
21
 
the Hyperion Holdings common stock to its limited and general partners in
accordance with the limited partnership agreement of Hyperion Partners; and
(iii) following the Distribution, Hyperion Holdings was merged with and into the
Company, with the result that holders of Hyperion Holdings voting and nonvoting
common stock received shares of Class A Common Stock and Class B Common Stock
and the holders of Class C Common Stock received shares of Class B Common Stock.
As part of the Restructuring, the common stock of Hyperion Holdings and the
Class C Common Stock were converted 1800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Offering is intended to establish a public market value
for the Class A Common Stock while providing the Selling Stockholders with
liquidity for their current holdings in the Company.
 
     Management
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Restructuring and the
Offering, Mr. Burkholder will also become Chairman of the Board of the Bank as
well as President and CEO of the Company. The executive management group of the
Bank consists of seven individuals who have worked together for the past six
years, giving them a thorough understanding of the businesses they have
developed together. They average more than 20 years of related industry
experience, the majority of which comes from commercial banking. As a team, they
have brought the discipline and sophistication of commercial banking to the
Bank. The next level of senior management comprises 42 executives, a third of
whom were hired directly from commercial banks. The balance of the senior
management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".
 
     Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Offering, to serve as non-executive
Chairman of the Board of the Company. The Company is contemplating entering into
a consulting agreement with Mr. Ranieri pursuant to which he would serve as a
consultant to the Company for a three year period.
 
     Future Tax Benefits
 
     In connection with the Acquisition and the Assistance Agreement, the
Company succeeded to and recorded substantial NOLs which have resulted in
certain tax benefits. As of March 31, 1996, the Company had NOLs of $808.0
million available to reduce taxable income in future years. Pursuant to the Tax
Benefits Agreement (as defined below), the Bank is required to pay to the FRF a
certain portion of net tax benefits obtained through the taxable year ending
nearest to September 30, 2003. See "Regulation -- Taxation -- FSLIC Assistance".
 
     The Offering is structured with the intent to preserve the beneficial tax
attributes of the Company as described below. See "Regulation -- Taxation".
Accordingly, certain of the Selling Stockholders have agreed to limit their
further disposition of Common Stock for up to three years following the Offering
except with approval of the Company Board. See "Description of Capital
Stock -- Common Stock -- Restrictions on Transfers of Common Stock". The
limitations on transfers will allow the Company to record a $101.7 million tax
benefit in the quarter ended June 30, 1996. See "Risk Factors -- Limitations on
Use of Tax Losses; Restrictions on Transfers of Stock" and Note 21 to the
Consolidated Financial Statements.
 
     Senior Note Exchange
 
     Substantially simultaneously with the consummation of the Offering, the
Company intends to commence the Exchange Offer for the Senior Notes. The
Exchange Offer is intended to satisfy the condition of the Senior Notes pursuant
to which the interest rate on the Senior Notes will revert from 9.05% to 8.05%
per annum commencing with and including the date on which the Exchange Offer is
consummated. See Note 11 to the Consolidated Financial Statements.
 
     Claims Related to Forbearance Agreement
 
     In connection with the Acquisition, the FHLB approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory
 
                                       19
22
 
provisions with respect to regulatory capital requirements, liquidity
requirements, accounting requirements and other matters. Following enactment of
FIRREA, the OTS took the position that the capital standards set forth in FIRREA
apply to all savings institutions, including those institutions that had been
operating under previously granted capital and accounting forbearances, and that
FIRREA eliminated these forbearances. On July 25, 1995, the Bank, the Company,
and certain of their then-direct and indirect parent entities filed suit against
the United States in the Court of Federal Claims for alleged failures of the
United States to honor certain contractual obligations, including obligations
related to the Forbearance Agreement. The lawsuit is in a preliminary stage.
Discovery has been stayed pending the United States Supreme Court's review of
United States v. Winstar Corp, an action by another thrift raising similar
issues. The Company is unable to predict the outcome of its suit against the
United States and the amount of judgment for damages, if any, that may be
entered in favor of the Company. Consequently, no assurances can be given as to
the results of this suit. See "Legal Proceedings".
 
                                USE OF PROCEEDS
 
     The sale of the shares of Class A Common Stock offered hereby is for the
account of the Selling Stockholders. Accordingly, the Company will not receive
any proceeds from the sale to the public of the shares of Class A Common Stock
offered hereby. See "Selling Stockholders".
 
                                DIVIDEND POLICY
 
     The Company Board currently intends to declare and pay quarterly dividends
on its Common Stock. It is expected that the first quarterly dividend payment
will be $          per share (a rate of $          annually), with the initial
dividend to be declared and paid in the      quarter of fiscal year      . The
declaration and payment of dividends by the Company are subject to the
discretion of the Company Board and limitations imposed by the Senior Notes on
Restricted Payments (as defined in the Senior Notes), including dividends. At
March 31, 1996, pro forma after giving effect to the Restructuring, the Company
would be permitted to pay $62.7 million in dividends on its capital stock. The
Company's ability to pay dividends and to meet its other cash obligations,
including debt service on the Senior Notes, is dependent on the receipt of
dividends from the Bank. The declaration of dividends by the Bank on all classes
of its capital stock is subject to the discretion of the Board of Directors of
the Bank, the terms of the Bank Preferred Stock, applicable regulatory
requirements and compliance with the covenants of the Senior Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity". Any determination as to the
payment of dividends will depend upon, among other things, general business
conditions, the Company's financial results, contractual, legal and regulatory
restrictions regarding the payment of dividends by the Company's subsidiaries,
the credit ratings of the Company and such other factors as the Company Board
may consider to be relevant. Dividends may not be paid on the Bank Common Stock
if full dividends on the Bank Preferred Stock have not been paid for the four
most recent quarterly dividend periods. Thus, if for any reason the Bank failed
to declare and pay full quarterly dividends on the Bank Preferred Stock, the
Company would not receive any cash dividends from the Bank until four full
quarterly dividends on the Bank Preferred Stock had been paid. See "Risk
Factors -- Holding Company Structure; Ability to Pay Dividends". The Company has
not historically paid dividends, with the exception of a $100 million dividend
paid to holders of Class A Common Stock and its former Class C Common Stock, par
value $.01 per share, of the Company (the "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
Warrants. Thus, the dividends historically paid by the Company are not
indicative of its future dividend policy.
 
                                       20
23
 
                                 CAPITALIZATION
 
     The following table sets forth the historical capitalization of the Company
at March 31, 1996 and the pro forma capitalization of the Company at March 31,
1996 after giving effect to (i) the Restructuring and an associated 1,800 to one
Common Stock conversion, (ii) a $100 million dividend paid in May 1996 and a
$5.9 million contractually required payment to the FDIC, (iii) a $101.7 million
tax benefit recorded in June 1996, (iv) a $6.2 million charge, after tax, in
connection with the Executive Management Incentive Compensation Plans (as
defined below) and (v) estimated expenses related to the Offering. See Note 21
to the Consolidated Financial Statements. In addition to the long-term debt of
the Company reflected below, at March 31, 1996, the Bank had long-term debt
consisting of deposits, FHLB advances, and certain other funding liabilities
incurred in the ordinary course of business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital Resources
and Liquidity" and Notes 8, 9, 10 and 11 to the Consolidated Financial
Statements.
AT MARCH 31, 1996
                                                                  -------------------------
                                                                  HISTORICAL     PRO FORMA
                                                                  ----------     ----------
                                                                       (IN THOUSANDS)
Long-Term Debt -- Senior Notes(1)...........................    $115,000       $115,000
    Minority Interest(2)........................................     185,500        185,500
    Stockholders' Equity:
      Preferred Stock(3)........................................          --             --
      Common Stock(4)...........................................           2              2
      Paid-in capital(5)........................................     118,009        122,009
      Retained earnings.........................................     411,498        401,098
      Unrealized gains (losses) on securities and
         mortgage-backed securities available for sale, net of
         tax....................................................      (3,068)        (3,068)
                                                                    --------       --------
      Total stockholders' equity................................     526,441        520,041
                                                                    --------       --------
         Total Consolidated Capitalization......................    $826,941       $820,541
                                                                    ========       ========
    Ratio of equity to assets...................................        4.67%          4.62%
    Ratio of tangible equity to tangible assets.................        4.48%          4.42%
    Shares outstanding(6)
      Class A...................................................  23,828,400
      Class B...................................................          --             --
      Class C...................................................   5,034,600
    Book value per common share(6)..............................      $18.24             --
    Tangible book value per share (6)...........................      $17.44             --
    Regulatory capital of the Bank(7)(8)
      Tangible Capital
         Amount.................................................    $770,764       $658,664
         Ratio..................................................        6.88%          5.89%
      Core Capital
         Amount.................................................    $780,227       $668,127
         Ratio..................................................        6.96%          5.97%
      Total Risk-Based Capital
         Amount.................................................    $816,772       $704,672
         Ratio..................................................       14.20%         12.12%
- ---------------
(1) The Senior Notes currently bear a stepped up rate of 9.05% per annum pending
     consummation of the Exchange Offer, following which the rate will revert to
     8.05% per annum.
 
                                       21
24
 
(2) Minority interest consists of $185.5 million stated value of the Bank
     Preferred Stock. In addition, the Warrants represent a potential additional
     minority interest in the Bank. See Notes 7 and 16 to the Consolidated
     Financial Statements.
 
(3) The Company had 2,500 shares of Preferred Stock authorized, none of which
     were issued as of March 31, 1996.
 
(4) The Company has reserved           shares of its Common Stock for issuance
     and to be available for grants under three separate plans. See
     "Management -- The 1996 Incentive Compensation Plan", "-- Executive
     Management Compensation Plan" and "-- The Director Stock Compensation
     Plan".
 
(5) Offering expenses estimated to be $2,000,000.
 
(6) Historical and pro forma per share results have been restated to reflect an
     1,800 to one Common Stock conversion, effective June 18, 1996, in
     connection with the Restructuring. Pro forma per share amounts also include
     the effects of stock issued pursuant to the 1996 Incentive Compensation
     Plan.
 
(7) The Bank's portion of the $101.7 million tax benefit recorded in June 1996
     was $85.2 million and has been excluded for purposes of computing the
     Bank's regulatory capital ratios. OTS regulations limit the amount of
     deferred tax asset an institution may include in its regulatory capital.
 
(8) The Bank's pro forma regulatory capital ratios reflect a $100 million
     dividend payment from the Bank to the Company and a related contractually
     required payment of $5.9 million to the FDIC. These payments were made in
     May 1996.
 
                                       22
25
 
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The following selected consolidated financial and other data as of and for
each of the years in the five-year period ended September 30, 1995 are derived
from the Company's audited Consolidated Financial Statements. The information
set forth below should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Consolidated Statements of
Financial Condition as of September 30, 1995 and 1994, and the Consolidated
Statements of Operations for each of the years in the three year period ended
September 30, 1995, and the report thereon of Deloitte & Touche LLP are included
elsewhere in this Prospectus. The selected consolidated financial and other data
as of and for the six months ended March 31, 1996 and 1995 are derived from the
unaudited consolidated financial statements included in the Consolidated
Financial Statements which, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments), which are
necessary for a fair presentation of the results for such periods. The results
of operations for the six months ended March 31, 1996 are not necessarily
indicative of the results of operations to be obtained for the entire fiscal
year.
 
           FIVE-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
AT MARCH 31,                                 AT SEPTEMBER 30,
                                  -------------------------   ---------------------------------------------------------------
                                     1996          1995          1995          1994         1993       1992(1)      1991(1)
                                  -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
SUMMARY OF FINANCIAL CONDITION:
ASSETS(2)
Cash and cash equivalents.......  $   135,691   $    90,912   $   112,931   $   76,938   $   65,388   $  94,723    $ 217,630
Securities purchased under
  agreements to resell and
  federal funds sold............      659,279       636,274       471,052      358,710      547,988     206,000    1,632,600
Trading account assets..........        1,267         1,044         1,081        1,011        1,006      94,691           --
Securities......................       58,351       114,254       116,013      114,115       43,430       4,909        6,800
Mortgage-backed securities......    1,954,070     2,600,876     2,398,263    2,828,903    2,175,925     833,425      419,064
Loans...........................    7,878,080     6,161,432     8,260,240    5,046,174    4,862,379   4,101,716    3,431,154
Covered Assets and related
  assets(3).....................           --            --            --           --      392,511     610,901      779,304
All other assets................      579,898       539,985       623,954      484,310      351,929     308,918      390,295
                                  -----------   -----------    ----------   ----------   ----------   ----------
        Total assets............  $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
                                  ===========   ===========    ==========   ==========   ==========   ==========
LIABILITIES, MINORITY INTEREST,
  AND STOCKHOLDERS' EQUITY(2)
Deposits........................  $ 4,963,321   $ 5,015,713   $ 5,182,220   $4,764,204   $4,839,388   $4,910,760   $6,054,474
FHLB advances...................    4,139,023     3,284,373     4,383,895    2,620,329    2,185,445     632,345      287,345
Securities sold under agreements
  to repurchase.................      949,936       839,939     1,172,533      553,000      310,000          --           --
Note payable to related party...           --            --            --           --           --       4,090        4,090
Long-term debt ("15.75%
  Notes").......................           --            --            --           --           --     102,000      107,000
Senior Notes....................      115,000       115,000       115,000      115,000      115,000          --           --
All other liabilities...........      387,415       327,559       448,283      320,766      516,020     373,715      262,178
                                  -----------   -----------    ----------   ----------   ----------   ----------
    Total liabilities...........   10,554,695     9,582,584    11,301,931    8,373,299    7,965,853   6,022,910    6,715,087
                                  -----------   -----------    ----------   ----------   ----------   ----------
    Minority interest -- Bank
      Preferred Stock(4)........      185,500        85,500       185,500       85,500       85,500          --           --
    Total stockholders'
      equity....................      526,441       476,693       496,103      451,362      389,203     232,373      161,760
                                  -----------   -----------    ----------   ----------   ----------   ----------
        Total liabilities,
          minority interest, and
          stockholders'
          equity................  $11,266,636   $10,144,777   $11,983,534   $8,910,161   $8,440,556   $6,255,283   $6,876,847
                                  ===========   ===========    ==========   ==========   ==========   ==========
23
26
AT OR FOR
                                               THE SIX MONTHS
                                               ENDED MARCH 31,              AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                             -------------------   --------------------------------------------------------
                                               1996       1995       1995       1994       1993      1992(1)      1991(1)
                                             --------   --------   --------   --------   --------   ----------   ----------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
SUMMARY OF OPERATIONS(2)
Interest income............................  $421,221   $327,586   $746,759   $494,706   $482,490    $502,854     $422,184
Interest expense...........................   309,289    239,960    552,760    320,924    300,831     348,291      330,659
                                             --------   --------   --------   --------   --------    --------
  Net interest income......................   111,932     87,626    193,999    173,782    181,659     154,563       91,525
Provision for credit losses................     5,850      4,157     24,293      6,997      4,083      21,133        4,122
                                             --------   --------   --------   --------   --------    --------
  Net interest income after provision for
    credit losses..........................   106,082     83,469    169,706    166,785    177,576     133,430       87,403
Non-interest income
  Net gains (losses)
    Sales of single family servicing rights
      and single family warehouse loans....    19,157     38,464     60,495     63,286     67,403      67,223       30,541
    Securities and mortgage-backed
      securities...........................     2,863          8         26     10,404     43,702       2,022        1,440
    Other loans............................     3,485       (380)    (1,210)       163      1,496       4,759          756
  Loan servicing fees and charges..........    22,107     22,813     43,508     31,741     21,780      20,823        6,076
  Other fees and charges...................     6,997      5,748     12,162     13,295     12,310       8,963        6,117
                                             --------   --------   --------   --------   --------    --------
  Total non-interest income................    54,609     66,653    114,981    118,889    146,691     103,790       44,930
                                             --------   --------   --------   --------   --------    --------
Non-interest expense
  Compensation and benefits................    39,898     43,192     83,520     86,504     81,472      69,476       46,580
  Amortization of intangibles..............     9,801     10,718     21,856     18,247     24,469      22,832       14,789
  Other....................................    49,605     47,735     89,200     94,842     96,023      88,107       52,258
                                             --------   --------   --------   --------   --------    --------
  Total non-interest expense...............    99,304    101,645    194,576    199,593    201,964     180,415      113,627
                                             --------   --------   --------   --------   --------    --------
  Income before income taxes, minority
    interest, and extraordinary loss.......    61,387     48,477     90,111     86,081    122,303      56,805       18,706
Income tax expense (benefit)(5)............    25,278     20,186     37,415    (31,899)   (26,153)        200         (409)
                                             --------   --------   --------   --------   --------    --------
  Income before minority interest and
    extraordinary loss.....................    36,109     28,291     52,696    117,980    148,456      56,605       19,115
Less minority interest
  Bank Preferred Stock dividends(4)........     9,126      4,326     10,600      8,653      6,537          --           --
  Payments in lieu of dividends(6).........       224        306        377        357         --          --           --
                                             --------   --------   --------   --------   --------    --------
  Income before extraordinary loss.........    26,759     23,659     41,719    108,970    141,919      56,605       19,115
Extraordinary loss(7)......................        --         --         --         --     14,549          --           --
                                             --------   --------   --------   --------   --------    --------
  Net income...............................  $ 26,759   $ 23,659   $ 41,719   $108,970   $127,370    $ 56,605     $ 19,115
                                             ========   ========   ========   ========   ========    ========
Operating earnings(8)......................  $ 55,039   $ 48,849   $ 91,295   $ 75,514   $ 77,105    $ 50,024     $ 16,510
Earnings per common share(9)
  Income before extraordinary loss.........  $   0.87   $   0.76   $   1.35   $   3.55   $   4.61    $   1.85     $   0.71
  Extraordinary loss.......................        --         --         --         --       0.50          --           --
                                             --------   --------   --------   --------   --------    --------
  Net income...............................  $   0.87   $   0.76   $   1.35   $   3.55   $   4.11    $   1.85     $   0.71
                                             ========   ========   ========   ========   ========    ========
Book value per common share(9).............  $  18.24   $  16.52   $  17.19   $  15.64   $  13.48    $   8.19     $   6.87
CERTAIN RATIOS AND OTHER DATA(2)(10)
Regulatory capital ratios of the Bank(11):
  Tangible Capital.........................      6.88%      5.65%      6.20%      6.01%      6.17%       4.24%        2.64%
  Core Capital.............................      6.96       5.77       6.29       6.17       6.43        5.04         3.59
  Total Risk-Based Capital.................     14.20      12.43      13.45      14.02      14.87       12.19         9.37
Return on average assets...................      0.46       0.50       0.40       1.32       1.74        0.89         0.42
Return on average common equity............     10.45      10.23       8.77      26.32      44.87       28.18        13.95
Stockholders' equity to assets.............      4.67       4.70       4.14       5.07       4.61        3.71         2.35
Tangible stockholders' equity to tangible
  assets...................................      4.48       4.40       3.93       4.68       4.14        2.58         1.10
Net yield on interest-earning assets(12)...      2.00       1.92       1.92       2.20       2.61        2.60         2.16
Interest rate spread(12)...................      1.66       1.61       1.61       1.95       2.41        2.54         2.15
24
27
AT OR FOR THE SIX MONTHS
                                           ENDED MARCH 31,                    AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                      -------------------------   ---------------------------------------------------------------
                                         1996          1995          1995          1994         1993       1992(1)      1991(1)
                                      -----------   -----------   -----------   ----------   ----------   ----------   ----------
                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
CERTAIN RATIOS AND OTHER
  DATA -- CONTINUED(2)(10)
Average interest-earning assets to
  average interest-bearing
  liabilities.......................         1.06x         1.06x         1.06x        1.06x        1.04x        1.01x        1.00x
Non-interest expense to average
  total assets......................         1.72%         2.13%         1.86%        2.41%        2.76%        2.85%        2.50%
Net operating expense ratio(13).....         0.77          0.74          0.76         0.97         0.76         1.21         1.51
Efficiency ratio(14)................        60.16         62.45         59.50        66.38        65.11        63.98        75.14
Nonperforming assets to total
  assets............................         1.10          1.04          0.84         1.09         0.72         0.89         0.59
Nonaccrual loans to total loans.....         1.21          1.29          0.91         1.51         0.85         0.92         0.98
Allowance for credit losses to net
  nonaccrual loans..................        38.00         31.43         48.74        30.73        71.71        74.04        30.00
Allowance for credit losses to
  nonperforming assets..............        29.36         23.62         36.65        24.18        49.28        50.54        25.05
Allowance for credit losses to total
  loans.............................         0.46          0.40          0.44         0.46         0.61         0.68         0.29
Net loan charge-offs to average
  loans.............................         0.15          0.09          0.16         0.30         0.05         0.07         0.04
Full-time equivalent employees......        2,642         2,684         2,663        2,894        3,122        2,720        2,023
Number of Community Banking
  branches(1).......................           67            64            65           62           62           65           74
Number of Commercial Banking
  origination offices...............            9             8             9            5            3            2            1
Number of Mortgage Banking
  origination offices...............          112           131           122          145          109           93           72
Mortgage Banking servicing
  portfolio.........................  $11,594,485   $12,031,533   $12,532,472   $8,920,760   $8,073,226   $7,187,000   $4,681,712
Mortgage Banking originations.......    2,021,127     1,553,255     3,447,250    5,484,111    6,737,762    6,118,363    3,195,873
Financial Markets loans purchased...       80,948       769,995     2,640,755    1,312,827    1,202,970      912,847    1,885,956
- ---------------
 
 (1) The Bank acquired from the RTC $2.2 billion in deposit liabilities during
     fiscal 1991. Pursuant to the Bank's plan of acquisition, rates on these
     deposits were reduced after acquisition and, as expected, approximately
     $766 million of deposits were withdrawn from the Bank during fiscal 1992.
     Also, the Bank consolidated overlapping branch locations that resulted from
     these acquisitions. See "The Company -- History".
 
 (2) See Note 21 to the Consolidated Financial Statements for a discussion of
     subsequent events and see "Capitalization". On a pro forma basis,
     stockholders' equity would have been $520.0 million as of March 31, 1996.
 
 (3) Reflects assets governed under the Assistance Agreement between the Bank
     and the FRF. See "Business -- The Assistance Agreement".
 
 (4) During fiscal 1993, the Bank issued Bank Preferred Stock, Series A, and
     during fiscal 1995, the Bank issued Bank Preferred Stock, Series B. None of
     the shares of Bank Preferred Stock are owned by the Company. Certain
     Selling Stockholders and directors and management of the Company own shares
     of the Bank Preferred Stock. See "Management -- Security Ownership of
     Certain Beneficial Owners and Management -- Principal Stockholders, Bank
     Preferred Stock".
 
 (5) Fiscal 1994 and 1993 include tax benefits recognized as a result of
     Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
     for Income Taxes". See Note 13 to the Consolidated Financial Statements. A
     tax benefit in the amount of $101.7 million was recognized in the third
     quarter of fiscal 1996.
 
 (6) All of the outstanding Bank Common Stock is currently owned by the Company.
     The Bank has issued to the FDIC Warrants to acquire 158,823 shares of Bank
     Common Stock (representing 5.56% of the Bank Common Stock as of March 31,
     1996 and September 30, 1995, assuming exercise in full of the Warrants), at
     an exercise price of $0.01 per share. Payments in lieu of dividends relate
     to the Warrants. See "Business -- The Assistance Agreement -- Warrant
     Agreement" and Note 16 to the Consolidated Financial Statements.
 
 (7) Reflects costs and charges associated with the issuance of the Senior
     Notes. See Note 11 to the Consolidated Financial Statements.
 
 (8) Operating earnings represents income before taxes, minority interest, and
     extraordinary loss and excludes net gains (losses) on securities, MBS, and
     other loans.
 
 (9) Per share results have been restated to reflect an 1,800 to one Common
     Stock conversion effective June 1996 in connection with the Restructuring.
     See Note 21 to the Consolidated Financial Statements.
 
(10) Ratio, yield, and rate information are based on weighted average daily
     balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
     1994, and 1993 and average monthly balances for prior periods, with the
     exception of return on average common equity, which is based on average
     monthly balances for all periods presented. Interim rates and yields are
     annualized.
 
(11) Regulatory capital ratios presented are those of the Bank. No regulatory
     capital ratios are presented for the Company because there are no such
     applicable requirements for savings and loan holding companies such as the
     Company. For a discussion of the regulatory capital requirements applicable
     to the Bank, see "Regulation -- Safety and Soundness Regulations -- Capital
     Requirements".
 
(12) Net yield on interest-earning assets represents net interest income as a
     percentage of average interest-earning assets. Interest rate spread
     represents the difference between the average yield on interest-earning
     assets and the average rate on interest-bearing liabilities.
 
(13) Net operating expense ratio represents total non-interest expense less
     total non-interest income as a percentage of average assets for each
     period.
 
(14) Efficiency ratio represents non-interest expenses (excluding goodwill
     amortization) divided by net interest income plus non-interest income,
     excluding net gains (losses) on securities, MBS and other loans.
 
                                       25
28
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
DISCUSSION OF RESULTS OF OPERATIONS
 
  Overview.
 
     Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  Net income was $26.8 million for the six months ended March 31, 1996,
compared to $23.7 million for the six months ended March 31, 1995. The increase
primarily reflects the higher levels of interest-earning assets for the six
months ended March 31, 1996, partially offset by the effect of increased
dividends paid by the Bank on the Bank Preferred Stock (reflected as minority
interest on the Consolidated Statements of Operations) and lower gains on sales
of single family MSRs and single family warehouse loans. Loan servicing fees and
charges decreased during the six months ended March 31, 1996 as compared to the
six months ended March 31, 1995. As of March 31, 1996, the principal balances of
the single family servicing portfolio was $11.6 billion.
 
     Operating earnings represents income before taxes, minority interest, and
extraordinary losses and excludes net gains (losses) on securities, MBS, and
other loans. Operating earnings were $55.0 million for the six months ended
March 31, 1996, compared to $48.8 million for the six months ended March 31,
1995. This increase primarily reflects the higher levels of interest-earning
assets, partially offset by a decrease in gains on sales of single family MSRs
and warehouse loans, as noted above.
 
     1995 Compared to 1994.  Net income was $41.7 million for fiscal 1995,
compared to $109.0 million for fiscal 1994. The decrease primarily reflects the
effect of a tax benefit of $58.2 million recognized in fiscal 1994 for the
expected utilization of NOLs under SFAS No. 109, a lower interest rate spread
realized on its interest-earning assets, lower gains on sales of securities and
MBS and higher provisions for credit losses in fiscal 1995. Net income for
fiscal 1995 was favorably impacted by the effect of higher levels of
interest-earning assets during fiscal 1995 compared to fiscal 1994 and an
increase in the single family servicing portfolio. The single family servicing
portfolio increased to $12.5 billion at September 30, 1995 compared to $8.9
billion at September 30, 1994, contributing to increased loan servicing fees and
charges during fiscal 1995.
 
     Operating earnings were $91.3 million for fiscal 1995, compared to $75.5
million for fiscal 1994. This increase primarily reflects the higher levels of
interest-earning assets and increased loan servicing fees and charges, partially
offset by higher provisions for credit losses, as noted above.
 
     1994 Compared to 1993.  Net income was $109.0 million for fiscal 1994,
compared to $127.4 million for fiscal 1993. The decrease is primarily a result
of lower gains on sales of securities and MBS in fiscal 1994, unfavorable
changes in net interest rate spread and higher provisions for credit losses in
fiscal 1994. Net income for fiscal 1994 was favorably impacted by an increase in
the single family servicing portfolio. The single family servicing portfolio
increased to $8.9 billion at September 30, 1994, from $8.1 billion at September
30, 1993, contributing to increased loan servicing fees and charges during
fiscal 1994. Tax benefits of $58.2 million and $44.2 million were recognized in
fiscal 1994 and 1993, respectively, for the expected utilization of NOLs under
SFAS No. 109.
 
     Operating earnings were $75.5 million for fiscal 1994, compared to $77.1
million for fiscal 1993. This decrease primarily reflects the effect of
unfavorable changes in the net interest rate spread and higher provisions for
credit losses, partially offset by increased loan servicing fees and charges, as
noted above.
 
                                       26
29
 
     The following table sets forth a reconciliation of Bank and Company net
income.
FOR THE SIX MONTHS
                                                                 ENDED MARCH 31,        FOR THE YEAR ENDED SEPTEMBER 30,
                                                               -------------------     ----------------------------------
                                                                1996        1995         1995         1994         1993
                                                               -------     -------     --------     --------     --------
                                                                                     (IN THOUSANDS)
BANK
Net income...................................................  $41,358     $33,516     $ 62,708     $124,761     $163,671
Preferred stock dividends....................................   (9,126)     (4,326)     (10,600)      (8,653)      (6,537)
                                                               -------     -------     --------     --------     --------
  Net income available for Bank's common stock...............   32,232      29,190       52,108      116,108      157,134
Dividends to Company.........................................   (3,810)     (5,209)      (6,409)     (11,435)     (15,224)
Payments in lieu of dividends................................     (224)       (306)        (377)        (357)          --
                                                               -------     -------     --------     --------     --------
Undistributed income of Bank.................................   28,198      23,675       45,322      104,316      141,910
                                                               -------     -------     --------     --------     --------
COMPANY
Dividends from Bank..........................................    3,810       5,209        6,409       11,435       15,224
Interest expense.............................................   (5,205)     (5,202)     (10,407)     (10,177)     (14,261)
Other (expense) income, net..................................      (44)        (23)         395        3,396         (954)
Extraordinary loss...........................................       --          --           --           --      (14,549)
                                                               -------     -------     --------     --------     --------
  Net (loss) income of Company without including
    undistributed income of Bank.............................   (1,439)        (16)      (3,603)       4,654      (14,540)
                                                               -------     -------     --------     --------     --------
Consolidated net income(1)...................................  $26,759     $23,659     $ 41,719     $108,970     $127,370
                                                               =======     =======     ========     ========     ========
- ---------------
(1) See Note 21 to the Consolidated Financial Statements for the effect of a
    dividend paid and a tax benefit recorded during the third quarter of fiscal
    1996 and other subsequent events.
 
  Net Interest Income
 
     Net interest income is based on the relative amounts of interest-earning
assets and interest-bearing liabilities and the spread between the yields earned
on assets and rates paid on liabilities. Net interest rate spread is affected by
changes in general market interest rates, including changes in the relationship
between short- and long-term interest rates (the yield curve), the effects of
periodic caps on the Bank's adjustable-rate mortgage and MBS portfolios and the
interest rate sensitivity position or "gap". The Bank has traditionally managed
its business to limit its overall exposure to changes in interest rates. See
"Business -- Business Strategy". Nevertheless, different aspects of its business
remain subject, in varying degrees, to risk from interest rate changes.
 
                                       27
30
 
                      AVERAGE BALANCES AND AVERAGE YIELDS
FOR THE YEAR ENDED
                                                      FOR THE SIX MONTHS ENDED MARCH 31,                       SEPTEMBER 30,
                                      ------------------------------------------------------------------   ----------------------
                                                    1996                              1995                          1995
                                      --------------------------------   -------------------------------   ----------------------
                                        AVERAGE                YIELD/     AVERAGE                YIELD/      AVERAGE
                                        BALANCE     INTEREST   RATE(3)    BALANCE     INTEREST   RATE(3)     BALANCE     INTEREST
                                      -----------   --------   -------   ----------   --------   -------   -----------   --------
                                                                        (DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
 Short-term interest-earning
   assets...........................  $   575,936   $ 17,360     5.93%   $  462,791   $ 14,415     6.16%   $   466,276   $ 29,675
 Trading account assets.............        1,148         35     6.10         1,063         29     5.46          1,079         62
 Securities(1)......................       84,659      2,112     4.99       117,075      2,950     5.05        116,934      5,893
 Mortgage-backed securities(1)......    2,177,645     70,699     6.49     2,734,073     87,134     6.37      2,618,990    173,155
 Loans(2)...........................    8,092,849    323,930     8.01     5,751,629    218,370     7.59      6,707,868    526,528
 FHLB stock.........................      227,895      7,085     6.22       155,307      4,688     6.05        180,416     11,446
 Covered Assets and related
   assets...........................           --         --       --            --         --       --             --         --
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
   TOTAL INTEREST-EARNING ASSETS....   11,160,132    421,221     7.55     9,221,938    327,586     7.10     10,091,563    746,759
Non-interest-earning assets.........      379,397                           310,660                            345,500
                                      -----------                        ----------                        -----------
   Total assets.....................  $11,539,529                        $9,532,598                        $10,437,063
                                      ===========                        ==========                        ===========
INTEREST-BEARING LIABILITIES:
 Deposits:
   Transaction accounts.............  $   243,668      1,440     1.18    $  228,716      1,694     1.49    $   225,799      3,384
   Insured money fund accounts......    1,316,051     33,013     5.02       995,160     23,567     4.75      1,032,873     57,848
   Savings accounts.................      145,427      1,883     2.59       193,759      2,620     2.71        171,308      4,715
   Certificates of deposits.........    3,358,442    102,174     6.08     3,436,942     94,623     5.52      3,560,420    198,419
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
     Total deposits.................    5,063,588    138,510     5.47     4,854,577    122,504     5.06      4,990,400    264,366
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
 FHLB advances......................    4,346,960    136,501     6.18     3,068,768     92,281     5.95      3,560,844    224,767
 Reverse repurchase agreements and
   federal funds purchased..........      982,169     29,073     5.82       675,452     19,973     5.85        888,453     53,220
 Note payable to related party......           --         --       --            --         --       --             --         --
 Long-term debt.....................           --         --       --            --         --       --             --         --
 Senior Notes.......................      115,000      5,205     9.05       115,000      5,202     9.05        115,000     10,407
 Other..............................           --         --       --            --         --       --             --         --
                                      -----------   --------     ----    ----------   --------     ----    -----------   --------
   TOTAL INTEREST-BEARING
     LIABILITIES....................   10,507,717    309,289     5.89     8,713,797    239,960     5.49      9,554,697    552,760
 Non-interest-bearing liabilities
   and stockholders' equity.........    1,031,812                           818,801                            882,366
                                      -----------                        ----------                        -----------
   Total liabilities and
     stockholders' equity...........  $11,539,529                        $9,532,598                        $10,437,063
                                      ===========                        ==========                        ===========
Net interest income/interest rate
 spread.............................                $111,932     1.66%                $ 87,626     1.61%                 $193,999
                                                    ========     ====                 ========     ====                  ========
Net yield on interest-earning
 assets.............................                             2.00%                             1.92%
                                                                 ====                              ====
Ratio of average interest-earning
 assets to average interest-bearing
 liabilities........................         1.06                              1.06                               1.06
                                              ---                               ---                                ---
                                              ---                               ---                                ---
1994                             1993
                                               ------------------------------   ------------------------------
                                      YIELD/    AVERAGE                YIELD/    AVERAGE                YIELD/
                                       RATE     BALANCE     INTEREST    RATE     BALANCE     INTEREST    RATE
                                      ------   ----------   --------   ------   ----------   --------   ------
INTEREST-EARNING ASSETS:
 Short-term interest-earning
   assets...........................   6.36%   $  461,530   $ 19,019    4.12 %  $  408,972   $ 14,301    3.50 %
 Trading account assets.............   5.75         1,026       (144)  (14.04)     176,617      6,224    3.52
 Securities(1)......................   5.04       108,751      5,007    4.60         1,707         63    3.69
 Mortgage-backed securities(1)......   6.61     2,595,163    151,972    5.86     1,336,709     83,525    6.25
 Loans(2)...........................   7.85     4,524,158    308,804    6.83     4,488,405    344,515    7.68
 FHLB stock.........................   6.34       132,277      5,558    4.20        89,927      3,095    3.44
 Covered Assets and related
   assets...........................     --        74,547      4,490    6.02       469,742     30,767    6.55
                                       ----    ----------   --------   ------   ----------   --------   -----
   TOTAL INTEREST-EARNING ASSETS....   7.40     7,897,452    494,706    6.26     6,972,079    482,490    6.92
Non-interest-earning assets.........              386,175                          346,698
                                               ----------                       ----------
   Total assets.....................           $8,283,627                       $7,318,777
                                               ==========                       ==========
INTEREST-BEARING LIABILITIES:
 Deposits:
   Transaction accounts.............   1.50    $  237,537      3,753    1.58    $  230,649      4,843    2.10
   Insured money fund accounts......   5.60       582,126     18,508    3.18       476,835     13,471    2.83
   Savings accounts.................   2.75       284,885      7,311    2.57       341,785      7,055    2.06
   Certificates of deposits.........   5.57     3,662,043    179,462    4.90     3,816,152    200,614    5.26
                                       ----    ----------   --------   ------   ----------   --------   -----
     Total deposits.................   5.30     4,766,591    209,034    4.39     4,865,421    225,983    4.64
                                       ----    ----------   --------   ------   ----------   --------   -----
 FHLB advances......................   6.31     2,285,630     91,060    3.98     1,344,129     48,594    3.62
 Reverse repurchase agreements and
   federal funds purchased..........   5.99       274,666     10,574    3.85       346,009     11,180    3.23
 Note payable to related party......     --            --         --      --         3,595        601   16.72
 Long-term debt.....................     --            --         --      --        63,715     10,214   16.03
 Senior Notes.......................   9.05       115,000     10,177    8.85        42,806      3,446    8.05
 Other..............................     --         3,350         79    2.36        11,123        813    7.31
                                       ----    ----------   --------   ------   ----------   --------   -----
   TOTAL INTEREST-BEARING
     LIABILITIES....................   5.79     7,445,237    320,924    4.31     6,676,798    300,831    4.51
 Non-interest-bearing liabilities
   and stockholders' equity.........              838,390                          641,979
                                               ----------                       ----------
   Total liabilities and
     stockholders' equity...........           $8,283,627                       $7,318,777
                                               ==========                       ==========
Net interest income/interest rate
 spread.............................   1.61%                $173,782    1.95 %               $181,659    2.41 %
                                       ====                 ========   ======                ========   =====
Net yield on interest-earning
 assets.............................   1.92%                            2.20 %                           2.61 %
                                       ====                            ======                           =====
Ratio of average interest-earning
 assets to average interest-bearing
 liabilities........................                 1.06                             1.04
                                                      ---                              ---
                                                      ---                              ---
- ---------------
 
(1) For purposes of computing yields, the effects of SFAS No. 115, "Accounting
    for Certain Investments in Debt and Equity Securities", have been excluded
    from the average balances.
 
(2) Includes nonaccrual loans.
 
(3) Annualized.
 
                                       28
31
 
     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
FOR THE SIX MONTHS
                                       ENDED MARCH 31,                         FOR THE YEAR ENDED SEPTEMBER 30,
                                -----------------------------   ---------------------------------------------------------------
                                        1996 VS. 1995                   1995 VS. 1994                    1994 VS. 1993
                                -----------------------------   ------------------------------   ------------------------------
                                 VOLUME     RATE       NET       VOLUME      RATE       NET       VOLUME      RATE       NET
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
                                                                        (IN THOUSANDS)
INTEREST INCOME
  Short-term interest-earning
    assets....................  $  3,496   $  (551)  $  2,945   $    198   $ 10,458   $ 10,656   $  1,984   $  2,734   $  4,718
  Trading account assets......         2         4          6         (7)       213        206     (1,058)    (5,310)    (6,368)
  Securities..................      (801)      (37)      (838)       390        496        886      4,924         20      4,944
  Mortgage-backed
    securities................   (18,037)    1,602    (16,435)     1,418     19,765     21,183     73,970     (5,523)    68,447
  Loans.......................    93,144    12,416    105,560    166,278     51,446    217,724      2,725    (38,436)   (35,711)
  FHLB stock..................     2,266       131      2,397      2,453      3,435      5,888      1,677        786      2,463
  Covered Assets and related
    assets....................        --        --         --     (4,490)        --     (4,490)   (23,971)    (2,306)   (26,277)
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
        Total.................    80,070    13,565     93,635    166,240     85,813    252,053     60,251    (48,035)    12,216
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
INTEREST EXPENSE
  Deposits....................     5,554    10,452     16,006     10,219     45,113     55,332     (4,640)   (12,309)   (16,949)
  FHLB advances...............    40,476     3,744     44,220     65,246     68,461    133,707     37,186      5,280     42,466
  Reverse repurchase
    agreements and federal
    funds purchased...........     9,189       (89)     9,100     34,151      8,495     42,646     (2,535)     1,929       (606)
  Note payable to related
    party.....................        --        --         --         --         --         --       (601)        --       (601)
  Long-term debt..............        --        --         --         --         --         --    (10,214)        --    (10,214)
  Senior Notes................        --         3          3         --        230        230      6,357        374      6,731
  Other.......................        --        --         --        (79)        --        (79)      (373)      (361)      (734)
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
        Total.................    55,219    14,110     69,329    109,537    122,299    231,836     25,180     (5,087)    20,093
                                --------   -------   --------   --------   --------   --------   --------   --------   --------
  NET CHANGE IN NET INTEREST
    INCOME....................  $ 24,851   $  (545)  $ 24,306   $ 56,703   $(36,486)  $ 20,217   $ 35,071   $(42,948)  $ (7,877)
                                ========   =======   ========   ========   ========   ========   ========   ========   ========
Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  Net interest income increased $24.3 million or 28% to $111.9 million for
the six months ended March 31, 1996, compared to $87.6 million for the six
months ended March 31, 1995. The increase in net interest income is primarily
attributable to a $1.9 billion, or 21%, increase in average interest-earning
assets and, to a lesser extent, to a five basis point increase in the net
interest rate spread.
 
     Interest-earning assets are primarily comprised of single family mortgage
loans and MBS. Interest-bearing liabilities primarily include deposits and FHLB
advances. The increase in average interest-earning assets during the six months
ended March 31, 1996 can be principally attributed to single family loan
purchases during the second half of fiscal 1995, approximating $1.9 billion. The
increase in average interest-earning assets was funded primarily with FHLB
advances and reverse repurchase agreements. See "-- Discussion of Financial
Condition".
 
     Approximately 79% of the Company's interest-earning assets at March 31,
1996 were adjustable-rate assets, a portion of which are tied to indices that
normally lag the changes in market interest rates. Substantially all of the
Company's adjustable-rate assets are subject to periodic and/or lifetime
interest rate caps. Periodic caps limit the amount by which the interest rate on
a particular mortgage loan may increase at its next interest rate reset date. In
a rising-rate environment, the interest rate spread may be negatively
 
                                       29
32
 
impacted when the repricing of interest-earning assets is limited by caps on
periodic interest rate adjustments, compared to market interest rate movements.
 
     The periodic caps on loans and MBS with adjustable rates limited the
increase in income relative to the cost of deposits and borrowings, as market
interest rates increased during the six months ended March 31, 1995. Net
interest rate spread for the six months ended March 31, 1996 reflects an
improvement over the six months ended March 31, 1995 due to a lessening of the
impact of caps as market interest rates began to level off during the first six
months of fiscal 1996. As of March 31, 1996, substantially all of the mortgages
subject to caps would have no limitation on their next scheduled rate reset. The
net interest rate spread was also positively impacted during the six months
ended March 31, 1996 due to higher yields earned on loans purchased in the later
part of fiscal 1995.
 
     1995 Compared to 1994.  Net interest income increased $20.2 million, or
12%, to $194.0 million for fiscal 1995, compared to $173.8 million for fiscal
1994. Average interest-earning assets increased $2.2 billion, or 28%, during the
period, principally attributed to single family loan purchases during the second
half of fiscal 1995. The increase in average interest-earning assets was funded
primarily with FHLB advances and reverse repurchase agreements. Increased net
interest income resulting from higher volumes of interest-earning assets was
offset, to some extent, by unfavorable changes in the net spread between the
yield on interest-earning assets and cost of funds. The net interest rate spread
decrease of 34 basis points was the result of the rapid rise in market interest
rates during the early part of fiscal 1995. Increases in market interest rates
and the effect of lagging rate indices and caps on adjustable-rate assets and
the sale of higher yielding assets in fiscal 1994 all contributed to the drop in
net interest rate spread.
 
     1994 Compared to 1993.  Net interest income decreased $7.9 million, or 4%,
to $173.8 million for fiscal 1994, compared to $181.7 million for fiscal 1993.
This decrease was principally the result of unfavorable changes in net spread
between the yield on interest-earning assets and the cost of funds. Net interest
rate spread decreased 46 basis points primarily as a result of a reduction in
the yield on interest-earning assets from the sales and securitizations of high
yielding assets. In connection with the securitization of loans from the Bank's
own portfolio, the Bank sold the higher-yielding subordinated classes and
retained the lower-yielding, higher quality securities. Although general market
rates increased during the later portion of fiscal 1994, proceeds from sales and
increased prepayments could not be reinvested at the same rates as the assets
sold or prepaid. Partially offsetting the decrease in net interest rate spread
was a $925.4 million, or 13%, increase in average interest-earning assets during
fiscal 1994 reflecting growth in the loan and MBS portfolios, funded primarily
with FHLB advances.
 
  Provision for Credit Losses
 
     Six Months Ended March 31, 1996 Compared to the Six Months Ended March 31,
1995.  The provision for credit losses increased to $5.9 million for the six
months ended March 31, 1996 from $4.2 million for the six months ended March 31,
1995. Loss experience on the unsecured consumer line of credit portfolio
resulted in increased consumer provisions of $3.0 million for the six months
ended March 31, 1996, compared to $1.8 million for the six months ended March
31, 1995, reflecting increased volume and increased charge-offs. Consumer loans
increased to $130.4 million at March 31, 1996, from $109.4 million at March 31,
1995, while consumer charge-offs increased to $3.0 million for the six months
ended March 31, 1996, from $1.2 million for the six months ended March 31, 1995.
See "-- Asset Quality" and Note 5 to the Consolidated Financial Statements.
 
     1995 Compared to 1994.  The provision for credit losses increased to $24.3
million for fiscal 1995 compared to $7.0 million for fiscal 1994. This increase
primarily resulted from increased provisions for credit losses for single family
loans, which increased to $18.5 million for fiscal 1995 compared to $2.4 million
for fiscal 1994, primarily as a result of an increase in the single family loans
portfolio to $7.1 billion at September 30, 1995 from $4.2 billion at September
30, 1994, which included loan purchases totaling $2.7 billion and originations
retained for portfolio of $1.0 billion during fiscal 1995. The growth in the
consumer lending business and loss experience on the unsecured consumer line of
credit portfolio also increased consumer provisions to $4.2 million for fiscal
1995, from $2.8 million for fiscal 1994. Consumer loans increased to $123.1
million at September 30, 1995, from $108.2 million at September 30, 1994, while
 
                                       30
33
 
consumer charge-offs increased to $2.8 million for fiscal 1995, from $1.3
million for fiscal 1994. See "-- Asset Quality" and Note 5 to the Consolidated
Financial Statements.
 
     1994 Compared to 1993.  The provision for credit losses increased to $7.0
million for fiscal 1994 compared to $4.1 million for fiscal 1993. The higher
provision during fiscal 1994 is due primarily to the growth in the consumer
lending business and loss experience on the unsecured consumer line of credit
portfolio. Consumer loans increased to $108.2 million at September 30, 1994,
from $57.9 million at September 30, 1993, and the consumer provision increased
to $2.8 million for fiscal 1994 from $264,000 for fiscal 1993. Consumer
charge-offs increased to $1.4 million for fiscal 1994 from $72,000 for fiscal
1993. Although single family loan purchases totaled $1.4 billion for fiscal 1994
and originations retained for portfolio were $1.3 billion for fiscal 1994, the
effect of these purchases and originations on the provision for credit losses
was partially offset by the effect of securitizations of $1.2 billion of loans
into MBS. The securitization process resulted in lower allowance requirements
because of the credit enhancement as a result of selling the subordinated
securities. See "-- Asset Quality" and Note 5 to the Consolidated Financial
Statements.
 
     Non-Interest Income
 
     Non-interest income includes gains from sales of single family servicing
rights and single family warehouse loans, gains (losses) on securities and MBS,
gains (losses) on other loans, loan servicing fees and charges, and other fees
and charges.
 
                     NON-INTEREST INCOME AND PRINCIPAL SOLD
FOR THE SIX MONTHS                FOR THE YEAR ENDED
                                          ENDED MARCH 31,                   SEPTEMBER 30,
                                     -------------------------   ------------------------------------
                                        1996           1995         1995         1994         1993
                                     ----------     ----------   ----------   ----------   ----------
                                                              (IN THOUSANDS)
NON-INTEREST INCOME
  Net gains (losses)
     Sales of single family
       servicing rights............  $       --     $   28,304   $   34,080   $   67,198   $   63,257
     Single family warehouse
       loans.......................      19,157         10,160       26,415       (3,912)       4,146
                                     ----------     ----------   ----------   ----------   ----------
                                         19,157         38,464       60,495       63,286       67,403
     Securities and mortgage-backed
       securities..................       2,863              8           26       10,404       43,702
     Other loans...................       3,485           (380)      (1,210)         163        1,496
  Loan servicing fees and
     charges.......................      22,107         22,813       43,508       31,741       21,780
  Other fees and charges...........       6,997          5,748       12,162       13,295       12,310
                                     ----------     ----------   ----------   ----------   ----------
          Total non-interest
            income.................  $   54,609     $   66,653   $  114,981   $  118,889   $  146,691
                                      =========      =========    =========    =========    =========
PRINCIPAL SOLD
  MSRs.............................  $  875,235     $2,028,813   $2,854,114   $4,521,491   $4,572,361
  Single family warehouse loans....   1,516,799        902,509    2,100,662    4,786,413    6,244,262
Six Months Ended March 31, 1996 Compared to Six Months Ended March 31,
1995.  Non-interest income was $54.6 million for the six months ended March 31,
1996 compared to $66.7 million for the six months ended March 31, 1995,
resulting in a decrease of $12.1 million. During the six months ended March 31,
1996 and 1995, $875.2 million and $2.0 billion, respectively, of single family
MSRs were sold. The decrease in single family servicing sales during the six
months ended March 31, 1996 reflects management's decision to retain a greater
portion of MSRs in response to the implementation of SFAS No. 122, "Accounting
for Mortgage Servicing Rights, an Amendment of FASB Statement No. 65". See
"Business -- Loan Servicing Portfolio". The 1995 period includes substantial
gains on sales of servicing rights originated in prior years. Excluding gains
from sales of single family MSRs and single family warehouse loans, non-interest
income increased $7.3 million for the six months ended March 31, 1996 compared
to the six months ended March 31, 1995, primarily due to increased gains on
sales of securities and MBS and other loans.
 
                                       31
34
 
     Gains on sales of single family warehouse loans were $19.2 million during
the six months ended March 31, 1996, compared to $10.2 million during the six
months ended March 31, 1995, reflecting an increase in the volume of single
family warehouse loans sold.
 
     Net gains on securities and MBS were $2.9 million and $8,000 for the six
months ended March 31, 1996 and 1995, respectively. During the six months ended
March 31, 1996, the net gains on MBS were from the sale of $198.8 million of
MBS. See "-- Discussion of Financial Condition".
 
     Net gains (losses) on other loans were $3.5 million and $(380,000) for the
six months ended March 31, 1996 and 1995, respectively. During the six months
ended March 31, 1996, the Bank sold $93.7 million of single family loans held by
the Financial Markets Group for a gain of $1.5 million and $164.5 million of
multi-family loans for a gain of $2.6 million. See "-- Discussion of Financial
Condition".
 
     During the six months ended March 31, 1996 loan servicing fees and charges
decreased $706,000, or 3% from the prior year period. This decrease is due to a
slight decrease in the portfolio of single family loans serviced for others,
$6.4 billion at March 31, 1996 compared to $6.9 billion at March 31, 1995.
 
     Other fees and charges were $7.0 million in the first six months of fiscal
1996 compared to $5.7 million in the first six months of fiscal 1995. The
increase was primarily due to growth in mutual fund and annuity sales. The
growth in these alternative products reflected the low interest rate
environment, more experienced salespeople, and increased marketing of those
products.
 
     1995 Compared to 1994.  Non-interest income was $115.0 million for fiscal
1995, a $3.9 million decrease from $118.9 million for fiscal 1994. This decrease
is attributable, in part, to a $2.8 million decrease in gains on sales of single
family MSRs and single family warehouse loans which were $60.5 million and $63.3
million, respectively, for fiscal 1995 and 1994.
 
     In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement requires that, among other things, the book value of
mortgage loans be allocated at the time of origination between the MSRs and the
related loans, provided there is a plan to sell or securitize such loans. With
the implementation of SFAS No. 122, the original cost basis of the loan is
allocated between the loan and the MSRs, thus increasing the gains on sales of
loans and reducing the gains on sales of MSRs.
 
     The implementation of SFAS No. 122 resulted in the capitalization of $28.7
million of originated MSRs during fiscal 1995 and an increase to net income and
stockholders' equity of $9.8 million. This implementation also had the effect of
decreasing the gains on sales of single family MSRs by $17.7 million and
increasing the gains on single family warehouse loans by $34.6 million.
Excluding the effects of implementing SFAS No. 122, the gains on sales of single
family MSRs and the gains (losses) on single family warehouse loans would have
been $51.8 million and $(8.2) million, respectively. In accordance with the
requirements of SFAS No. 122, the prior year amounts have not been restated. See
Notes 1 and 6 to the Consolidated Financial Statements.
 
     Excluding the effects of SFAS No. 122 in fiscal 1995, the gains on single
family MSRs were $51.8 million, compared to $67.2 million for fiscal 1994.
During fiscal 1995, single family MSRs were sold at an average premium of 181
basis points, compared to 149 basis points during fiscal 1994. The average
premiums on MSRs sold in fiscal 1994 were lower compared to fiscal 1995,
reflecting the lower interest rate environment during the first half of fiscal
1994. The rise in market interest rates during the second half of fiscal 1994,
and continuing through the beginning of fiscal 1995 had a positive effect on the
average premiums on servicing rights sold, reflecting an increase in the value
of the servicing portfolio due to actual and anticipated declines in
prepayments. The increase in interest rates during the second half of fiscal
1994 and during fiscal 1995 resulted in a decrease in originations. The decrease
in originations and the retention of a greater proportion of originated loans
for the Bank's own portfolio decreased the volume of MSRs available for sale
during fiscal 1995.
 
     Excluding the effects of SFAS No. 122 in fiscal 1995, the gains (losses) on
single family warehouse loans were $(8.2) million in fiscal 1995 and $(3.9)
million in 1994. The decrease reflects the increasingly competitive pricing in
the market during that period and decreased volumes sold.
 
                                       32
35
 
     Net gains on securities and MBS were $26,000 and $10.4 million for fiscal
1995 and 1994, respectively. The gains in fiscal 1994 primarily relate to the
sale of $213.0 million of MBS created when the Bank securitized single family
loans from its own portfolio.
 
     Loan servicing fees and charges increased $11.8 million, or 37%, during
fiscal 1995 compared to fiscal 1994. The increase was due primarily to an
increase in the portfolio of single family loans serviced for others and an
increase in the average fees collected on those loans due to a change in the
composition of that portfolio. The portfolio of single family loans serviced for
others increased to $7.2 billion at September 30, 1995, compared to $4.7 billion
at September 30, 1994, primarily due to loan originations and purchases of MSRs.
See "-- Discussion of Financial Condition". The increase in the single family
loan servicing portfolio during fiscal 1995 includes $3.4 billion of loans
associated with MSRs purchased in fiscal 1994 that were not transferred to the
Bank until fiscal 1995 and were not included in the portfolio as of September
30, 1994. See Note 6 to the Consolidated Financial Statements.
 
     1994 Compared to 1993.  Non-interest income was $118.9 million for fiscal
1994 compared to $146.7 million for fiscal 1993. This $27.8 million decrease is
primarily attributable to a $33.3 million decrease in gains on securities and
MBS partially offset by a $10.0 million increase in loan servicing fees and
charges.
 
     Gains from sales of single family MSRs totaled $67.2 million in 1994, an
increase of $3.9 million, or 6%, from 1993. Although the dollar amount of single
family servicing sales decreased slightly to $4.5 billion in 1994 from $4.6
billion in 1993, the gains on sales of single family MSRs increased as a result
of an increase in the average servicing premium realized in such sales. The
average net servicing price was 149 basis points in 1994, up from 138 basis
points in 1993. During 1994, sales of single family MSRs were reduced and an
increased amount of originations were retained for the Company's own portfolio
along with the related MSRs, which contributed to the net increase of $847.5
million in the single family servicing portfolio in 1994. During 1994, the
single family servicing portfolio increased to $8.9 billion at September 30,
1994 from $8.1 billion at September 30, 1993. As of September 30, 1994, $3.4
billion of loans associated with the MSRs purchased in 1994 had not been
transferred to the Company and thus are not included in the single family
servicing portfolio balance of $8.9 billion.
 
     The Company realized a net loss on single family warehouse loans of $3.9
million in fiscal 1994, compared to a net gain of $4.1 million in fiscal 1993,
primarily due to the increasingly competitive pricing in the market during
fiscal 1994. Additionally, volume sold decreased to $4.8 billion during fiscal
1994 as compared to $6.2 billion during fiscal 1993.
 
     Gains on securities and MBS were $10.4 million in fiscal 1994 and $43.7
million in fiscal 1993. These gains relate to the sale of $213.0 million and
$359.4 million of MBS in fiscal 1994 and 1993, respectively, that were created
when the Bank securitized single family loans from its own portfolio. See
"-- Discussion of Financial Condition". The gains in 1993 reflect the
realization of gains on mortgages acquired at a substantial discount in
connection with the Acquisition.
 
     Loan servicing fees and charges of $31.7 million in 1994 increased $10.0
million, or 46%, over 1993. The increase primarily reflects an increase in the
portfolio of single family loans serviced for others to $4.7 billion at
September 30, 1994 from $4.0 billion at September 30, 1993.
 
                                       33
36
 
  Non-Interest Expense
 
     Non-interest expense comprises the following significant items:
 
                              NON-INTEREST EXPENSE
FOR THE SIX MONTHS
                                         ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                       --------------------     ----------------------------------
                                        1996         1995         1995         1994         1993
                                       -------     --------     --------     --------     --------
                                       (IN THOUSANDS)
Compensation and benefits............  $39,898     $ 43,192     $ 83,520     $ 86,504     $ 81,472
Occupancy............................    9,439        9,072       18,713       17,196       15,971
Data processing......................    8,120        8,116       16,360       15,821       15,072
Advertising and marketing............    4,053        4,782        9,262       10,796        8,772
Amortization of intangibles..........    9,801       10,718       21,856       18,247       24,469
SAIF deposit insurance premiums......    6,129        5,630       11,428       11,329       10,162
Furniture and equipment..............    3,128        3,219        6,428        6,810        5,535
Other................................   18,736       16,916       27,009       32,890       40,511
                                       -------     --------     --------     --------     --------
     Total non-interest expense......  $99,304     $101,645     $194,576     $199,593     $201,964
                                       =======     ========     ========     ========     ========
Six Months Ended March 31, 1996 Compared to Six Months Ended March 31,
1995.  Non-interest expense was $99.3 million for the six months ended March 31,
1996 and $101.6 million for the six months ended March 31, 1995, or 1.72% and
2.13%, respectively, of average total assets for those same periods.
Compensation and benefits was the largest component of non-interest expense,
representing $39.9 million, or 40%, of total non-interest expense for the six
months ended March 31, 1996 and $43.2 million, or 42%, for the six months ended
March 31, 1995. Loan origination volume directly impacts the level of
compensation expense. Advertising expenses were also lower in the six months
ended March 31, 1996 compared to the six months ended March 31, 1995, reflecting
advertising expenses in connection with the introduction of community banking
products in the prior period. Reduced compensation and advertising expenses were
partially offset by increased other non-interest expenses. During the six months
ended March 31, 1996, $408,000 of gains on sales of real estate owned ("REO")
properties were recognized and included in other non-interest expense. Gains of
$1.7 million were recognized in the six months ended March 31, 1995.
 
     1995 Compared to 1994.  Non-interest expense was $194.6 million for fiscal
1995 compared to $199.6 million for fiscal 1994, or 1.86% and 2.41%,
respectively, of average total assets for those periods. Compensation and
benefits was $83.5 million for fiscal 1995 and $86.5 million for fiscal 1994, or
43% of total non-interest expense for both of these periods. Advertising
expenses were lower during fiscal 1995 reflecting the introduction of community
banking products in the prior year. During fiscal 1995 and 1994, $11.2 million
and $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Amortization of intangibles increased in
fiscal 1995, reflecting increased amortization of MSRs due to servicing
acquisitions.
 
     1994 Compared to 1993.  Non-interest expense was $199.6 million for fiscal
1994 compared to $202.0 million for fiscal 1993, or 2.41% and 2.76%,
respectively, of average total assets for those periods. Compensation and
benefits was $86.5 million, or 43%, of total non-interest expense for fiscal
1994 and $81.5 million, or 40%, for fiscal 1993. Advertising expenses were
higher during fiscal 1994 due to advertising expenses in connection with the
introduction of community banking products during that period. During fiscal
1994, $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Losses on sales of REO properties of
$120,000 were recognized in fiscal 1993. Amortization of intangibles decreased
in fiscal 1994 due to the reduction of goodwill; such a reduction is required
under SFAS No. 109 for tax benefits derived from acquisitions. See "Regulation
- -- Taxation".
 
                                       34
37
 
Income Taxes
 
     The provision for income taxes is comprised of current federal income
taxes, deferred federal income taxes, state income taxes, and payments due in
lieu of taxes. The provision for income taxes was an expense of $25.3 million
and $20.2 million for the six months ended March 31, 1996 and 1995,
respectively, and an expense of $37.4 million in fiscal 1995, compared to
benefits of $31.9 million and $26.2 million in fiscal 1994 and 1993,
respectively. During fiscal 1994 and 1993, tax benefits of $58.2 million and
$44.2 million, respectively, were recorded. The benefits recorded reflect the
application of SFAS No. 109, which was implemented effective October 1, 1992.
Such benefits arose due to the expected utilization of net operating loss
carryforwards against future taxable income. No tax benefits were recorded in
fiscal 1995 or the first half of fiscal 1996. See Note 13 to the Consolidated
Financial Statements.
 
     During the third quarter of fiscal 1996, the Company recorded a $101.7
million tax benefit for the expected utilization of NOLs against future taxable
income. See Note 21 to the Consolidated Financial Statements.
 
Minority Interest
 
     Dividends on Bank Preferred Stock paid by the Bank increased to $9.1
million for the six months ended March 31, 1996 from $4.3 million for the six
months ended March 31, 1995, due to the Bank's issuance of Bank Preferred Stock,
Series B during the fourth quarter of fiscal 1995. These shares are not owned by
the Company and, accordingly, are reflected as minority interest in the
Consolidated Financial Statements. Certain of the Selling Stockholders and
certain directors and managers of the Company are owners of the Bank Preferred
Stock. See "Management -- Security Ownership of Certain Beneficial Owners and
Management -- Principal Stockholders, Bank Preferred Stock".
 
DISCUSSION OF FINANCIAL CONDITION
 
Overview
 
     The Company, through its principal subsidiary, the Bank, operates a
broad-based financial services company. Historically, the Company focused on
traditional single family mortgage lending and deposit gathering, as well as
retail and wholesale mortgage banking activities. Over the past few years, the
Company's management has pursued a strategy designed to reduce the Bank's
reliance on its thrift and mortgage banking lines of business by developing
potentially higher margin community banking and commercial banking lines of
business. Over this time, the Company has increased its portfolio of
multi-family, residential construction, consumer and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. In addition to its efforts to increase originations of commercial and
consumer loans, the Company plans to increase the retention of higher yielding
single family and multi-family mortgage loans that, in the past, may have
otherwise been sold or securitized.
 
                                       35
38
 
     The following chart reflects activity in the MBS portfolio.
 
                           MORTGAGE-BACKED SECURITIES
FOR THE SIX MONTHS
                                       ENDED MARCH 31,            FOR THE YEAR ENDED SEPTEMBER 30,
                                   ------------------------    --------------------------------------
                                      1996          1995          1995          1994          1993
                                   ----------    ----------    ----------    ----------    ----------
                                                             (IN THOUSANDS)
Beginning balance................  $2,398,263    $2,828,903    $2,828,903    $2,175,925    $  833,425
  Loans securitized..............          --            --            --     1,182,172       572,582
  Purchases......................       3,841        38,515        38,745       667,298     1,212,592
  Net change in unrealized gains
     (losses) before tax.........       5,209         2,109         8,577       (71,815)       53,414
  Sales..........................    (198,753)      (77,646)      (77,610)     (212,954)     (359,417)
  Repayments.....................    (251,481)     (194,029)     (406,710)     (922,439)     (330,270)
  Transfers(1)...................          --            --            --            --       191,801
  Other..........................      (3,009)        3,024         6,358        10,716         1,798
                                   ----------    ----------    ----------    ----------    ----------
Ending balance...................  $1,954,070    $2,600,876    $2,398,263    $2,828,903    $2,175,925
                                   ==========    ==========    ==========    ==========    ==========
- ---------------
(1) Principally related to the implementation of SFAS No. 115, "Accounting for
    Certain Investments in Debt and Equity Securities". These securities were
    transferred from the trading portfolio.
 
                                       36
39
 
     The following chart reflects activity in the loan portfolio.
 
                                     LOANS
FOR THE SIX MONTHS
                                    ENDED MARCH 31,             FOR THE YEAR ENDED SEPTEMBER 30,
                               -------------------------    -----------------------------------------
                                  1996           1995          1995           1994           1993
                               -----------    ----------    -----------    -----------    -----------
                                                           (IN THOUSANDS)
Beginning balance............  $ 8,260,240    $5,046,174    $ 5,046,174    $ 4,862,379    $ 4,101,716
  Originations
     Single family(1)........    1,945,434     1,453,267      3,226,324      5,424,550      6,645,096
     Single family
       residential
       construction..........      208,847       100,328        239,481        133,609        129,254
     Consumer................       53,570        41,734         99,249         94,153         64,742
     Multi-family, commercial
       real estate, and
       business credit.......      146,309       162,897        307,636        230,995         60,489
  Purchases
     Single family...........      145,277       772,031      2,705,858      1,373,727      1,261,849
     Consumer................           --            68             68         24,982          9,133
     Multi-family and
       commercial real
       estate................        7,927        56,093         56,093         68,466             --
  Net change in mortgage
     banker finance line of
     credit..................       32,437       (76,009)       (38,124)      (238,223)       385,548
  Repayments.................   (1,109,850)     (460,020)    (1,192,156)      (862,420)      (957,327)
  Securitized loans sold or
     transferred(2)..........   (1,335,333)     (802,549)    (1,864,313)    (5,595,325)    (6,439,835)
  Sales......................     (452,211)     (125,145)      (308,612)      (457,272)      (402,029)
  Other......................      (24,567)       (7,437)       (17,438)       (13,447)         3,743
                               -----------    ----------    -----------    -----------    -----------
Ending balance...............  $ 7,878,080    $6,161,432    $ 8,260,240    $ 5,046,174    $ 4,862,379
                               ===========    ==========    ===========    ===========    ===========
- ---------------
(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
    $529.0 million of loans originated for the Company's portfolio during the
    six months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
    1993, respectively.
 
(2) Includes $1.3 billion, $802.5 million, $1.9 billion, $4.4 billion, and $5.9
    billion of loans securitized by the mortgage banking segment and sold to
    third parties during the six months ended March 31, 1996 and 1995 and during
    fiscal 1995, 1994, and 1993, respectively.
 
1996 Activity. Total assets decreased by $716.9 million, or 6%, to $11.3 billion
at March 31, 1996 from $12.0 billion at September 30, 1995. This decrease
primarily resulted from loan and MBS sales and repayments.
 
     Securities purchased under agreements to resell ("repurchase agreements")
and federal funds sold increased to $659.3 million at March 31, 1996 from $471.1
million at September 30, 1995. The increase primarily reflects the Company's
decision to borrow and invest funds on a short-term basis.
 
     Securities decreased $57.6 million, to $58.4 million at March 31, 1996 from
$116.0 million at September 30, 1995 reflecting the sale of $67.4 million in
Treasury securities.
 
     MBS decreased $444.2 million during the six months ended March 31, 1996,
primarily due to sales and repayments. During the six months ended March 31,
1996, the Company sold $198.8 million in MBS for a gain of $2.8 million,
compared to $77.6 million in sales for a gain of $5,000 during the six months
ended March 31, 1995. The increase in repayments resulted from a decline in
market interest rates.
 
                                       37
40
 
     In November 1995, the Financial Accounting Standards Board (the "FASB")
issued "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities". This implementation guide provided
the Company the opportunity to reassess the appropriateness of the
classification of its securities. It further stated that reclassifications of
securities from the held to maturity category resulting from this one-time
reassessment would not call into question the intent to hold other securities to
maturity in the future. During the first quarter of fiscal 1996, the Company
reassessed its securities portfolios and reclassified $1.2 billion in MBS from
the held to maturity portfolio to the available for sale portfolio. An
unrealized gain of $4.2 million before tax, or $2.6 million after tax, was
recorded in stockholders' equity as a result of this transfer. At March 31, 1996
and 1995, the Company had unrealized losses on securities and MBS available for
sale, net of tax, of $3.1 million and $11.8 million, respectively. See Note 4 to
the Consolidated Financial Statements.
 
     During the six months ended March 31, 1996, total loans decreased $382.2
million, primarily due to sales and repayments. During this period, the Bank
sold $93.7 million of single family portfolio loans for a gain of $1.5 million
and $164.5 million of multi-family loans for a gain of $2.6 million.
 
     The increase in single family loan originations during the six months ended
March 31, 1996 resulted from a decline in market interest rates in comparison to
a year ago. The decline in market interest rates prompted borrowers to refinance
their mortgages at lower rates of interest, resulting in an increase in
repayments as well as in single family mortgage loan originations. Refinancings
approximated $831.4 million and $214.2 million, or 41%, and 14% of total single
family mortgage loan originations during the six months ended March 31, 1996 and
1995, respectively. While fundings of multi-family, commercial real estate and
business credit loans decreased $16.6 million during the six months ended March
31, 1996 as compared to the six months ended March 31, 1995, commitments to fund
multi-family loans increased $42.7 million or 58%, to $116.7 million for the six
months ended March 31, 1996, as compared to $74.0 million for the six months
ended March 31, 1995. At March 31, 1996, $64.5 million of multi-family loan
commitments had not yet been funded. The increase in commitments to fund
multi-family loans, as well as the increase in residential construction loan
originations during the six months ended March 31, 1996, as compared to the six
months ended March 31, 1995, reflects the geographic expansion of these
products.
 
     Increased consumer loan originations during the six months ended March 31,
1996 as compared to the six months ended March 31, 1995 are primarily due to
increased home improvement loan originations evidencing increased marketing
efforts.
 
     The decline in market interest rates during the six months ended March 31,
1996 resulted in a $32.4 million increase, to $141.8 million at March 31, 1996,
in the MBF line of credit portfolio.
 
     Single family loan purchases were $145.3 million during the six months
ended March 31, 1996, compared to $772.0 million during the six months ended
March 31, 1995. The decrease in purchases reflects a decrease in available
products at attractive yields.
 
     In the aggregate, FHLB advances, reverse repurchase agreements and federal
funds purchased decreased $467.5 million to $5.1 billion at March 31, 1996 from
$5.6 billion at September 30, 1995, reflecting a reduction in the Bank's asset
base.
 
     The decrease in commercial deposits, as well as the decrease in advances
from borrowers for taxes and insurance, reflects the payment of property taxes
during the six months ended March 31, 1996. See "Business -- Commercial Banking
Group -- Mortgage Banker Finance". Consumer and wholesale deposits also
decreased, primarily due to maturities of certificates of deposit that were not
renewed.
 
     1995 Activity.  Total assets increased to $12.0 billion at September 30,
1995 from $8.9 billion at September 30, 1994, reflecting an increase of $3.1
billion. The majority of this increase occurred in the loan portfolio, primarily
as a result of single family adjustable-rate loan originations retained for the
Bank's portfolio and purchases of single family loans.
 
                                       38
41
 
     Repurchase agreements and federal funds sold increased to $471.1 million at
September 30, 1995 from $358.7 million at September 30, 1994. The increase
primarily reflected the Company's decision to borrow and invest funds on a
short-term basis.
 
     MBS decreased $430.6 million during fiscal 1995, primarily due to
repayments of $406.7 million. The decrease in purchases to $38.7 million for
fiscal 1995 from $667.3 million for fiscal 1994 reflected lower yields available
in the marketplace on MBS during fiscal 1995. The decreased volume of MBS sales,
to $77.6 million for fiscal 1995 as compared to $213.0 million during fiscal
1994, primarily resulted from reduced sales of securitized assets. There were no
loans securitized during fiscal 1995, as compared to $1.2 billion securitized
during fiscal 1994. The $515.7 million decrease in repayments for fiscal 1995,
as compared to fiscal 1994, reflected a decrease in prepayments resulting
primarily from rising interest rates, beginning in the second half of fiscal
1994.
 
     At September 30, 1995 and 1994, unrealized losses on securities and MBS
available for sale, net of tax, were $6.6 million and $13.4 million,
respectively. The decrease resulted principally from a decline in market prices
due to increased interest rates in the second half of fiscal 1994 and
prepayments of certain high yielding securities. See Note 4 to the Consolidated
Financial Statements.
 
     During fiscal 1995, loans increased $3.2 billion, primarily as a result of
the retention of single family adjustable-rate loan originations for the Bank's
portfolio and purchases of single family loans.
 
     While the total loan portfolio increased, single family loan originations
decreased $2.2 billion, or 41%, in fiscal 1995 compared to fiscal 1994 and $1.2
billion, or 18%, in fiscal 1994 compared to fiscal 1993. The decrease in single
family loan originations during fiscal 1995 and 1994 can be attributed to higher
interest rates during those periods leading to a decline in mortgage loan
refinance activity during fiscal 1995 and 1994. Refinancings approximated $600.6
million and $2.0 billion, or 17% and 37%, respectively, of total originations in
fiscal 1995 and 1994. Despite lower origination volumes, the Bank retained a
greater percentage of originations for its portfolio due to an increase in the
proportion of adjustable-rate loans as compared to fixed-rate loans originated
by the mortgage banking segment. During fiscal 1995, 30% of single family loan
originations were retained for portfolio, as compared to 24% in fiscal 1994. The
higher market interest rates also resulted in a decline in the MBF line of
credit portfolio.
 
     During fiscal 1994 and 1995, despite the decline in single family mortgage
loan originations, the Bank's single family loan portfolio increased as a result
of purchases from third parties. The Bank also began retaining a larger
percentage of its single family mortgage loan originations for its portfolio
than it had historically. While purchases of single family loans increased
during these periods, purchases of MBS decreased. During fiscal 1995, yields on
loan purchases were higher than yields on MBS purchased. During fiscal 1995,
$2.7 billion of single family loans yielding 8.46% were purchased, including a
$1.3 billion purchase consisting of adjustable-rate loans, compared to $38.7
million of MBS purchased at a yield of 5.93%.
 
     Increased single family residential construction, multi-family, and
commercial real estate loan originations in fiscal 1995 reflect geographic
expansion of these products.
 
     Total deposits increased $418.0 million, to $5.2 billion at September 30,
1995, from $4.8 billion at September 30, 1994. The majority of the increase is
due to an increase in commercial deposits from MBF customers, reflecting the
Bank's effort to build its customer base for this type of deposit.
 
     In the aggregate, FHLB advances, reverse repurchase agreements, and federal
funds purchased increased to $5.6 billion at September 30, 1995 from $3.2
billion at September 30, 1994, primarily to fund asset originations and
purchases. In connection with the increase in FHLB advances, FHLB stock was
purchased to maintain the required balance of such stock. The Bank is in
compliance with such stock requirements at September 30, 1995.
 
     During fiscal 1995, the Bank issued the Bank Preferred Stock, Series B.
Costs incurred in connection with the stock issuance were recorded as a
reduction to paid-in capital. The Bank's total capital was increased by $96.2
million as a result of the Offering.
 
                                       39
42
 
     1994 Activity.  Total assets increased $469.6 million to $8.9 billion at
September 30, 1994 from $8.4 billion at September 30, 1993. The primary reason
for the increase was the Bank's acquisition of single family loans and MBS.
 
     MBS increased during 1994, primarily as a result of the securitization of a
portion of the single family loan portfolio and from purchases. During fiscal
1994, $1.2 billion of single family portfolio loans were securitized by the
Company. See Note 4 to the Consolidated Financial Statements. The securitization
process created $1.2 billion in MBS. The securitization process created both
senior and subordinated MBS. Approximately $39.1 million of MBS, which were the
subordinate portions of the securitizations, were sold. The MBS that were
created and retained were rated in one of the two highest rating categories by
the rating agencies of Moody's Investors Service, Inc., Standard & Poor's
Corporation and Fitch Investors Service, Inc.
 
     Unrealized losses on securities and MBS available for sale, net of tax,
resulted in an unrealized loss of $13.4 million at September 30, 1994, down from
an unrealized gain of $33.4 million at September 30, 1993. This decrease
resulted principally from a decline in market prices due to increased interest
rates in the second half of fiscal 1994, sales of certain securities with gains,
and prepayments of certain high yielding securities. See Notes 3 and 4 to the
Consolidated Financial Statements.
 
     Loans also increased during 1994, principally due to originations and
purchases of single family and multi-family loans. Single family loan
originations, however, decreased $1.2 billion, or 18%, as compared to the prior
year. Conversely, multi-family originations increased $170.5 million compared to
the prior year. During 1994, the Bank retained $1.3 billion of single family
loan originations for the held to maturity portfolio. These increases in the
portfolio were offset by loan sales and with the securitization of single family
loans during the year, as discussed above. The effect of lower refinance
activity resulting from higher interest rates during the second half of 1994
contributed to the decrease in single family loan originations, and a lower MBF
line of credit portfolio.
 
     MSRs increased $46.0 million to $56.7 million at September 30, 1994 from
$10.7 million at September 30, 1993. During 1994, the Bank acquired or entered
into contracts to acquire MSRs associated with $3.9 billion in single family
loans at a premium of $50.9 million and $31.2 million in multi-family loans at a
premium of $59,000. See Note 6 to the Consolidated Financial Statements.
 
     On December 23, 1993, the Bank entered into the Settlement Agreement
providing, among other things, for the termination of the Assistance Agreement
and the disposition of all remaining Covered Assets (as defined below). Covered
Assets and related assets decreased $392.5 million during 1994. For a
description of the Settlement Agreement, see "Business -- The Assistance
Agreement" and Note 7 to the Consolidated Financial Statements.
 
     Other assets increased $84.6 million during 1994 primarily due to an
increase in the Company's deferred tax asset as a result of the recognition of
additional tax benefits. See Note 13 to the Consolidated Financial Statements.
 
     Total deposits decreased $75.2 million during fiscal 1994. Retail deposits
decreased $390.9 million to $3.9 billion at September 30, 1994, from $4.3
billion at September 30, 1993. The Company's pricing strategy decreased rates
offered on deposits, resulting in an increase in the runoff of the Company's
certificates of deposits ("CDs"). Offsetting the decrease in retail deposits was
a $402.5 million increase in commercial deposits primarily due to the
introduction of commercial banking services (i.e. cash management and deposit
services) to the Company's MBF customers during 1994.
 
     FHLB advances, reverse repurchase agreements, and federal funds purchased
increased to $3.2 billion at September 30, 1994 from $2.5 billion at September
30, 1993, primarily to fund asset originations and purchases and to replace
reduced deposit balances.
 
ASSET QUALITY
 
     The Company, like all financial institutions, is exposed to certain credit
risks related to the value of the collateral that secures loans held in its
portfolio and the ability of borrowers to repay their loans during the
 
                                       40
43
 
term thereof. The Bank has a Credit Committee, which is comprised of senior
officers of the Bank, that closely monitors the loan and REO portfolios for
potential problems on a continuing basis and reports to the Board of Directors
of the Bank at regularly scheduled meetings.
 
     The Bank also has established an Asset Classification Committee, which is
comprised of senior management. This committee reviews the classification of
assets and reviews the allowance for losses. This committee reviews all assets
and periodically reports its findings directly to the Board of Directors of the
Bank. The asset classification policy sets forth certain requirements with
respect to how to classify certain assets. The Bank also has an Asset Review
Department, the function of which is to provide to the Board of Directors of the
Bank an independent ongoing review and evaluation of the quality of assets.
 
     Nonperforming assets consist of nonaccrual loans and REO. Loans are usually
placed on nonaccrual status when the loan is past due 90 days or more, or the
ability of a borrower to repay principal and interest is in doubt. The portion
of the purchase discount attributable to potential credit risk on certain
acquired delinquent single family loans is treated as non-accretable discount.
The Bank believes that these purchase discounts are sufficient to cover losses
from these portfolios and to provide a market rate of return. At September 30,
1994 and 1993, nonaccrual loans included $5.7 million and $9.0 million of single
family loans 90 days delinquent that were subject to government guaranty and
upon which interest continued to accrue. There were no such loans at March 31,
1996 and September 30, 1995. At March 31, 1996 and September 30, 1995, single
family nonaccrual loans included $10.1 million and $10.2 million, respectively,
of loans which were contractually current pursuant to the borrowers'
court-approved bankruptcy plans.
 
     The following tables present the Company's nonperforming assets.
 
                              NONPERFORMING ASSETS
AT SEPTEMBER 30,
                                                AT MARCH 31,     ----------------------------------
                                                    1996           1995         1994         1993
                                                ------------     --------     --------     --------
                                                                           (IN THOUSANDS)
Nonaccrual loans
  Single family(1)............................    $101,936       $ 83,954     $ 85,722     $ 61,451
  Single family residential construction......          35            505           --           --
  Consumer....................................         745            563          506          427
  Multi-family................................         510            213        3,802        3,233
  Commercial real estate......................         488             --        2,342           --
                                                  --------       --------     --------     --------
                                                   103,714         85,235       92,372       65,111
                                                  --------       --------     --------     --------
(Discounts)/Premiums
  Accretable(2)...............................        (449)          (560)        (669)        (781)
  Non-accretable..............................      (7,246)        (9,167)     (15,384)     (22,684)
                                                  --------       --------     --------     --------
                                                    (7,695)        (9,727)     (16,053)     (23,465)
                                                  --------       --------     --------     --------
     Net nonaccrual loans.....................      96,019         75,508       76,319       41,646
REO, primarily single family properties.......      28,266         24,904       20,684       18,954
                                                  --------       --------     --------     --------
          Total nonperforming assets..........    $124,285       $100,412     $ 97,003     $ 60,600
                                                  ========       ========     ========     ========
- ---------------
 
(1) Originated single family nonaccrual loans to total single family nonaccrual
    loans were 29.06%, 20.64%, 13.66%, and 15.44% at March 31, 1996 and at
    September 30, 1995, 1994, and 1993, respectively.
 
(2) Accretable discount arises principally from the purchase of performing
    single family residential loans in the secondary market. The discount in
    effect functions principally as an additional reserve by lowering the book
    value of the outstanding loans. If the accretable discount is included with
    the allowance for credit losses, the resulting ratio of the allowance for
    credit losses to total loans would have been 0.77% at March 31, 1996.
 
                                       41
44
 
                         SELECTED ASSET QUALITY RATIOS
AT OR FOR
                                               THE SIX MONTHS           AT OR FOR THE YEAR ENDED
                                               ENDED MARCH 31,               SEPTEMBER 30,
                                               ---------------       ------------------------------
                                                    1996             1995        1994         1993
                                               ---------------       -----       -----       ------
Allowance for credit losses to net nonaccrual
  loans......................................       38.00%           48.74%      30.73%       71.71%
Allowance for credit losses to nonperforming
  assets.....................................       29.36(2)         36.65       24.18        49.28
Allowance for credit losses and
  non-accretable discounts to net nonaccrual
  loans......................................       45.55            60.88       50.89       126.18
Allowance for credit losses to total loans...        0.46             0.44        0.46         0.61
Nonperforming assets to total assets.........        1.10(2)          0.84        1.09         0.72
Nonaccrual loans to total loans..............        1.21             0.91        1.51         0.85
Nonperforming assets to total loans and
  REO........................................        1.56             1.21        1.91         1.23
Net loan charge-offs to average loans(1)
     Total...................................        0.15             0.16        0.30         0.05
     Single family...........................        0.09             0.08        0.04         0.05
- ---------------
(1) Annualized for the interim period.
 
(2) Excluding the $10.1 million of loans included above, which were
    contractually current pursuant to the borrowers' court-approved bankruptcy
    plans at March 31, 1996, the allowance for credit losses to nonperforming
    assets ratio would have been 31.96% and the nonperforming assets to total
    assets ratio would have been 1.01%.
 
             PORTFOLIO OF GROSS NON-ACCRUAL LOANS BY STATE AND TYPE
                               AT MARCH 31, 1996
SINGLE FAMILY                             COMMERCIAL
                                         RESIDENTIAL                                 REAL                   % OF
         STATE          SINGLE FAMILY   CONSTRUCTION    CONSUMER   MULTI-FAMILY     ESTATE       TOTAL      TOTAL
- ----------------------- -------------   -------------   --------   ------------   ----------   ----------   -----
                                                             (IN THOUSANDS)
California.............   $  53,378         $  --         $  1         $ --          $ --       $  53,379    51.5%
Texas..................      10,895            35          730           --            --          11,660    11.2
Florida................       8,175            --           --           --            --           8,175     7.9
New Jersey.............       5,143            --           --           --            --           5,143     5.0
Illinois...............       5,023            --           --           --            --           5,023     4.8
New York...............       3,388            --           --           --            --           3,388     3.3
Connecticut............       1,802            --           --          510           488           2,800     2.7
Maryland...............       1,828            --           --           --            --           1,828     1.8
Pennsylvania...........       1,798            --           --           --            --           1,798     1.7
Virginia...............       1,352            --           --           --            --           1,352     1.3
Massachusetts..........       1,082            --           --           --            --           1,082     1.0
Louisiana..............       1,018            --           --           --            --           1,018     1.0
Other..................       7,054            --           14           --            --           7,068     6.8
                        -------------      ------       --------      -----         -----      ----------   -----
    Total..............   $ 101,936         $  35         $745         $510          $488       $ 103,714   100.0%
                        =============   =============   ========== =============  ============  =========   =====
% of Total.............        98.3%           --%         0.7%         0.5%          0.5%          100.0%
                        =============   =============   ========== =============  ============  =========
Total nonperforming assets increased $23.9 million to $124.3 million at
March 31, 1996 from $100.4 million at September 30, 1995. The single family
nonaccrual loans increased $18.0 million, reflecting, in part, the effects of
the loan purchases which occurred in the second half of 1995.
 
     The portion of the purchase discount attributable to potential credit risk
on certain acquired delinquent single family loans is treated as non-accretable
discount. The Bank believes that these purchase discounts are sufficient to
cover losses from these portfolios and to provide a market rate of return. The
non-accretable discount decreased $2.0 million to $7.2 million at March 31, 1996
from $9.2 million at September 30, 1995.
 
                                       42
45
 
This decrease resulted primarily from loans being foreclosed upon and
transferred to REO. The non-accretable discount related to these loans was also
transferred. REO increased $3.4 million to $28.3 million at March 31, 1996 from
$24.9 million at September 30, 1995. This increase primarily resulted from
higher levels of delinquencies on a larger loan portfolio.
 
     Total nonperforming assets increased $3.4 million to $100.4 million at
September 30, 1995 from $97.0 million at September 30, 1994. The multi-family
and commercial real estate nonaccrual loans decreased $5.9 million from
September 30, 1994. This decrease resulted primarily from loans being paid in
full, and improvement in performance and cash flows. The non-accretable discount
decreased $6.2 million to $9.2 million at September 30, 1995 from $15.4 million
at September 30, 1994. This decrease resulted primarily from loans being
foreclosed upon and transferred to REO. The non-accretable discount related to
these loans was also transferred. REO increased $4.2 million to $24.9 million at
September 30, 1995 from $20.7 million at September 30, 1994. This increase
resulted primarily from increased volumes in the single family portfolio.
 
     Total nonperforming assets increased $36.4 million to $97.0 million at
September 30, 1994 from $60.6 million at September 30, 1993. The single family
nonaccrual loans increased $24.3 million to $85.7 million at September 30, 1994
from $61.4 million at September 30, 1993. This increase resulted primarily from
the purchase, at substantial discounts, of single family loans that were
delinquent at acquisition. The Company has historically purchased nonperforming
loans as part of a larger loan purchase from the RTC, the FDIC or liquidating
institutions, and realized profits by modifying, restructuring and liquidating
the loans as necessary. The non-accretable discount decreased $7.3 million to
$15.4 million at September 30, 1994 from $22.7 million at September 30, 1993.
The decrease resulted primarily from a reallocation of approximately $11.2
million of non-accretable discounts to accretable discounts due to improved
performance of the loans, offset by an increase in non-accretable discounts
related to the purchase discussed above.
 
     The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, an amendment of SFAS No. 114",
effective October 1, 1995. These statements address the accounting by creditors
for impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
At March 31, 1996, the recorded investment in impaired loans, pursuant to SFAS
No. 114, totaled $4.7 million. There was no allowance for credit losses
determined in accordance with SFAS No. 114 related to these impaired loans
because the measured values of the loans exceeded the Company's recorded
investments in the loans.
 
                                       43
46
 
     The Company's criticized and classified assets are identified pursuant to
management's asset classification policy, which was established in accordance
with regulatory guidelines.
 
             RECONCILIATION OF CRITICIZED AND CLASSIFIED ASSETS TO
                              NONPERFORMING ASSETS
                               AT MARCH 31, 1996
NONPERFORMING     PERFORMING       TOTAL
                                                      -------------     ----------     ----------
                                                                    (IN THOUSANDS)
Criticized assets:
  Special Mention
     Single family residential construction.........    $      --        $    186       $     186
     Multi-family...................................           --          10,753          10,753
     Commercial real estate and business credit.....           --           2,501           2,501
                                                      -------------     ----------     ----------
          Total criticized assets...................           --          13,440          13,440
                                                      -------------     ----------     ----------
Classified:
  Substandard
     Single family..................................       94,962              --          94,962
     Single family residential construction.........           35              --              35
     Consumer.......................................          672              --             672
     Multi-family...................................          404          17,979          18,383
     Commercial real estate and business credit.....          395           2,939           3,334
     Real estate owned..............................       28,266              --          28,266
                                                      -------------     ----------     ----------
                                                          124,734          20,918         145,652
  Doubtful -- multi-family..........................           --             350             350
  Loss..............................................           --              --              --
                                                      -------------     ----------     ----------
          Total classified assets...................      124,734          21,268         146,002
                                                      -------------     ----------     ----------
          Total criticized and classified assets....    $ 124,734        $ 34,708       $ 159,442
                                                      =============     ==========       ========
Total classified assets as a % of total gross
  loans.............................................                                         1.84%
Total allowance for credit losses as a % of total
  classified assets.................................                                        24.99%
The Company establishes an allowance for credit losses based on
management's periodic evaluation of the loan portfolio and considers such
factors as historical loss experience, delinquency status, identification of
adverse situations that may affect the ability of obligators to repay, known and
inherent risks in the portfolio, assessment of economic conditions, regulatory
policies, and the estimated value of the underlying collateral, if any. Although
the Company's credit management systems have resulted in a very low loss
experience, there can be no assurance that such results will continue in the
future. The allowance for credit losses is based principally on delinquency
status and historical loss experience.
 
     The following table presents the Company's allowance for credit losses.
 
                          ALLOWANCE FOR CREDIT LOSSES
FOR THE SIX
                                              MONTHS ENDED          FOR THE YEAR ENDED SEPTEMBER
                                                MARCH 31,                        30,
                                           -------------------     -------------------------------
                                            1996        1995        1995        1994        1993
                                           -------     -------     -------     -------     -------
(IN THOUSANDS)
Beginning balance........................  $36,801     $23,454     $23,454     $29,864     $28,214
  Provision..............................    5,850       4,157      24,293       6,997       4,083
  Charge-offs net of recoveries..........   (6,162)     (2,572)    (10,946)    (13,407)     (2,433)
                                           -------     -------     -------     -------     -------
Ending balance...........................  $36,489     $25,039     $36,801     $23,454     $29,864
                                           =======     =======     =======     =======     =======
44
47
 
                   ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
AT MARCH 31,                AT SEPTEMBER 30,
                                           -------------------     -------------------------------
                                            1996        1995        1995        1994        1993
                                           -------     -------     -------     -------     -------
                                           (IN THOUSANDS)
Single family..........................    $28,799     $16,784     $29,594     $15,905     $15,238
Single family residential
  construction.........................        483         473         361         399         306
Consumer...............................      3,339       2,455       3,247       1,822         355
Multi-family...........................      3,229       2,974       3,054       2,456       1,474
Commercial real estate and business
  credit...............................        183       2,112          97       2,112      11,382
Mortgage Banker Finance line of
  credit...............................        412         236         410         684         944
Single family mortgage warehouse.......         44           5          38          76         165
                                           -------     -------     -------     -------     -------
     Total.............................    $36,489     $25,039     $36,801     $23,454     $29,864
                                           =======     =======     =======     =======     =======
The allowance for credit losses decreased to $36.5 million at March 31,
1996 from $36.8 million at September 30, 1995. The single family allowance for
credit losses decreased to $28.8 million at March 31, 1996 from $29.6 million at
September 30, 1995. This decrease primarily resulted from a reduced level of
single family loans as repayments exceeded originations.
 
     The allowance for credit losses increased to $36.8 million at September 30,
1995 from $23.5 million at September 30, 1994. The single family allowance for
credit losses increased to $29.6 million at September 30, 1995 from $15.9
million at September 30, 1994. This increase primarily resulted from an increase
in the single family loan portfolio to $7.1 billion at September 30, 1995 from
$4.2 billion at September 30, 1994 due to purchases of $2.7 billion during
fiscal 1995 and additional originations retained for portfolio of $1.0 billion.
Purchases and originations of loans result in provisions for credit losses being
provided which increase the allowance for credit loss relating to these loans.
The consumer allowance for credit losses increased to $3.2 million at September
30, 1995 from $1.8 million at September 30, 1994. This increase primarily
resulted from increased losses related to this unsecured consumer line of credit
portfolio.
 
     The allowance for credit losses decreased to $23.5 million at September 30,
1994 from $29.9 million at September 30, 1993. The commercial real estate and
business credit allowance for credit losses decreased to $2.1 million at
September 30, 1994 from $11.4 million at September 30, 1993. This decrease
primarily resulted from a $10.1 million charge-off in fiscal 1994 related to a
single commercial real estate loan. See Note 5 to the Consolidated Financial
Statements.
 
     The Bank charges-off loans, other than consumer loans, when all attempts
have been exhausted to resolve any outstanding loan or legal issues. For
consumer loans, all loans are charged-off when they contractually become 120
days delinquent.
 
                                       45
48
 
     The components of charge-offs and recoveries by property type for the
periods indicated are as follows:
 
                              NET LOAN CHARGEOFFS
FOR THE SIX MONTHS             FOR THE YEAR ENDED
                                           ENDED MARCH 31,                 SEPTEMBER 30,
                                         -------------------     ---------------------------------
                                          1996        1995         1995         1994        1993
                                         -------     -------     --------     --------     -------
                                                              (IN THOUSANDS)
Charge-offs
  Single family........................  $(3,242)    $(1,441)    $ (4,840)    $ (1,722)    $(2,167)
  Single family residential
     construction......................       --          --           --           --         (71)
  Consumer.............................   (3,008)     (1,190)      (2,847)      (1,365)        (72)
  Multi-family.........................       --          --           --         (233)         --
  Commercial real estate and business
     credit............................       --          --       (3,389)     (10,145)         --
  Single family mortgage warehouse.....       --          (2)          (2)          --        (148)
                                         -------     -------     --------     --------     -------
     Total charge-offs.................   (6,250)     (2,633)     (11,078)     (13,465)     (2,458)
                                         -------     -------     --------     --------     -------
Recoveries
  Single family........................       18          27           36           20           6
  Consumer.............................       70          32           94           38          19
  Multi-family.........................       --           2            2           --          --
                                         -------     -------     --------     --------     -------
     Total recoveries..................       88          61          132           58          25
                                         -------     -------     --------     --------     -------
     Total net charge-offs.............  $(6,162)    $(2,572)    $(10,946)    $(13,407)    $(2,433)
                                         =======     =======     ========     ========     =======
     Net loan charge-offs to average
       loans...........................     0.15%       0.09%        0.16%        0.30%       0.05%
Net loan charge-offs for all loan types increased to $6.2 million for the
six months ended March 31, 1996 from $2.6 million for the six months ended March
31, 1995. The Bank's loan portfolio consists primarily of single family mortgage
loans. Net charge-offs on the single family portfolio increased to $3.2 million
for the six months ended March 31, 1996 from $1.4 million for the six months
ended March 31, 1995. This resulted in net charge-offs as a percentage of single
family loans on average of 0.09% and 0.06%, respectively, for the six months
ended March 31, 1996 and 1995 (annualized). Net charge-offs on the consumer loan
portfolio increased to $2.9 million for the six months ended March 31, 1996 from
$1.2 million for the six months ended March 31, 1995. The increase primarily
relates to the unsecured consumer line of credit portfolio.
 
     Net loan charge-offs for all loans decreased to $10.9 million for fiscal
1995 compared to $13.4 million for fiscal 1994. Net charge-offs on the
commercial real estate and business credit portfolio decreased to $3.4 million
for fiscal 1995 compared to $10.1 million for fiscal 1994. The charge-off in
fiscal 1995 included a $3.4 million charge related to the sale of a single
commercial real estate loan. Excluding the commercial real estate loan
charge-offs, net charge-offs to average loans outstanding would have been $7.5
million and $3.3 million or 0.11% and 0.07%, respectively, for fiscal 1995
compared to fiscal 1994. Net charge-offs on the single family portfolio
increased to $4.8 million for fiscal 1995 compared to $1.7 million for fiscal
1994. This resulted in net charge-offs as a percentage of single family loans on
average of 0.08% and 0.04%, respectively, for fiscal 1995 compared to fiscal
1994. Net charge-offs on the consumer loan portfolio increased to $2.8 million
for fiscal 1995 compared to $1.3 million for fiscal 1994. This increase
primarily relates to the unsecured consumer line of credit portfolio.
 
     Net loan charge-offs for all loans increased to $13.4 million for fiscal
1994 compared to $2.4 million for fiscal 1993. This increase reflects a $10.1
million charge-off related to a single commercial real estate loan. Excluding
this commercial real estate loan charge-off, net charge-offs to average loans
outstanding would have been $3.3 million and $2.4 million or 0.07% or 0.05%,
respectively, for fiscal 1994 compared to fiscal 1993. Net charge-offs on the
single family portfolio decreased to $1.7 million for fiscal 1994 compared to
$2.2 million for fiscal 1993. This resulted in net charge-offs as a percentage
of single family loans on average of 0.04% and 0.05%, respectively, for fiscal
1994 compared to fiscal 1993. Net charge-offs on the consumer loan portfolio
increased to $1.3 million for fiscal 1994. This increase primarily relates to
the unsecured consumer line of credit portfolio.
 
                                       46
49
 
     Excluding charge-offs associated with the single commercial real estate
loan, discussed above, net REO gains of $16.8 million exceeded net charge-offs
of $13.3 million for the three years ended September 30, 1995. REO gains have
historically been significant for the Company because of discounts attributable
to the original loan purchases.
 
     The Company's only credit product that has had charge-offs higher than its
original formula reserves is the unsecured consumer line of credit. The Company
began offering this product in 1993. The portfolio outstandings at March 31,
1996 were $56.0 million, for which allowances for credit losses were recently
increased from 4% to 6% of total outstandings. Due to the initial growth and
loss experience in this portfolio, the Company modified its underwriting,
approval and collection processes. Net of charge-offs, the portfolio has had
positive net interest income after loss provisions. The Company believes that
its current formula reserve policy is appropriate for this product.
 
CAPITAL RESOURCES AND LIQUIDITY
 
     Liquidity refers to the ability or the financial flexibility to manage
future cash flows to meet the needs of depositors and borrowers and fund
operations on a timely and cost-effective basis. The Bank is required by the OTS
to maintain average daily balances of liquid assets and short-term liquid assets
in amounts equal to 5% and 1%, respectively, of net-withdrawable deposits plus
borrowings payable on demand or with remaining maturities of one year or less.
The average daily liquidity ratio for March 31, 1996 was 5.84%, and the average
short-term liquidity ratio for March 31, 1996 was 3.51%.
 
     The primary sources of funds consist of deposits, advances from the FHLB,
reverse repurchase agreements, principal repayments on loans and MBS, and
proceeds from the issuance of Bank Preferred Stock. Liquidity may also be
provided from other sources including investments in short-term high credit
quality instruments. At March 31, 1996, these instruments generally comprised
repurchase agreements, federal funds sold, trading account assets, and MBS and
securities available for sale. These instruments totaled $2.0 billion at March
31, 1996 and $933.2 million, $905.4 million, and $2.4 billion at September 30,
1995, 1994, and 1993, respectively. Funding resources are principally used to
meet ongoing commitments to fund deposit withdrawals, repay borrowings, fund
existing and continuing loan commitments and maintain liquidity. See Notes 8, 9,
10, and 12 to the Consolidated Financial Statements.
 
     As a holding company without significant assets other than its equity
interest in the Bank, the Company's ability to pay interest and principal on the
Senior Notes and on its other debt and to fund its operations depends upon cash
dividends it receives from the Bank and is subject to limitations imposed by the
Senior Notes. The Bank's ability to pay dividends is, in turn, dependent upon
its ability to generate earnings and is subject to a number of regulatory and
other restrictions and risks. Dividends may not be paid on the Bank Common Stock
if full dividends on the Bank Preferred Stock have not been paid for the four
most recent quarterly dividend periods. Thus, if for any reason the Bank failed
to declare and pay full quarterly dividends on the Bank Preferred Stock, the
Company would not receive any cash dividends from the Bank until four full
quarterly dividends on the Bank Preferred Stock had been paid. See "-- Capital"
and Notes 11 and 15 to the Consolidated Financial Statements for a discussion of
the various dividend limitations.
 
     Deposits
 
     Deposits have provided the Company with a source of relatively stable and
low cost funds. Average deposits funded 44% of average total assets for the six
months ended March 31, 1996, 48% for fiscal 1995, 58% for fiscal 1994, and 66%
for fiscal 1993. The relationship of the Company's deposits to its average
assets has decreased over the past three years, while overall deposit levels
have remained constant. This change in the relationship of deposit funding is
due to the opportunities for leverage created by increased capital raised by the
Company through the issuance of preferred stock, in 1993 and 1995, and earnings
retained by the Company. Additionally, other financial instrument opportunities
available to consumers, who have traditionally invested in bank deposit
products, have become more widely used as an alternative to deposit products.
 
                                       47
50
 
     The following table reflects net activity in the Company's deposit
accounts:
 
                            DEPOSIT ACCOUNT ACTIVITY
FOR THE SIX MONTHS              FOR THE YEAR ENDED
                                         ENDED MARCH 31,                  SEPTEMBER 30,
                                      ---------------------    -----------------------------------
                                        1996         1995        1995         1994         1993
                                      ---------    --------    ---------    ---------    ---------
                                                             (IN THOUSANDS)
Consumer Accounts:
  Checking accounts (including
     interest-bearing and
     non-interest bearing)..........  $  33,995    $  1,650    $   4,984    $   5,467    $  (3,437)
  Savings accounts..................     (6,798)    (61,520)     (83,089)     (97,286)     (94,857)
  Money market accounts.............     87,129     (19,140)     (24,028)      (1,275)     (26,918)
  Time deposits.....................   (193,275)     82,709       35,425     (389,465)       4,296
                                      ---------    --------    ---------    ---------    ---------
          Total consumer activity...    (78,949)      3,699      (66,708)    (482,559)    (120,916)
Commercial deposits.................   (134,763)    267,372      482,726      384,387       63,000
Wholesale deposits..................    (91,450)    (94,802)    (157,019)    (108,196)    (157,805)
                                      ---------    --------    ---------    ---------    ---------
Total activity before interest
  credited..........................   (305,162)    176,269      258,999     (206,368)    (215,721)
Interest credited...................     86,263      75,240      159,017      131,184      144,349
                                      ---------    --------    ---------    ---------    ---------
          Net change in deposits....  $(218,899)   $251,509    $ 418,016    $ (75,184)   $ (71,372)
                                      =========    ========    =========    =========    =========
The Company has historically utilized CDs to compete for consumer deposits.
Beginning in 1995, the Company's strategy has been to increase checking and
money market deposit accounts which are the core relationships that provide a
stable source of funding for the Company. As a complement to this strategy, the
Company continues to offer traditional deposit products, such as savings
accounts and CDs. See Note 8 to the Consolidated Financial Statements.
 
     The Company offers cash management services to its MBF customers. These
services are commercial deposit accounts comprised of (i) operating accounts of
MBF customers, (ii) escrow deposits, and (iii) principal and interest payments
on the loans serviced by the MBF customers. At March 31, 1996, these deposits
totaled $797.3 million. The Company also raises wholesale deposits from
institutional customers through its Financial Markets Group. These deposits tend
to be interest rate sensitive and are subject to withdrawal if the rates paid on
these deposits are not competitive with other market rates. While the Company
does not generally solicit brokered deposits, the Company may accept brokered
deposits when permitted by regulation and available at favorable rates.
 
     Borrowings
 
     The Company also relies upon borrowings, primarily collateralized
borrowings such as advances from the FHLB and reverse repurchase agreements, to
fund its assets. These sources of funds were the primary source of funds for the
recent asset growth and accounted for 46% of the funding of average assets for
the six months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994,
and 23% for fiscal 1993. Long-term fixed and variable rate advances are obtained
from the FHLB Dallas under a security and pledge agreement that restricts the
amount of borrowings to a percentage of (i) fully disbursed single family loans,
unless assets are physically pledged to the FHLB Dallas, and (ii) total assets.
At March 31, 1996, these limitations were 65% of the outstanding principal of
single family loans and 45% of total assets. See Notes 9 and 10 to the
Consolidated Financial Statements.
 
     Notes Payable
 
     In May 1989, the Bank issued $110 million of 15% subordinated capital notes
to raise regulatory capital as required by the Assistance Agreement. During
September 1990, the holders exchanged their notes for senior notes issued by the
Company with an interest rate of 15.75% (the "15.75% Notes") and the Bank
prepaid the 15% subordinated capital notes. In May 1993, the Company issued $115
million of Senior Notes at an initial rate of 8.05%. Simultaneously, the 15.75%
Notes and the note payable to related party were paid
 
                                       48
51
 
off. The interest rate on the Senior Notes was subject to increase in certain
circumstances and the per annum interest rate was increased to 8.55% in October
1993, and to 9.05% in February 1994. The Senior Notes mature on May 15, 1998.
See Note 11 to the Consolidated Financial Statements. Substantially
simultaneously with the consummation of the Offering, the Company intends to
commence the Exchange Offer for the Senior Notes. The Exchange Offer is intended
to satisfy the condition of the Senior Notes pursuant to which the interest rate
on the Senior Notes will revert from 9.05% to 8.05% per annum commencing with
and including the date on which the Exchange Offer is consummated.
 
     Commitments
 
     At March 31, 1996, the Bank had mandatory forward delivery contracts for
single family loans of $514.8 million and had warehouse loans and a mortgage
pipeline of single family loans of $379.7 million and $190.8 million available
to fill these contracts. At March 31, 1996 the Bank had $1.3 billion of
commitments to extend credit. Because such commitments may expire without being
drawn upon, the commitments do not necessarily represent future cash
requirements. Scheduled maturities of CDs and borrowings (including advances
from the FHLB and reverse repurchase agreements) during the 12 months following
March 31, 1996, total $1.2 billion and $4.8 billion, respectively. Management
believes that the Bank has adequate resources to fund all of its commitments.
 
     Capital
 
     The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations. The Bank's capital level at March 31, 1996 and
September 30, 1995 qualified it as "well-capitalized", the highest of five tiers
under applicable regulatory definitions. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements" and Note 15 to the Consolidated Financial
Statements.
 
     The following table sets forth the regulatory capital ratios of the Bank as
of the dates indicated. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements".
 
                           REGULATORY CAPITAL RATIOS
AT MARCH             AT SEPTEMBER 30,
                                                    31,         -----------------------------
                                                   1996          1995       1994       1993
                                                -----------     -------    -------    -------
Tangible Capital..........................      6.88%         6.20%      6.01%      6.17%
    Core Capital..............................      6.96%         6.29%      6.17%      6.43%
    Total Risk-Based Capital..................     14.20%        13.45%     14.02%     14.87%
During fiscal 1993, the Bank issued its Preferred Stock, Series A and
during fiscal 1995, the Bank issued its Preferred Stock, Series B. Shares
totalling $85.5 million were issued as a result of the Preferred Stock, Series A
offering and shares totalling $100 million were issued as a result of the
Preferred Stock, Series B offering. These shares are not owned by the Company.
Bank Preferred Stock, which is treated as core capital for regulatory purposes,
was issued to increase total capital to support further growth.
 
CONTINGENCIES AND UNCERTAINTIES
 
     A petition for review has been filed in the United States Court of Appeals
for the Fifth Circuit seeking to modify, terminate, and set aside the order
approving the Acquisition, which involved substantially all the Bank's initial
assets and liabilities. The same petitioner has filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the United States District
Court of Texas, also seeking to set aside the order approving the Acquisition.
The petitioner contends, in both cases, that it submitted the most favorable bid
to acquire the assets and liabilities of Old USAT and that it should have been
selected as the winning bidder.
 
     The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court of Texas case at a later date. Management believes, after
consultation with legal counsel, that the claims of the petitioner are barred by
applicable time
 
                                       49
52
 
limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity. See "Legal Proceedings".
 
     As noted above, the Bank, in its various operations, is subject to
substantial statutory and regulatory compliance obligations. See "Regulation".
The Bank attempts in good faith to comply with the requirements of the various
statutes and regulations to which it is subject. These statutes and regulations
are complex, however, and even inadvertent noncompliance could result in civil
and, in some cases, criminal liability. In this regard, a substantial part of
the Bank's business has involved the origination, purchase, and sale of mortgage
loans. During the past several years, numerous individual claims and purported
consumer class action claims have been commenced against a number of financial
institutions, their subsidiaries, and other mortgage lending institutions,
alleging violations of various state and regulatory provisions relating to
mortgage lending and servicing, including the TILA and the RESPA.
 
     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. See "Legal Proceedings".
 
     Each house of Congress has passed legislation which, if it were to become
law, would require recapture of a thrift's post-1987 tax bad debt reserve over a
six-taxable-year period with the opportunity to defer recapture by up to two
years if certain residential loan requirements were met. A thrift's tax bad debt
reserve as of December 31, 1987 would not be subject to recapture. There would
be no financial statement impact on the Bank or the Company from this recapture
because a deferred tax liability has already been provided for on the Bank's
post-1987 tax bad debt reserves. At September 30, 1995, the Bank had
approximately $101 million of post-1987 tax bad debt reserves. The current tax
liability resulting from recapture of these reserves would be reduced by NOLs
available to offset this income. See "Risk Factors -- Recapitalization of the
SAIF and its Impact on SAIF Premiums; Other Legislative Proposals".
 
     As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. There can be no assurance that the tax
deductions associated with these NOLs will be allowed by the IRS. In addition,
such tax deductions would be subject to significant limitation under Section 382
of the Code if the Company undergoes an Ownership Change. In the event of an
Ownership Change, Section 382 of the Code imposes an annual limitation on the
amount of taxable income a corporation may offset with NOLs and certain
recognized built-in losses. See "Regulation -- Taxation -- Net Operating Loss
Limitations".
 
FEDERAL FINANCIAL ASSISTANCE
 
     The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement and the Settlement Agreement. These payments aggregated
$218.9 million in fiscal 1994, including the settlement payment of $195.3
million, and $70.9 million in fiscal 1993. Approximately $23.1 million in fiscal
1994 and $9.3 million in fiscal 1993 reflected financial assistance that was
recorded as income. Pursuant to the Settlement Agreement, all financial
assistance and related payments ceased to accrue as of December 28, 1993, and,
as of that date, the Bank no longer managed or owned any Covered Assets. There
was no material adverse effect on the Company or the Bank as a result of the
Settlement Agreement, the transfer of certain Covered Assets to the FDIC and the
retention of the remainder of such Covered Assets without financial assistance.
See "Business -- The Assistance Agreement".
 
                                       50
53
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
     In March 1995, FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This statement
establishes accounting standards for recognizing and measuring impairment of
long-lived assets (and related goodwill) to be held and used and for such assets
held for disposal. The statement is effective for financial statements with
fiscal years beginning after December 15, 1995, with earlier application
encouraged. Implementation of this pronouncement should have no material adverse
effect on the Consolidated Financial Statements.
 
     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.
 
                                       51
54
 
                                    BUSINESS
 
GENERAL
 
     The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, nine commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Offering, the Company will be the largest
publicly traded depository institution headquartered in Texas, in terms of both
assets and deposits.
 
     The Company's operating structure reflects its current business strategy,
with four business groups in two business segments.
 

                        [CHART SHOWING BUSINESS GROUPS]

                                       52
55
 
     Operating earnings (loss) by business segment, for the Company, were as
follows:
 
                     OPERATING EARNINGS BY BUSINESS SEGMENT
BANKING    MORTGAGE BANKING     BANK UNITED                       TOTAL OPERATING
                              SEGMENT         SEGMENT          CORP.(1)      ELIMINATIONS(2)      EARNINGS(3)
                              -------    -----------------    -----------    ---------------    ---------------
                                                      (IN MILLIONS)
Six months ended March 31,
  1996.......................  $58.3           $ 2.4             $(1.9)          $  (3.8)           $  55.0
  1995.......................   37.6            17.0              (0.6)             (5.2)              48.8
Years ended September 30,
  1995.......................   83.3            19.4              (5.0)             (6.4)              91.3
  1994.......................   63.2            24.4              (0.7)            (11.4)              75.5
  1993.......................   60.8            31.5                --             (15.2)              77.1
- ---------------
(1) Principally interest expense on the Senior Notes.
 
(2) Reflecting the elimination of dividends received by the Company from the
    Bank.
 
(3) Operating earnings represents income before taxes, minority interest and
    extraordinary loss, and excludes net gains (losses) on securities, MBS and
    other loans.
 
BUSINESS STRATEGY
 
     The Company's initial strategy was to obtain assets and deposits through
the acquisition of failed thrifts and through purchases from the RTC during the
resolution of the banking and thrift problems that occurred in the late 1980s
and early 1990s. Operationally, the Company focused on traditional single family
mortgage lending and on deposit gathering. As a complement to these activities,
the Company entered the retail and wholesale mortgage banking businesses,
leveraging management's substantial experience in the origination, purchase,
sale, structuring, and securitization of mortgage loans and the purchase and
sale of MSRs.
 
     The Company's financial priorities initially were focused towards
minimizing interest rate and credit risk while maximizing the net value of the
Company's assets and liabilities. To this end, the Company maintained a highly
liquid pool of securitizable assets as its core portfolio holdings. Given the
liquid nature of its portfolio, the Company was very active in the buying and
selling of loans, MBS and MSRs when economically attractive.
 
     Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lines of business. During this time, the Company has increased its portfolio of
multi-family, residential construction, consumer, and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. To support this strategy, the Company has hired experienced commercial
banking professionals and engaged in more aggressive marketing campaigns. In
addition to its efforts to increase originations of commercial and consumer
loans, the Company plans to increase the retention of higher yielding single
family and multi-family mortgage loans that, in the past, may have been sold or
securitized.
 
MANAGEMENT
 
     Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Offering, Mr. Burkholder will
also become Chairman of the Board of the Bank and President and CEO of the
Company. The executive management group of the Bank is composed of seven
individuals who have worked together for the past six years, giving them a
thorough understanding of the businesses they have developed together. They
average more than 20 years of related industry experience, the majority of which
comes from commercial banks. As a team, they have brought the disciplines and
sophistication of commercial banking to the Bank. The next level
 
                                       53
56
 
of senior management is composed of 42 executives, a third of whom were hired
directly from commercial banks. The balance of the senior management team has
experience working with various financial services companies, including mortgage
banks, thrifts and accounting firms. See "Management".
 
     Lewis A. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Offering, to serve as Chairman of the
Board of the Company. The Company is contemplating entering into a consulting
arrangement with Mr. Ranieri pursuant to which he would serve as a consultant to
the Company for a period of three years.
 
COMMUNITY BANKING GROUP
 
     The Community Banking Group, which has marketed itself under the name "Bank
United" since 1993, operates a 67 branch community banking network, a 24-hour
telephone banking center, and a 62-unit ATM network, which together serve as the
platform for the Company's consumer and small business banking activities. The
Company's branch network includes 34 branches in the greater Houston area, 29
branches in the Dallas/Ft. Worth metropolitan area, and two branches each in
Austin and San Antonio. In addition, the Company plans to open at least three
supermarket-based banking branches in 1996. Through its branch network, the
Company maintains more than 400,000 accounts with an estimated 182,000
households and businesses. The Community Banking Group's principal activities
include deposit gathering, consumer lending, small-business banking, and
investment product sales.
 
     Deposit Gathering
 
     The Community Banking Group offers a variety of traditional deposit
products and services, including checking and savings accounts, money market
accounts, and CDs. In addition, the Company offers deposit products and services
tailored specifically to small business needs. The Community Banking Group's
strategy is to become its customers' primary financial services provider by
emphasizing high levels of customer service and innovative products. The Company
has a history of introducing innovative products that have helped it increase
its competitive position within its primary banking markets. At March 31, 1996,
the Community Banking Group maintained over 310,000 deposit accounts with $3.9
billion in deposits.
 
     Consumer Lending
 
     Since 1992, the Community Banking Group has engaged in consumer lending for
its own portfolio. At March 31, 1996, consumer loans outstanding totaled $130.4
million. Through the Community Banking Group, the Company offers a variety of
consumer loan products, including home improvement loans, unsecured lines of
credit, and automobile loans. In addition, while the Company has offered its
customers credit cards since 1990, the Company intends to begin credit card
lending for its own portfolio in the fourth quarter of 1996. The consumer
lending division of the Community Banking Group also offers home equity lines of
credit ("HELOCs") outside of Texas. (Current laws prohibit HELOC lending in the
state of Texas; however, the Company has put in place the systems and controls
needed to manage a Texas-based HELOC operation in anticipation of Texas
legislative and constitutional changes that would authorize such lending.) The
Community Banking Group has developed the technology required for efficient loan
processing and underwriting, including credit scoring and such services as
taking loan applications by telephone.
 
     Small Business Banking
 
     The Community Banking Group provides a broad range of credit services to
its small business customers, including lines of credit, working capital loans,
equipment loans, owner-occupied real estate loans, and Small Business
Administration loans. At March 31, 1996, the Community Banking Group had
approximately 280 business credit loans outstanding, representing approximately
$26.1 million in loan commitments. At March 31, 1996, the Community Banking
Group also had approximately $7.5 million in approved, unclosed business credit
loans and another $5.6 million in pending applications for business credit
loans. The Community Banking Group's small business strategy is focused on
offering loan products and services tailored specifically to most small business
needs, with highly responsive credit decision-making. The Company is
aggressively seeking to increase its small business lending volume.
 
                                       54
57
 
     Investment Product Sales
 
     Since 1993, a subsidiary of the Bank has been marketing investment products
to the Bank's consumer customer base. At March 31, 1996, the investment product
sales force was comprised of 23 commissioned Series 7 and Group I licensed
registered representatives. A broad range of investment products, including
stocks, bonds, mutual funds, annuities, and securities are offered by these
registered representatives.
 
COMMERCIAL BANKING GROUP
 
     The Commercial Banking Group provides credit and a variety of cash
management and other services to certain real estate and real estate related
businesses. The Commercial Banking Group conducts its activities through four
units: MBF, a financial service provider to small- and medium-sized mortgage
companies; Multi-Family Lending; Residential Construction Lending; and
Commercial Real Estate Lending. Business is solicited in Texas and in targeted
regional markets throughout the United States. The Commercial Banking Group
earns fees on committed lines and fees and interest on loans outstanding. The
Commercial Banking Group is expanding its products and industry specialties to
include health care lending, asset-based lending, and other industrial and
commercial loan products.
 
     Mortgage Banker Finance
 
     The Commercial Banking Group's MBF unit provides third-party mortgage
companies with credit facilities, including warehouse lines of credit, gestation
repurchase agreements, term loans secured by MSRs and working capital credit
lines, as well as cash management services. At March 31, 1996, the MBF unit had
$100.8 million in unfunded commitments and $141.8 million of loans outstanding.
Since 1994, the MBF unit has also offered commercial banking services (i.e.,
cash management, document custody and deposit services) to its mortgage banking
customers. Deposits related to MBF activities totaled $797.3 million at March
31, 1996.
 
     Multi-Family Lending
 
     Since 1990, the Commercial Banking Group has been providing multi-family
financing for established, operating multi-family properties, real estate
investment trusts and selected construction, acquisition, and rehabilitation
projects. At March 31, 1996, the Multi-Family Lending unit had $243.0 million in
multi-family commitments and $341.1 million in multi-family loans outstanding,
including $297.7 million in permanent loans and $43.4 million in construction
loans. Loans are solicited directly in Texas and in targeted regional markets
throughout the United States, through regional offices and selected preapproved
multi-family mortgage banking correspondents. From time to time, the Commercial
Banking Group also purchases servicing rights related to multi-family loans. At
March 31, 1996, the multi-family servicing portfolio totaled $669.2 million, of
which $373.5 million represented loans in the Company's portfolio.
 
     Residential Construction Lending
 
     Since 1989, the Commercial Banking Group has been active in making loans to
builders for the construction of single family residential properties and, on a
more limited basis, loans for acquisition and development of improved
residential lots. During fiscal 1994 and 1995, the Company expanded into several
other major markets outside of Texas, including Atlanta, Chicago, Denver,
Orlando, Phoenix, and Philadelphia. Current markets in Texas include Houston,
Dallas, Austin, and San Antonio. At March 31, 1996, the Company had $401.7
million in commitments and $179.5 million of residential construction loans
outstanding.
 
     Commercial Real Estate Lending
 
     The Commercial Banking Group is engaged in commercial real estate lending
in targeted sectors, emphasizing permanent mortgages on income producing
properties, such as assisted living facilities. At March 31, 1996, the Company
had $45.1 million in permanent commercial real estate loans outstanding.
 
                                       55
58
 
FINANCIAL MARKETS GROUP
 
     The Financial Markets Group manages the Company's asset portfolio
activities, including loan acquisition and management and the securitization of
whole loans. Additionally, under the supervision of the ALCO, the Financial
Markets Group is responsible for the Company's investment portfolio, for
interest rate risk hedging strategies, and for securing funding sources other
than consumer and commercial deposits.
 
     Loan Acquisition and Management
 
     The Financial Markets Group acquires residential loans, primarily single
family loans, through traditional secondary market sources (mortgage companies,
financial institutions, and investment banks), as well as from the Mortgage
Banking Group. Since September, 1992, the Company has closed more than 50 loan
acquisition transactions representing more than $5.3 billion in loans. At March
31, 1996, the majority of the $7.5 billion of loans held to maturity by the
Company, which are primarily (88%) adjustable-rate loans, were managed by the
Financial Markets Group.
 
     Wholesale Fundings
 
     The Financial Markets Group arranges funding sources other than consumer
and commercial deposits for the Company. Wholesale funding sources include
advances from the FHLB Dallas, reverse repurchase agreements, commercial
borrowings, and brokered CDs. At March 31, 1996, wholesale activities provided
$5.3 billion in funding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Capital Resources and Liquidity" and
Notes 8, 9 and 10 to the Consolidated Financial Statements.
 
     Investment Portfolio Management
 
     The Financial Markets Group manages the Company's investment portfolio,
which totaled nearly $2.7 billion at March 31, 1996. The Financial Markets Group
seeks to maintain a portfolio of assets that provides for liquidity needs and
maintains an interest rate spread over matched funded liabilities, including
assets that may be pledged as collateral for secured borrowings, and that
maximize utilization of the Bank's risk-based capital. See
"Business -- Investment Portfolio" and Notes 2, 3 and 4 to the Consolidated
Financial Statements.
 
     Securitization of Whole Mortgage Loans
 
     The Financial Markets Group evaluates the Company's loan portfolio for
securitization opportunities and, when appropriate, creates MBS and retains the
master servicing. During the past three years, the Financial Markets Group has
structured seven securitization transactions, creating $1.8 billion in MBS. The
Company has sold substantially all of the non-investment grade securities
created, thus enhancing the Bank's risk-based capital ratios and credit quality.
These securitization activities are separate from the secondary marketing
activities of the Mortgage Banking Group.
 
MORTGAGE BANKING GROUP
 
     The Mortgage Banking Group operates under the names "Bank United Mortgage"
in Texas and Virginia and "Commonwealth United Mortgage" elsewhere in the United
States. The Mortgage Banking Group originates and services first mortgage loans
for single family residences for both the Company's portfolio and for sale to
investors. At December 31, 1995, with originations of $3.4 billion in fiscal
year 1995, the Company was ranked by the American Banker as among the 30 largest
originators of single family loans in the nation. In addition, the Company was
ranked by the American Banker as one of the 40 largest single family loan
servicers in the nation at December 31, 1995. The Company's servicing portfolio
at March 31, 1996 was $11.6 billion. To manage the risk on mortgage pipeline
loans, the Company estimates the portion of the loans that will close and then
enters into forward sales of such loans in the secondary market. Consistent with
the increasing emphasis on its community and commercial banking business, the
Company is in the process of evaluating its strategic alternatives with respect
to its mortgage banking business, including a sale or
 
                                       56
59
 
restructuring of all or parts of its mortgage origination business. No
assurances can be made regarding the timing or impact of any such sale or
restructuring on the Company's residential mortgage lending business.
 
     The Mortgage Banking Group principally engages in three activities: Retail
Mortgage Operations, Wholesale Mortgage Operations, and Mortgage Servicing
Operations.
 
     Retail Mortgage Operations
 
     The Mortgage Banking Group offers a variety of fixed-rate and
adjustable-rate mortgage products for consumers through a nationwide network of
retail mortgage origination offices. For the 12 months ended March 31, 1996, the
Mortgage Banking Group originated $2.2 billion in retail mortgage loans. Loans
are originated through direct contact with individual borrowers by the Group's
commissioned retail loan officers.
 
     Wholesale Mortgage Operations
 
     The Mortgage Banking Group provides qualified mortgage brokers nationwide
with a variety of fixed-rate and adjustable-rate mortgage products through its
network of wholesale mortgage origination offices. For the 12 months ended March
31, 1996, the Mortgage Banking Group originated $1.7 billion in mortgage loans
through its wholesale operations. Loans are originated through contact with one
of the Company's 3,255 mortgage brokers, serviced by the Group's wholesale
account executives. All loans originated through wholesale mortgage operations
are underwritten by the Company's staff according to secondary market
requirements and internal guidelines. The loans are originated and closed in
either the name of the Bank or, under certain circumstances, the mortgage
broker's name with immediate assignment to the Bank.
 
     Mortgage Servicing Operations
 
     The Mortgage Banking Group services residential mortgage loans owned by the
Bank and by others, including the GNMA, the FNMA, the FHLMC and private mortgage
investors. Mortgage loan servicing consists of collecting and accounting for
principal and interest payments from borrowers, remitting principal and interest
payments to investors, making cash advances when required, collecting funds for
and paying mortgage-related expenses such as taxes and insurance, inspecting
mortgaged properties when required, collecting delinquent mortgages, conducting
foreclosures and property dispositions in the event of unremedied defaults, and
generally administering the loans. At March 31, 1996, the Mortgage Banking Group
serviced over $11.6 billion in mortgage loans, including $4.0 billion for the
Company's portfolio and $7.6 billion for others. Mortgage servicing operations
are technology and process management intensive. The Company views itself as
being competitively positioned to service loans in an efficient and cost
effective manner relative to its peers. The Company has been ranked by ICM
Consultants, Inc. as one of the nation's top 10 servicing organizations in terms
of efficiency and productivity for the past five years.
 
                                       57
60
 
LOAN PORTFOLIO
 
     The Company has focused in recent years on originating and servicing
commercial banking assets. However, the Company's loan portfolio still reflects
the Company's origins as a thrift institution, with single family mortgage
originations constituting a majority of loans made by the Company. The following
tables set out the Company's loan origination levels, as well as the product and
geographic distribution of its loan portfolio.
 
                               LOAN ORIGINATIONS
FOR THE SIX MONTHS
                                           ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                       -----------------------   ------------------------------------
                                          1996         1995         1995         1994         1993
                                       ----------   ----------   ----------   ----------   ----------
                                                               (IN THOUSANDS)
Single family(1).....................  $1,945,434   $1,453,267   $3,226,324   $5,424,550   $6,645,096
Single family residential
  construction.......................     208,847      100,328      239,481      133,609      129,254
Consumer.............................      53,570       41,734       99,249       94,153       64,742
Multi-family, commercial real estate,
  and business credit................     146,309      162,897      307,636      230,995       60,489
                                       ----------   ----------   ----------   ----------   ----------
          Total......................  $2,354,160   $1,758,226   $3,872,690   $5,883,307   $6,899,581
                                       ==========   ==========   ==========   ==========   ==========
- ---------------
(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
    $529 million of loans originated for the Company's portfolio during the six
    months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
    1993.
 
                                 LOAN PORTFOLIO
AT SEPTEMBER 30,
                                                 AT MARCH 31,   ------------------------------------
                                                     1996          1995         1994         1993
                                                 ------------   ----------   ----------   ----------
                                                                   (IN THOUSANDS)
Single family..................................   $6,651,723    $7,061,088   $4,203,614   $3,376,181
Single family residential construction.........      179,505       115,436       57,786       35,904
Consumer.......................................      130,356       123,096      108,179       57,902
Multi-family...................................      393,604       479,798      289,334      112,055
Commercial real estate and business credit.....       64,113        38,326       61,919       49,510
Mortgage banker finance line of credit.........      141,781       109,339      147,754      385,548
Single family mortgage warehouse...............      379,720       411,287      252,153      899,602
                                                  ----------    ----------   ----------   ----------
                                                   7,940,802     8,338,370    5,120,739    4,916,702
Allowance for credit losses....................      (36,489)      (36,801)     (23,454)     (29,864)
Accretable unearned discount...................      (24,452)      (38,460)     (50,650)     (27,923)
Net deferred loan origination fees.............       (1,525)       (1,727)        (461)       3,464
Unrealized losses..............................         (256)       (1,142)      --           --
                                                  ----------    ----------   ----------   ----------
          Total                                   $7,878,080    $8,260,240   $5,046,174   $4,862,379
                                                  ==========    ==========   ==========   ==========
58
61
 
             GEOGRAPHIC DISTRIBUTION OF REAL ESTATE LOAN PORTFOLIO
AT SEPTEMBER 30,
                                           AT MARCH 31,     ----------------------------------------------
                  STATE                        1996             1995             1994             1993
- -----------------------------------------  ------------     ------------     ------------     ------------
                                                                   (IN THOUSANDS)
California...............................   $3,793,094       $ 3,958,293      $ 1,764,531      $ 1,375,506
Texas....................................    1,238,727         1,259,306        1,131,225          891,459
Florida..................................      450,849           479,379          456,812          485,977
Illinois.................................      168,905           190,801          138,072           72,749
Arizona..................................      130,703           115,260           30,142           20,932
Pennsylvania.............................      120,853           128,693           68,728           33,489
New Jersey...............................      107,080           118,825           80,727           53,452
Virginia.................................      100,700           107,420           92,704           92,846
Washington...............................       85,425            81,005           32,899            7,682
Georgia..................................       83,871            94,413           56,442           63,098
Other states.............................    1,039,559         1,202,943          827,480          532,740
Other -- single family mortgage
  warehouse..............................      379,720           411,287          252,153          899,602
                                            ----------        ----------       ----------       ----------
          Total real estate..............    7,699,486         8,147,625        4,931,915        4,529,532
Mortgage Banker Finance lines of
  credit.................................      141,781           109,339          147,754          385,548
Business credit..........................       19,015             7,320               --               --
Non real estate consumer.................       91,730            89,509           72,987           44,597
                                            ----------        ----------       ----------       ----------
          Subtotal.......................    7,952,012         8,353,793        5,152,656        4,959,677
Non-accretable unearned discounts........      (11,210)          (15,423)         (31,917)         (42,975)
                                            ----------        ----------       ----------       ----------
          Total..........................   $7,940,802       $ 8,338,370      $ 5,120,739      $ 4,916,702
                                            ==========        ==========       ==========       ==========
GEOGRAPHIC AND PRODUCT DISTRIBUTION OF LOAN PORTFOLIO
                               AT MARCH 31, 1996
SINGLE                                   SINGLE
                     FAMILY                     COMMERCIAL    FAMILY                     NON REAL
       SINGLE     RESIDENTIAL       MULTI-         REAL      MORTGAGE       TOTAL         ESTATE                         % OF
STATE   FAMILY    CONSTRUCTION      FAMILY        ESTATE     WAREHOUSE   REAL ESTATE      LOANS          TOTAL          TOTAL
- ---- ----------   ------------   ------------   ----------   ---------   -----------   ------------   ------------      ------
                                                        (DOLLARS IN THOUSANDS)
California... $3,771,710   $     --   $   21,384  $     --   $     --    $3,793,094      $     --      $ 3,793,094          47.70%
Texas...         881,324    107,412      220,878      29,113       --     1,238,727            --        1,238,727          15.58
Florida...       421,850     27,013         --         1,986       --       450,849            --          450,849           5.67
Illinois...      157,986     10,919         --         --          --       168,905            --          168,905           2.12
Arizona...        97,372     14,323       19,008       --          --       130,703            --          130,703           1.64
Pennsylvania...  111,273      7,083        2,497       --          --       120,853            --          120,853           1.52
New
Jersey...        107,080       --           --         --          --       107,080            --          107,080           1.35
Virginia...      100,700       --           --         --          --       100,700            --          100,700           1.27
Washington...     65,974       --         19,451       --          --        85,425            --           85,425           1.07
Georgia...        56,331      6,957       20,583       --          --        83,871            --           83,871           1.06
Other
states...        926,785      5,798       91,211      15,765       --     1,039,559            --        1,039,559          13.07
Other(1)...         --         --           --         --     379,720       379,720       252,526          632,246           7.95
              ----------   --------   ----------    -------- --------    ----------      --------      -----------         ------
    Total...  $6,698,385   $179,505   $  395,012    $ 46,864 $379,720    $7,699,486      $252,526      $ 7,952,012         100.00%
              ==========   ========   ==========    ======== ========    ==========      ========      ===========         ======
% of
Total...          84.23%       2.26%        4.97%       0.59%    4.77 %       96.82 %        3.18%          100.00%
              =========    ========   ==========    ======== ========    ==========      ========      ===========
- ---------------
(1) Loans that cannot be classified by state.
 
                                       59
62
 
LOAN SERVICING PORTFOLIO
 
     At March 31, 1996, the Mortgage Banking Group was servicing $4.0 billion in
residential mortgage loans owned by the Company and $7.6 billion in mortgages
owned by others. Mortgage loan servicing consists of collecting and accounting
for principal and interest payments from borrowers, remitting principal and
interest payments to investors, making cash advances when required, collecting
funds for and paying mortgage-related expenses such as taxes and insurance,
inspecting mortgaged properties when required, collecting delinquent mortgages,
conducting foreclosures and property dispositions in the event of unremedied
defaults, and generally administering the loans.
 
     In return for performing the servicing functions listed above, the Mortgage
Banking Group receives servicing fees under loan administration contracts. These
fees are withheld from the monthly payments made to investors, are usually based
on the principal balance of the loan being serviced, generally range from 0.25%
to 0.50% annually of the outstanding principal amount of the loan, and are
collected only as payments are received. Minimum servicing fees for
substantially all loans serviced under MBS are set from time to time by the
sponsoring agencies. As a servicer of loans securitized by the GNMA, the FNMA
and the FHLMC, the Bank may be obligated to make timely payment of principal and
interest to security holders, whether or not such payments have been made by
borrowers on the underlying mortgage loans. With respect to mortgage loans
securitized under GNMA programs, the Company is insured by the FHA against
foreclosure loss on FHA loans, and by the VA through guarantees on VA loans.
Although the GNMA, the FNMA and the FHLMC are obligated to reimburse the Company
for principal and interest payments advanced by the Company as a servicer, the
funding of delinquent payments or the exercise of foreclosure rights involves
costs to the Company that may not be fully reimbursed or recovered.
 
                                       60
63
 
     The following table sets forth information on the Mortgage Banking Group's
Single Family Servicing Portfolio.
 
                       SINGLE FAMILY SERVICING PORTFOLIO
FOR THE SIX MONTHS      FOR THE YEAR ENDED SEPTEMBER
                                                ENDED MARCH 31,                    30,
                                              -------------------     -----------------------------
                                               1996        1995        1995        1994       1993
                                              -------     -------     -------     ------     ------
                                                                  (IN MILLIONS)
Beginning servicing portfolio................ $12,532     $ 8,921     $ 8,921     $8,073     $7,187
                                              -------     -------     -------     ------     ------
Add: Servicing acquisitions(1)...............      78       3,406       3,730        567         --
      Servicing on loans purchased by the
        Bank.................................       1         440         440         98      1,098
      Servicing originated...................   1,980       1,497       3,339      5,407      6,690
      Subservicing acquired..................      23         135         255         --         --
                                              -------     -------     -------     ------     ------
          Total additions....................   2,082       5,478       7,764      6,072      7,788
                                              -------     -------     -------     ------     ------
Less: Prepayments............................     823         329         938      1,051      1,169
      Foreclosures...........................      52          37          80         41         39
      Servicing released/transferred(1)......   1,986       1,861       2,840      3,913      5,492
      Amortization...........................     159         140         295        219        202
                                              -------     -------     -------     ------     ------
          Total reductions...................   3,020       2,367       4,153      5,224      6,902
                                              -------     -------     -------     ------     ------
Ending servicing portfolio................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
COMPOSITION OF ENDING SERVICING PORTFOLIO BY
  TYPE
  Government................................. $ 2,391     $ 3,008     $ 3,090     $2,777     $1,874
  Conventional...............................   9,203       9,024       9,442      6,144      6,199
                                              -------     -------     -------     ------     ------
Total servicing portfolio.................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
COMPOSITION OF ENDING SERVICING PORTFOLIO BY
  OWNER
  Company.................................... $ 3,956     $ 3,657     $ 4,010     $2,714     $3,634
  Others(2)..................................   7,638       8,375       8,522      6,207      4,439
                                              -------     -------     -------     ------     ------
Total servicing portfolio.................... $11,594     $12,032     $12,532     $8,921     $8,073
                                              =======     =======     =======     ======     ======
- ---------------
(1) The actual release or transfer of servicing does not necessarily take place
    during the same period as the related sale or purchase of MSRs.
 
(2) Includes servicing related to loans securitized by the Financial Markets
    Group into MBS, a portion of which have been retained by the Company.
 
     During the six months ended March 31, 1996 and 1995 and in fiscal 1995 and
1994, the Mortgage Banking Group purchased MSRs associated with loan principal
amounts of $78.2 million, $526.0 million, $594.7 million and $3.9 billion at
premiums of $949,000, $8.9 million, $10.3 million and $50.9 million,
respectively. In addition to the MSRs acquired during fiscal 1994 associated
with $567 million of single family loans included above, MSRs associated with
$3.4 billion of single family loans were purchased in fiscal 1994. Because this
transaction was consummated at or near year-end, these loans were subserviced by
the seller until they were transferred to the Company in fiscal 1995.
Accordingly, this $3.4 billion purchase is not reflected in the table above
until fiscal 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Discussion of Results of
Operations -- Non-Interest Income" and Note 6 to the Consolidated Financial
Statements.
 
     Gains on the sale of MSRs are affected by changes in interest rates as well
as the amount of MSRs capitalized at the time of loan origination or MSR
acquisition. Purchasers of MSRs analyze a variety of factors, including
prepayment sensitivity, to assess the purchase price they are willing to pay.
Lower market
 
                                       61
64
 
interest rates prompt an increase in prepayments as consumers refinance their
mortgages at lower rates of interest. As prepayments increase, the life of the
servicing portfolio is reduced, decreasing the servicing fee revenue that will
be earned over the life of that portfolio and the price third-party purchasers
are willing to pay. The fair value of servicing is also influenced by the supply
and demand of servicing available for purchase at any point in time. Conversely,
as interest rates rise, prepayments generally decrease, resulting in an increase
in the value of the servicing portfolio as well as the gains on sales of MSRs.
 
     Historically, the Company has sold substantially all of the originated MSRs
related to non-portfolio loans. The Company may retain servicing in order to
maintain the servicing portfolio at an acceptable level, particularly during
periods of unusually high levels of prepayments or low levels of new
originations.
 
     In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement requires that, among other things, the book value of
mortgage loans be allocated at the time of origination between the MSRs and the
related loans, provided there is a plan to sell or securitize such loans. With
the implementation of SFAS No. 122, the original cost basis of the loan is
allocated between the loan and the MSRs, thus increasing the gains on sales of
loans and reducing the gains on sales of MSRs.
 
     The following table presents the percentage of loans in the single family
servicing portfolio in each interest rate category.
AT MARCH 31, 1996
                                ---------------------------------------------------------------------
                                LESS
                                THAN     7.00-     8.01-     9.01-      10.01-     11.01-     12.01%
                                7.00%    8.00%     9.00%     10.00%     11.00%     12.00%     & ABOVE
                                ----     -----     -----     ------     ------     ------     -------
Government................   5.1%     7.5 %     5.3 %      2.1%       0.4%       0.2%       0.1%
    Conventional..............   9.1     29.6      28.9        8.4        2.0        0.7        0.6
                                                                                      --         --
                                ----     ----      ----       ----        ---
              Total...........  14.2%    37.1 %    34.2 %     10.5%       2.4%       0.9%       0.7%
                                ====     ====      ====       ====        ===         ==         ==
The weighted average interest rate in the single family servicing portfolio
has decreased from 9.57% at September 30, 1991 to 8.14% at March 31, 1996,
principally as a result of the origination of mortgage loans with increasingly
lower rates during fiscal 1991 to 1995, the prepayment and refinance of higher
rate mortgages, and purchases of MSRs on loans originated by others at lower
rates. At March 31, 1996, the weighted average contractual maturity (remaining
years to maturity) of the loans in the residential mortgage loan servicing
portfolio was 23 years.
 
     The following table sets forth as of March 31, 1996 the percentage of
loans, by principal amount, in the Company's single family servicing portfolio
secured on properties located in each state listed:
STATE                              PERCENT
            -------------------------------------------------------------  -------
California...................................................    30.8%
            Texas........................................................    18.3
            Florida......................................................     6.2
            Illinois.....................................................     5.1
            New Jersey...................................................     4.8
            Georgia......................................................     3.0
            Other(1).....................................................    31.8
                                                                            -----
                      Total..............................................   100.0%
                                                                            =====
- ---------------
(1) No other state constitutes more than 3%.
 
                                       62
65
 
     Of the approximately 159,000 loans serviced by the Mortgage Banking Group,
at March 31, 1996, 3.84% were delinquent and an additional 0.60% were in
foreclosure. The following table presents certain information regarding the
number of the delinquent single family loans serviced by the Mortgage Banking
Group as of the dates indicated. Completed foreclosures and loans less than 30
days delinquent have been excluded from the table below.
AT SEPTEMBER 30,
                                                        AT MARCH 31,     ----------------------
                                                            1996         1995     1994     1993
                                                        ------------     ----     ----     ----
30-59 Days Past Due...............................       2.3%         2.7%     2.3%     2.4%
    60-89 Days Past Due...............................       0.5          0.6      0.5      0.6
    90+ Days Past Due.................................       1.0          0.9      0.8      0.8
    Loans in foreclosure..............................       0.6          0.6      0.7      0.6
                                                            ----         ----     ----     ----
              Total...................................       4.4%         4.8%     4.3%     4.4%
                                                            ====         ====     ====     ====
Loan administration contracts with the FNMA, and typically with private
investors, provide for continuation of servicing over the term of the loan, but
permit termination for cause or termination without cause upon payment of a
cancellation fee. Loan administration contracts with the GNMA and the FHLMC are
terminable only for cause. Management believes that the Mortgage Banking Group
is currently in substantial compliance with all material rules, regulations, and
contractual obligations related to mortgage loan servicing.
 
INVESTMENT PORTFOLIO
 
     The Company maintains an investment portfolio for investment and liquidity
purposes.
 
                              INVESTMENT PORTFOLIO
AT SEPTEMBER 30,
                                           AT MARCH 31,     ----------------------------------------
                                               1996            1995           1994           1993
                                           ------------     ----------     ----------     ----------
                                                                (IN THOUSANDS)
Securities purchased under agreements to
  resell and federal funds sold..........   $  659,279      $  471,052     $  358,710     $  547,988
Trading account assets...................        1,267           1,081          1,011          1,006
Securities...............................       58,351         116,013        114,115         43,430
MBS......................................    1,954,070       2,398,263      2,828,903      2,175,925
                                            ----------      ----------     ----------     ----------
          Total..........................   $2,672,967      $2,986,409     $3,302,739     $2,768,349
                                            ==========      ==========     ==========     ==========
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.
 
                                       63
66
 
     The MBS in the investment portfolio include FNMA, FHLMC, and GNMA
certificates, privately issued and credit enhanced MBS ("non-agency
securities"), and certain types of collateralized mortgage obligations ("CMOs").
 
                           MORTGAGE-BACKED SECURITIES
AT MARCH 31, 1996
                                   ---------------------------------------------------------------
GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
(IN THOUSANDS)
Held to maturity
  Agency CMOs -- fixed-rate....... $    3,061     $    61      $      --    $   3,122
  Non-agency
     Fixed-rate...................      7,529       1,837             93        9,273
     Adjustable-rate..............    559,365         635         12,526      547,474
     CMOs -- fixed-rate...........    104,286           7          6,893       97,400
  Other...........................        303          --             --          303
                                     --------    --------       --------     --------
                                      674,544     $ 2,540      $  19,512      657,572
                                                 ========       ========
  Allowance for losses............        (56)                                     --
                                     --------                                --------
          Held to maturity........    674,488                                 657,572    $ 674,488
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     Adjustable-rate..............    386,876     $ 3,335      $       5      390,206
     CMOs -- fixed-rate...........      4,032           6             --        4,038
     CMOs -- adjustable-rate......    245,565       1,219            121      246,663
  Non-agency
     Fixed-rate...................     72,760       2,390              1       75,149
     Adjustable-rate..............    440,638         687          2,723      438,602
     CMOs -- fixed-rate...........     79,944          --          1,460       78,484
     CMOs -- adjustable-rate......     37,851          12          1,017       36,846
  Other...........................      8,360       1,234             --        9,594
                                     --------    --------       --------     --------
          Available for sale......  1,276,026     $ 8,883      $   5,327    1,279,582    $1,279,582
                                                 ========       ========                  ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $1,950,514                               $1,937,154
                                     ========                                ========
The FNMA, FHLMC and GNMA certificates are modified pass-through MBS that
represent undivided interests in underlying pools of fixed-rate or certain types
of adjustable-rate, single family loans issued by the GNMA, a governmental
agency, and by the FNMA and the FHLMC, government-sponsored enterprises. The
non-agency securities acquired by the Company have been pooled and sold by
private issuers and were generally underwritten by large investment banking
firms. These securities provide for the timely payments of principal and
interest either through insurance issued by a reputable insurer, or by
subordinating certain payments under other securities secured by the same
mortgage pool in a manner that is sufficient to have the senior MBS earn one of
the two highest credit ratings from one or more of the nationally recognized
statistical rating agencies. As of March 31, 1996, 99% of the non-agency MBS had
a credit rating of AA/Aa or higher as defined by the Standard & Poor's
Corporation or Moody's Investor Services, Inc., respectively.
 
     The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and MBS. The loans and MBS underlying the repurchase agreements are
held by the counterparty in safekeeping for the account of the Company or by a
third-party custodian for the benefit of the Company. All of the investments in
repurchase agreements and
 
                                       64
67
 
federal funds sold at March 31, 1996 matured on or before April 24, 1996 and
those outstanding at September 30, 1995 matured on or before October 5, 1995.
The repurchase agreements provide for the same loans and MBS to be resold at
maturity.
 
     See Notes 1 through 4 to the Consolidated Financial Statements for
additional information related to the assets in the investment portfolio.
 
DEPOSITS AND BORROWINGS
 
  Deposits
 
     The Company attracts deposits through the Bank's 67 community banking
branches located primarily in the Houston and Dallas/Ft. Worth areas. Currently,
the principal methods used by the Company to attract and retain deposit accounts
include offering generally competitive interest rates, having branch locations
in these major Texas markets, and offering a variety of services for the
Company's customers. The Company uses traditional marketing methods to attract
new customers and savings deposits, including newspaper, radio, and television
advertising. The Company offers a traditional line of deposit products that
currently includes checking, commercial checking, money market and savings
accounts and certificates of deposit. These deposit products are specifically
tailored to meet the needs of the Company's retail and small business banking
customers.
 
     The following table illustrates the levels of deposits gathered by the
Company's branch network at March 31, 1996.
 
                           COMMUNITY BANKING NETWORK
AT MARCH 31, 1996
                                                             --------------------------------------
                                                                                           AVERAGE
                                                                                           DEPOSITS
                                                             NUMBER OF      DEPOSITS         PER
                         LOCATION                            BRANCHES      OUTSTANDING      BRANCH
- -----------------------------------------------------------  ---------     -----------     --------
                                                                     (DOLLARS IN THOUSANDS)
Houston Area...............................................      34        $ 2,392,261     $ 70,361
Dallas/Ft. Worth Area......................................      29          1,322,686       45,610
Other......................................................       4            212,889       53,222
                                                                 --
                                                                            ----------
          Total deposits...................................      67        $ 3,927,836       58,624
                                                                 ==         ==========
The Company also offers cash management services to its MBF customers.
These services are commercial deposit accounts comprised of operating accounts
of MBF customers, escrow deposits, and principal and interest payments on the
loans serviced by MBF customers. At March 31, 1996, these deposits totaled
$797.3 million. While the Company does not generally solicit brokered deposits,
the Company from time to time accepts brokered deposits when permitted by
regulation and available at favorable rates. Wholesale deposits are raised from
time to time through the Company's money desk from institutional investors.
 
                                       65
68
 
     The following table sets forth by account types the aggregate amount and
weighted average rate of the Company's deposits.
 
                                    DEPOSITS
AT SEPTEMBER 30,
                                                        ---------------------------------------------------------------------
                                    AT MARCH 31,
                                        1996                    1995                    1994                    1993
                                ---------------------   ---------------------   ---------------------   ---------------------
                                             WEIGHTED                WEIGHTED                WEIGHTED                WEIGHTED
                                             AVERAGE                 AVERAGE                 AVERAGE                 AVERAGE
                                  AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE
                                ----------   --------   ----------   --------   ----------   --------   ----------   --------
                                                                   (DOLLARS IN THOUSANDS)
Non-interest bearing
  deposits....................  $  242,560       --%    $  181,196       --%    $   76,498       --%    $   44,149       --%
Interest-bearing deposits
  Transaction accounts........     222,148     1.00        219,307     1.50        233,666     1.49        229,972     2.07
  Insured money fund accounts
    Consumer..................     493,000     4.11        397,473     3.73        407,029     3.12        397,511     2.69
    Commercial................     717,308     5.32        857,669     5.82        416,571     4.84         51,938     2.60
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Subtotal................   1,210,308     4.83      1,255,142     5.16        823,600     3.99        449,449     2.68
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
  Savings accounts............     139,343     2.50        144,301     2.73        222,769     2.60        312,778     2.68
  Certificates of deposit
    Consumer..................   2,912,263     5.72      3,063,631     5.84      2,949,715     4.88      3,251,391     4.77
    Commercial................       3,348     5.02          2,273     5.36             --       --             --       --
    Wholesale.................     233,351     9.70        316,370     9.06        457,956     7.92        551,649     7.13
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Subtotal................   3,148,962     6.01      3,382,274     6.14      3,407,671     5.29      3,803,040     5.11
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Total interest-bearing
        deposits..............   4,720,761     5.37      5,001,024     5.59      4,687,706     4.74      4,795,239     4.58
                                ----------     ----     ----------     ----     ----------     ----     ----------     ----
      Total deposits..........  $4,963,321     5.11%    $5,182,220     5.40%    $4,764,204     4.67%    $4,839,388     4.53%
                                ==========     ====     ==========     ====     ==========     ====     ==========     ====
Consumer......................  $3,843,134              $3,868,498              $3,834,238              $4,207,739
Commercial....................     886,836                 997,352                 472,009                  80,000
Wholesale.....................     233,351                 316,370                 457,957                 551,649
                                ----------              ----------              ----------              ----------
      Total deposits..........  $4,963,321              $5,182,220              $4,764,204              $4,839,388
                                ==========              ==========              ==========              ==========
The following table sets forth, by various interest rate categories, the
dollar amounts and the periods to maturity of the Company's time deposits at
March 31, 1996.
 
                               DEPOSIT MATURITIES
CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
                                 ------------------------------------------------------------------------------
          STATED RATE               1997           1998          1999         2000        2001       THEREAFTER       TOTAL
- -------------------------------  ----------     ----------     --------     --------     -------     ----------     ----------
                                                                        (IN THOUSANDS)
2.99% & below..................  $    1,824     $       --     $     --     $     --     $    --      $     --      $    1,824
3.00% to 3.99%.................      21,033          3,827          649            8          --             3          25,520
4.00% to 4.99%.................     291,351        237,112       16,495       32,615       1,051         3,099         581,723
5.00% to 5.99%.................     524,650        564,293      144,050       47,412       5,496        15,581       1,301,482
6.00% to 6.99%.................     131,259        436,705       82,683       57,147      60,189        19,592         787,575
7.00% to 7.99%.................     127,964         80,121        7,690        5,723      21,599        12,888         255,985
8.00% to 8.99%.................      11,580          1,273        2,581        3,010       1,700           379          20,523
9.00% to 9.99%.................         265            741        6,249        2,925          12           446          10,638
10.00% to 10.99%...............      31,200          7,444       23,974          728         591           325          64,262
Over 10.99%....................      69,648         29,517           --          265          --            --          99,430
                                 ----------     ----------     --------     --------     -------       -------      ----------
                                 $1,210,774     $1,361,033     $284,371     $149,833     $90,638      $ 52,313      $3,148,962
                                 ==========     ==========     ========     ========     =======       =======      ==========
66
69
 
     The following table sets forth the amount of the Company's certificates of
deposit that are $100,000 or greater by time remaining until maturity.
 
                      TIME DEPOSITS GREATER THAN $100,000
AT MARCH 31, 1996
                                                              -------------------------------------
                                                              NUMBER OF ACCOUNTS     DEPOSIT AMOUNT
                                                              ------------------     --------------
                                                                     (DOLLARS IN THOUSANDS)
Three months or less........................................           648              $ 68,289
Over three through six months...............................           895                94,458
Over six through twelve months..............................         1,455               151,881
Over twelve months..........................................         1,352               143,660
                                                                     -----               -------
                                                                     4,350              $458,288
                                                                     =====               =======
Borrowings
 
     The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. These sources of funds were the primary source of funds for the recent
asset growth and accounted for 46% of the funding of average assets for the six
months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994 and 23%
for fiscal 1993. Fixed and variable rate advances are obtained from the FHLB
Dallas under a security and pledge agreement that restricts the amount of
borrowings to the greater of (i) a percentage of fully disbursed single family
loans, unless assets are physically pledged to the FHLB Dallas, and (ii) a
percentage of total assets. At March 31, 1996, these limitations were 65% of the
outstanding principal of single family loans and 45% of total assets. See Notes
9 and 10 to the Consolidated Financial Statements.
 
                                       67
70
 
     The following table sets forth certain information regarding the borrowings
of the Company as of or for the period indicated.
 
                                   BORROWINGS
AT OR FOR THE         AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                       SIX MONTHS ENDED      ----------------------------------------
                                        MARCH 31, 1996          1995           1994           1993
                                      ------------------     ----------     ----------     ----------
                                                          (DOLLARS IN THOUSANDS)
Reverse Repurchase Agreements
  Balance outstanding at
     period-end.....................      $  949,936         $1,172,533     $  553,000     $  300,000
  Fair value of collateral at
     period-end.....................         987,478          1,239,527        673,000        321,200
  Maximum outstanding at any month-
     end............................       1,096,508          1,355,540        553,000        659,000
  Daily average balance.............         982,115            887,932        273,899        345,269
  Average interest rate.............            5.82%              5.99%          3.85%          3.23%
Federal Funds Purchased
  Balance outstanding at
     period-end.....................      $       --         $       --     $       --     $   10,000
  Maximum outstanding at any month-
     end............................              --                 --         15,000         10,000
  Daily average balance.............              54                521            767            740
  Average interest rate.............            5.94%              5.95%          3.73%          2.84%
FHLB Advances
  Balance outstanding period-end....      $4,139,023         $4,383,895     $2,620,329     $2,185,445
  Maximum outstanding at any month-
     end............................       4,384,798          4,386,605      2,697,829      2,217,745
  Daily average balance.............       4,346,960          3,560,844      2,285,630      1,344,129
  Average interest rate.............            6.18%              6.31%          3.98%          3.62%
See Note 8 to the Consolidated Financial Statements for additional
information.
 
ASSET AND LIABILITY MANAGEMENT
 
     The Company's asset and liability management process is utilized to manage
the Company's interest rate risk through structuring the balance sheet and
off-balance sheet portfolios to maximize net interest income while maintaining
acceptable levels of risk to changes in market interest rates. The achievement
of this goal requires a balance between profitability, liquidity and interest
rate risk.
 
     Interest rate risk is managed by the ALCO, which is composed of senior
officers of the Bank, in accordance with policies approved by the Board of
Directors of the Bank. The ALCO formulates strategies based on appropriate
levels of interest rate risk. In determining the appropriate level of interest
rate risk, the ALCO considers the impact on earnings and capital of the current
outlook on interest rates, potential changes in interest rates, regional
economies, liquidity, business strategies and other factors. The ALCO meets
regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market values of assets and
liabilities, unrealized gains and losses, purchase and sale activity, the
mortgage pipeline, and the maturities of investments and borrowings.
Additionally, the ALCO reviews liquidity, cashflow flexibility, maturities of
deposits, consumer and commercial deposit activity, current market conditions,
and interest rates on both a local and national level.
 
     The "interest rate sensitivity gap" is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to affect net interest income
adversely, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest
 
                                       68
71
 
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest income adversely.
Different types of assets and liabilities with the same or similar maturities
may react differently to changes in overall market rates or conditions, thus
changes in interest rates may affect net interest income positively or
negatively even if an institution were perfectly matched in each maturity
category. While the interest rate sensitivity gap is a useful measurement and
contributes toward effective asset and liability management, it is difficult to
predict the effect of changing interest rates solely on that measure, without
accounting for alterations in the maturity or repricing characteristics of the
balance sheet that occur during changes in market interest rates.
 
     To effectively measure and manage interest rate risk, the Company uses
simulation analysis to determine the impact on net interest income under various
interest rate scenarios, balance sheet trends and strategies. From these
simulations, interest rate risk is quantified and appropriate strategies are
developed and implemented. Additionally, duration and market value sensitivity
measures are utilized when they provide added value to the overall interest rate
risk management process. The overall interest rate risk position and strategies
are reviewed by executive management and the Bank's Board of Directors on an
ongoing basis.
 
                                       69
72
 
     The following table sets forth the expected repricing characteristics of
the Company's consolidated assets and liabilities at March 31, 1996, utilizing
assumptions noted below:
 
                           ASSET/LIABILITY REPRICING
AMOUNTS MATURING OR REPRICING IN
                                        ------------------------------------------------------------
                                                       AFTER
                                                       THREE        AFTER        AFTER
                                        LESS THAN      MONTHS     SIX MONTHS    ONE YEAR     AFTER
                                          THREE      BUT WITHIN   BUT WITHIN   BUT WITHIN     FIVE       NON-
                                          MONTHS     SIX MONTHS    ONE YEAR    FIVE YEARS    YEARS     REPRICING      TOTAL
                                        ----------   ----------   ----------   ----------   --------   ---------   -----------
                                                                        (DOLLARS IN THOUSANDS)
ASSETS(1)(2)
  Residential construction and
    commercial real estate loans......  $  599,923   $    6,275   $   12,837   $  154,403   $  6,254   $      --   $   779,692
  Single family mortgage warehouse....     379,719           --           --           --         --          --       379,719
  Adjustable-rate loans and mortgage-
    backed securities.................   3,025,481    2,101,348    1,487,350    1,007,120     26,395          --     7,647,694
  Fixed-rate loans and mortgage-backed
    securities........................      47,260       46,311       89,921      555,531    248,791          --       987,814
  Cash and investment securities......     994,980           --       52,600           --     40,009          --     1,087,589
  Other assets........................      76,470           --           --           --         --     307,658       384,128
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total assets....................  $5,123,833   $2,153,934   $1,642,708   $1,717,054   $321,449   $ 307,658   $11,266,636
                                         =========    =========    =========    =========   ========   =========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Certificates of deposit.............  $  465,343   $  644,399   $1,107,134   $  902,043   $ 30,043   $      --   $ 3,148,962
  Checking and savings(3).............   1,108,572       91,606      183,213      430,968         --          --     1,814,359
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total deposits..................   1,573,915      736,005    1,290,347    1,333,011     30,043          --     4,963,321
  Senior Notes........................          --           --           --      115,000         --          --       115,000
  FHLB advances and other
    borrowings........................   3,516,307      653,564      843,202       71,200      5,045          --     5,089,318
  Other liabilities...................     287,056           --           --           --         --     100,000       387,056
  Minority interest...................          --           --           --           --         --     185,500       185,500
  Stockholders' equity................          --           --           --           --         --     526,441       526,441
                                         ---------    ---------    ---------    ---------   --------   ---------    ----------
      Total liabilities, minority
        interest, and stockholders'
        equity........................  $5,377,278   $1,389,569   $2,133,549   $1,519,211   $ 35,088   $ 811,941   $11,266,636
                                         =========    =========    =========    =========   ========   =========    ==========
Gap before off-balance-sheet financial
  instruments.........................  $ (253,445)  $  764,365   $ (490,841)  $  197,843   $286,361   $(504,283)
OFF-BALANCE-SHEET(5)
  Interest rate swap agreements -- pay
    floating..........................     (50,000)          --       50,000           --         --          --
  Interest rate swap agreements -- pay
    fixed.............................          --           --           --           --         --          --
                                         ---------    ---------    ---------    ---------   --------   ---------
Gap...................................  $ (303,445)  $  764,365   $ (440,841)  $  197,843   $286,361   $(504,283)
                                         =========    =========    =========    =========   ========   =========
Cumulative gap........................  $ (303,445)  $  460,920   $   20,079
                                                                   =========
Weighted average gap(4)...............                            $  (54,367)
                                                                   =========
Cumulative gap as a percentage of
  total assets........................      (2.69%)       4.09%        0.18%
- ---------------
(1) Fixed-rate loans and MBS are distributed based on their contractual maturity
    adjusted for prepayments, and adjustable-rate loans and MBS are distributed
    based on the interest rate reset date and contractual maturity adjusted for
    prepayments. Loans and MBS runoff and repricing assumes a constant
    prepayment rate based on coupon rate and maturity. The weighted average
    annual projected prepayment rate was 20%.
 
(2) Assets repricing to lagging rate indices are adjusted to reflect the delay
    in the repricing of the index to market interest rates. The lagging indices
    are based on a blended cost of funds, primarily the FHLB 11th District Cost
    of Funds Index. These indices are assumed to take 18 months to reprice fully
    to a change in the general level of interest rates.
 
                                       70
73
 
(3) Checking and savings deposits are distributed based on their assumed pricing
    relationship to general market interest rates. Savings accounts are assumed
    to reprice over a twelve month period, and checking accounts are assumed to
    reprice to interest rate changes after one year but before five years.
 
(4) The weighted average gap weighs each maturity or repricing amount by the
    number of months remaining in the year at the time of occurrence. It
    provides a measure of net interest income sensitivity over the next twelve
    months given a change in the general level of market interest rates without
    altering the maturity or repricing characteristics of the balance sheet.
 
(5) The above table includes only those off-balance-sheet financial instruments
    which impact the gap in all interest rate environments. The Company also has
    certain off-balance-sheet financial instruments which hedge specific
    interest rate risks.
 
COMPETITION
 
     The Company competes with numerous other providers of financial products
and services in all aspects of its operations. Competitors for deposits include
thrift institutions, commercial banks, credit unions, full service and discount
broker dealers, and other investment alternatives, such as mutual funds, money
market funds, and savings bonds or other government securities. Primary
competitive factors include convenience of locations, variety of deposit or
investment options, quality of customer service and rates and/or terms offered.
 
     The Company competes for mortgage originations with thrift institutions,
banks, insurance companies, and mortgage companies, many of which operate
nationwide mortgage origination networks similar to that of the Company. Primary
competitive factors include service quality, relationships with builders and
real estate brokers, and rates and fees. Many of the Company's competitors are,
or are affiliated with, organizations with substantially larger asset and
capital bases (including regional and multi-national banks and bank holding
companies) and with lower funding costs.
 
SUBSIDIARIES
 
     The Company has no direct subsidiaries other than the Bank. The Bank is
permitted to invest in the capital stock, obligations, and other securities of
its service corporations in an aggregate amount not to exceed 2% of the Bank's
assets, plus an additional 1% of assets if such investment is used for community
development or inner-city development purposes. In addition, if the Bank meets
minimum regulatory capital requirements, it may make certain conforming loans in
an amount not exceeding 50% of the Bank's regulatory capital to service
corporations of which the Bank owns more than 10% of the stock. At March 31,
1996, the Bank was authorized to have a maximum investment of approximately
$338.1 million in its subsidiaries.
 
  Commonwealth United Mortgage Company
 
     The Bank is the sole shareholder of Commonwealth United Mortgage Company, a
Texas corporation formed in 1992 to function as a licensed mortgage banker in
the state of Vermont.
 
  United Agency Corporation
 
     United Agency Corporation is a wholly-owned subsidiary of the Bank whose
primary purpose is holding the stock of Commonwealth General Services Agency,
Inc., an Arkansas corporation incorporated in 1951 ("CGSA"). CGSA is a managing
general insurance agency that contracts with insurance companies and agencies
that offer insurance products to the Bank's mortgage loan customers. CGSA earns
a commission on each insurance policy sold by the insurance companies or
agencies with which CGSA contracts.
 
  United Capital Management Corporation
 
     The Bank is the sole shareholder of United Capital Management Corporation,
a Texas corporation formed in 1985 to function in the deposit referral business
and is currently inactive.
 
                                       71
74
 
  United Financial Markets, Inc.
 
     The Bank is the sole shareholder of United Financial Markets, Inc. ("UFM"),
a Texas corporation, which acts as a full-service broker-dealer. UFM, through
its institutional division, sells various securities products and whole loans
and engages in the deposit referral business with institutional and
sophisticated retail customers. Through its retail division, UFM markets
annuities and securities, including mutual funds, stocks and bonds, to the
Bank's retail customers. UFM is a broker-dealer registered with the Commission
and a member of the National Association of Securities Dealers, Inc. ("NASD").
This subsidiary commenced operations in late 1992, and its activities have been
expressly approved by the OTS.
 
  United Greenway Securities Services, Inc.
 
     The Bank is the sole shareholder of United Greenway Securities Services,
Inc., a Texas corporation formed in 1989 to make mutual funds and other
non-deposit products available to retail customers through referrals to a
registered broker-dealer. This subsidiary is currently inactive.
 
  United Mortgage Securities Corporation
 
     The Bank is the sole shareholder of United Mortgage Securities Corporation,
a Delaware corporation formed in 1993 to issue MBS securitized with mortgage
loans purchased from the Bank.
 
  USAT Mortgage Securities, Inc.
 
     The Bank is the sole shareholder of USAT Mortgage Securities, Inc., a Texas
corporation formed in 1985 to function as an issuer of three series of CMOs.
This subsidiary is currently inactive.
 
PERSONNEL
 
     As of March 31, 1996, the Company employed 2,568 full-time employees and
129 part-time employees. The employees are not represented by a collective
bargaining agreement, and the Company believes that it has good relations with
its employees. See Note 14 to the Consolidated Financial Statements for
information relating to certain benefits generally available to all employees.
 
THE ASSISTANCE AGREEMENT
 
     In connection with the Acquisition, the Bank, the Company and certain of
their direct and indirect parent entities entered into an overall agreement with
certain agencies of the federal government that was evidenced by several written
agreements. The principal contract relating to the Acquisition was the
Assistance Agreement, dated December 30, 1988, among the FSLIC, the Company, the
Bank, and certain of the Bank's other direct and indirect parent entities (the
"Assistance Agreement"). The Assistance Agreement set forth certain mutual,
interdependent commitments of the parties with respect to the Acquisition. Among
other provisions, the FSLIC agreed to provide the Bank with certain forms of
financial assistance.
 
     The Company also succeeded to substantial NOLs as a result of the
Acquisition and has recorded substantial additional NOLs for tax purposes due to
the exclusion of assistance payments received from the FRF under the Assistance
Agreement from taxable income and the deduction of losses and writedowns on
certain assets (the "Covered Assets") for which tax-free assistance payments
were received. See "Regulation -- Taxation -- FSLIC Assistance".
 
     In connection with the Acquisition, the Bank issued the Warrants, which
enable the FDIC, as administrator of the FRF, to acquire a specified number of
shares of the outstanding Bank outstanding Common Stock for a nominal price, and
agreed to make payments in lieu of dividends on the Warrants upon the payment of
dividends on the Bank Common Stock. See "-- Warrant Agreement".
 
     The Assistance Agreement was terminated on December 23, 1993, when the
Company, the Bank, certain of their direct and indirect parent entities, and the
FDIC entered an agreement settling certain disputes with respect to various
matters relating to the Acquisition and the Assistance Agreement (the
"Settlement
 
                                       72
75
 
Agreement"). Pursuant to the Settlement Agreement, the Assistance Agreement was
terminated, the Bank no longer managed or owned the Covered Assets (except for
certain of the Covered Assets that were "uncovered" and retained), and, as of
December 28, 1993, the Bank no longer received any significant financial
assistance from the FRF. The Settlement Agreement also provided for the
continuation of certain of the Company's and the Bank's claims against the
United States in the United States Court of Federal Claims. See
"-- Forbearance".
 
  Impact of Assistance Payments
 
     The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement prior to its termination. Payments received during fiscal
1994 and 1993 are summarized below.
FOR THE YEAR ENDED
                                                                         SEPTEMBER 30,
                                                                      --------------------
                                                                        1994        1993
                                                                      --------     -------
                                                                         (IN THOUSANDS)
Payments affecting the results of operations....................  $ 23,143     $ 9,289
    Other Payments
      Settlement payment............................................   195,300          --
      Other.........................................................       468      61,578
                                                                      --------     -------
              Total FRF payments....................................  $218,911     $70,867
                                                                      ========     =======
Warrant Agreement
 
     Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into a warrant agreement (the "Warrant Agreement"), pursuant to
which the FSLIC was granted the Warrants to purchase up to 158,823 shares of the
Bank Common Stock (5.56% of the Bank Common Stock as of December 28, 1993,
assuming exercise in full of the Warrants) at an exercise price of $0.01 per
share. Pursuant to the Settlement Agreement, the Bank and the FDIC (as
administrator of the FRF, the successor to FSLIC) entered into the First
Amendment to the Warrant Agreement on December 28, 1993 (the "First Amendment to
Warrant Agreement"). References to the Warrant Agreement below are to the
Warrant Agreement as amended by the First Amendment to Warrant Agreement.
 
     The Warrant Agreement provides that the holder may exercise the Warrants,
in whole or in part, at any time, and from time to time until December 29, 2004.
The Warrant Agreement provides that the holder may sell, transfer, assign, or
otherwise dispose of the Warrant and its rights and obligations under the
Warrant Agreement at any time, subject to a right of first refusal by the Bank.
 
     The Warrant Agreement provides that the holder of the Warrants shall have
the right to, among other things, have an offering circular filed with the OTS
in connection with the sale of the Bank Common Stock to be received upon
exercise thereof. The Warrant Agreement also provides for an adjustment of the
number of shares of the Bank Common Stock that are purchasable upon exercise of
the Warrants upon the occurrence of certain events, including a stock split and
the issuance of Bank Common Stock, at a price below the market price determined
at and immediately prior to the time of issuance. No adjustments had been made
to such number of shares of the Bank Common Stock at September 30, 1995 or March
31, 1996. Within 60 days following the submission by the holders of more than
50% interest of the Warrants or of the Bank Common Stock that has been issued
upon the exercise of the Warrants of a demand for filing of an offering circular
with the OTS, the Bank, the Company or their affiliates have the right to
repurchase all or a portion of both the Warrants and any shares of the Bank
Common Stock that have been issued upon the exercise of the Warrants, for cash,
in an amount equal to their market value (as defined in the Warrant Agreement).
 
     Pursuant to the Settlement Agreement, all disputes with respect to the
Warrants, including the dispute concerning credit to the FRF for dividends paid
prior to December 28, 1993, were resolved, and the parties agreed that the Bank
will make payments to the holder of the Warrants in lieu of dividends upon any
payment of dividends on the Bank Common Stock (other than dividends for which
anti-dilution adjustments are made)
 
                                       73
76
 
beginning December 28, 1993 until December 30, 1998 or such earlier date as the
Warrants are no longer outstanding. In May 1996, the Bank made a payment to the
FDIC of $5.9 million in lieu of such dividends in connection with the
declaration of a $100 million dividend on the Bank Common Stock.
 
     The Warrant Agreement also provides that the Warrants shall be redeemed
upon a merger or liquidation of the Bank or certain events constituting a change
in control of the Bank's direct or indirect parent entities, at a price
equivalent to the value of the number of shares of the Bank Common Stock for
which the Warrants are exercisable, such value to be derived from the
consideration paid in connection with such merger, liquidation, or change in
control.
 
  Forbearance
 
     In connection with the Acquisition, the FHLB also approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory provisions with
respect to regulatory capital requirements, liquidity requirements, accounting
requirements and other matters. On January 9, 1990, OTS took the position that
the capital standards set forth in the FIRREA apply to all savings institutions,
including those institutions that had been operating under previously granted
capital and accounting forbearances, and that FIRREA eliminated these
forbearances. While the Bank has not had to rely on such forbearances or waivers
in order to remain in compliance with existing capital requirements as
interpreted by the OTS, the position of the OTS has adversely affected the Bank
by curtailing the growth and reducing the leverage contemplated by the terms of
the Forbearance Agreement. The Bank also has been and continues to be in
compliance with all of the other referenced regulatory capital provisions and,
accordingly, has not had to rely on the waivers or forbearances provided in the
Acquisition. Pursuant to the Settlement Agreement, the Company, the Bank and
certain of their then-direct and indirect parent entities have retained all
causes of action and claims relating to the forbearances against the United
States in the United States Court of Federal Claims, and the FDIC and the other
governmental parties to the lawsuit have reserved any and all defenses to such
causes of actions and claims. On July 25, 1995, the Bank, the Company, and
certain of their then-direct and indirect parent entities filed suit against the
United States in the Court of Federal Claims for alleged failures of the United
States to honor certain contractual obligations, including obligations related
to the Forbearance Agreement. The lawsuit is in a preliminary stage. Discovery
has been stayed pending the United States Supreme Court's review of United
States v. Winstar Corp., an action by another thrift raising similar issues. See
"Legal Proceedings".
 
                                   REGULATION
 
REGULATION OF SAVINGS AND LOAN HOLDING COMPANIES
 
     The Company is a savings and loan holding company that is regulated and
subject to examination by the OTS. The activities of savings and loan holding
companies are governed by the provisions of the Home Owners' Loan Act, as
amended (the "HOLA"). Pursuant to the HOLA, a savings and loan holding company
may not (i) acquire control of a savings association or savings and loan holding
company without prior OTS approval; (ii) acquire, except with prior OTS
approval, by process of merger, consolidation, or purchase of assets of another
savings association or savings and loan holding company, all or substantially
all of the assets of any such association or holding company; or (iii) acquire,
by purchase or otherwise, more than 5% of the voting shares of a savings
association that is not a subsidiary, or of a savings and loan holding company
that is not a subsidiary. Other restrictions on activities of a savings and loan
holding company do not apply to the Company because its savings association
subsidiary is a qualified thrift lender, and further because its savings
association subsidiary was initially acquired in connection with assisted
transactions. See "-- Safety and Soundness Regulations -- Capital
Requirements -- Qualified Thrift Lender ("QTL") Test". Every subsidiary savings
association of a savings and loan holding company must give the OTS not less
than 30 days of advance notice of proposed dividend declarations.
 
                                       74
77
 
SAFETY AND SOUNDNESS REGULATIONS
 
  Charter, Supervision and Examination
 
     Charter.  The Bank is chartered under the HOLA, which imposes certain
obligations and restrictions upon, and grants certain powers to, federally
chartered savings banks such as the Bank. The provisions of the HOLA are
implemented by regulations adopted and administered by the OTS.
 
     OTS.  Federally chartered savings banks, such as the Bank, are subject to
extensive regulation by the OTS and must regularly file financial and other
reports with that agency. The supervision and regulation to which the Bank is
subject is intended primarily for the protection of its depositors. The OTS
performs periodic examinations of the Bank to test compliance by the Bank with
various regulatory requirements. The OTS may revalue assets of an insured
institution based upon appraisals and require establishment of specific reserves
in amounts equal to the difference between such revaluation and the book value
of the assets, as well as require specific charge-offs relating to such assets.
 
     The OTS prescribes regulations for the collection of fees in order to
recover the expenses of the agency, the cost of supervision of savings
associations, the examination of savings associations and their subsidiaries,
and the processing of applications, filings, notices, and certain other requests
of savings associations filed with the OTS. The OTS adopted a two-pronged
sliding scale approach in 1990 by which all institutions pay a general
assessment and troubled institutions pay an additional premium assessment. The
Bank has never been subject to a premium assessment. The Bank's assessments
amounted to approximately $719,600, $1.2 million, and $1.1 million in the
aggregate during the six months ended March 31, 1996 and fiscal 1995 and 1994,
respectively.
 
     FDIC.  The FDIC administers the SAIF, which insures the deposits of savings
associations such as the Bank. The Bank's deposits are insured by the SAIF to a
maximum of $100,000 for each insured depositor. In addition, the FDIC has
certain regulatory and full examination authority over OTS regulated savings
associations. The FDIC may also recommend enforcement actions against savings
associations to the OTS and, if the OTS fails to act on the FDIC's
recommendation, the FDIC may, under certain circumstances, compel the OTS to
take the requested enforcement action.
 
     Insurance Assessments.  The FDIC establishes premium assessment rates for
SAIF deposit insurance. There is no statutory limit on the maximum assessment
and the percent of increase in the assessment that the FDIC may impose in any
one year. Effective January 1, 1993, the FDIC adopted risk-based assessment
regulations.
 
     To arrive at a risk-based assessment for each bank and thrift, the FDIC
places it in one of nine risk categories using a two-step process based first on
capital ratios and then on relevant supervisory information. Each institution is
assigned to one of three groups (well capitalized, adequately capitalized, or
undercapitalized) based on its capital ratios. A "well-capitalized" institution
is one that has at least a 10% "total risk-based capital" ratio (the ratio of
total capital to risk-weighted assets), a 6% "Tier 1 risk-based capital" ratio
(the ratio of Tier 1 (core) capital to risk-weighted assets) and a 5% "leverage
capital" ratio (the ratio of core capital to adjusted total assets). An
"adequately capitalized" institution has at least an 8% total risk-based capital
ratio, a 4% Tier 1 (core) risk-based capital ratio and a 4% leverage capital
ratio. An "undercapitalized" institution is one that does not meet either the
definition of well capitalized or adequately capitalized.
 
                                       75
78
 
     The FDIC also assigns each institution to one of three supervisory
subgroups based on an evaluation of the risk posed by the institution. These
supervisory evaluations modify premium rates within each of the three capital
groups. The nine risk categories and the corresponding SAIF assessment rates are
as follows:
SUPERVISORY
                                                                               SUBGROUP
                                                                          -------------------
                                                                           A       B       C
                                                                          ---     ---     ---
Meets numerical standards for:
      Well capitalized..................................................   23      26      29
      Adequately capitalized............................................   26      29      30
      Undercapitalized..................................................   29      30      31
For purposes of assessments of FDIC insurance premiums, the Bank is a
"well-capitalized" institution. FDIC regulations prohibit disclosure of the
supervisory subgroup to which an insured institution is assigned. The Bank's
insurance assessments for the six months ended March 31, 1996, fiscal 1995 and
1994 were $6.1 million, $11.4 million, and $11.3 million, respectively.
 
     Both the SAIF and the BIF, the deposit insurance fund that covers most
commercial bank deposits, are statutorily required to achieve and maintain a
reserve ratio equal to 1.25% of estimated insured deposits. As a result of the
BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered the deposit
insurance premium assessment rate for BIF members to between .04% and .31% of
insured deposits, while retaining the existing assessment rate of .23% to .31%
of insured deposits for members of SAIF. On November 14, 1995, the FDIC further
reduced insurance premiums on BIF deposits by $.04 per $100 of insured deposits,
creating an assessment range of 0% to .27% of insured deposits, subject to a
statutory requirement that all institutions pay at least $2,000 annually.
Approximately 92% of BIF members qualify for the lowest assessment rate. As a
result of the significant disparity in the deposit insurance premiums paid by
well-capitalized SAIF members, such as the Bank, and well-capitalized BIF
members, SAIF members are at a competitive disadvantage to BIF members with
respect to the pricing of loans and deposits and the ability to achieve lower
operating costs.
 
     Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. Many of these proposals feature a one-time
assessment (which reports estimate from 0.75% of deposits to 0.90% of deposits)
on SAIF-insured institutions with the aim of fully recapitalizing the SAIF. Such
an assessment could result in an amount payable by the Bank, net of tax, of as
much as $23.7 million to $28.5 million. At this time, no assurance can be given
as to whether any BIF/SAIF legislative alternatives will become law.
 
     Partly in response to the BIF/SAIF premium disparity, the Bank has applied
to the appropriate regulatory authorities to establish a BIF-insured national
bank as a subsidiary of the Bank. As a long-term strategy, if the BIF/SAIF
premium disparity continues, the national bank could attract BIF deposits by
offering interest rates that compare more favorably to that of the Bank.
However, legislation has been introduced in Congress that could make it more
difficult to carry out such a deposit-shifting strategy. At this time, no
assurance can be given when, or if, the Company will be able to carry out its
plan to establish and operate a national bank.
 
     Termination of Insurance.  The FDIC may terminate the deposit insurance of
any insured depository institution, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, or order, or any condition imposed by an agreement
with the FDIC. It also may suspend deposit insurance temporarily during the
hearing process for the permanent termination of insurance if the institution
has no tangible capital. If insurance of an institution's accounts is
terminated, the accounts at the institution at the time of such termination,
less subsequent withdrawals, would continue to be insured for a period of six
months to two years, as determined by the FDIC.
 
     Audit Requirements.  In May 1993, the FDIC adopted rules establishing
annual independent audits and financial reporting requirements for all
depository institutions with assets of more than $500 million, and for their
management, and their independent auditors. The rules also establish
requirements for the composition,
 
                                       76
79
 
duties, and authority of such institutions' audit committees and boards of
directors. Among other things, all depository institutions with assets in excess
of $500 million are required to prepare and make available to the public annual
reports on their financial condition and management, including statements of
management's responsibility for preparing the institution's financial
statements, for establishing and maintaining an internal control structure and
procedures for financial reporting, and for complying with specified laws and
regulations relating to safety and soundness, and an assessment of the
effectiveness of such internal controls and procedures and the institution's
compliance with laws and regulations designated by the FDIC. The institution's
independent auditors are required to attest to these management assessments.
Each such institution also is required to have an audit committee composed of
directors who are independent of management of the institution. Audit committees
of large institutions (institutions with assets exceeding $3.0 billion) must:
(i) include members with banking or related financial management expertise; (ii)
have the ability to engage their own independent legal counsel; and (iii) must
not include any entities designated as "large customers" of the institution. In
some cases, the institution's responsibilities under these rules may be
fulfilled by its holding company.
 
     Federal Reserve Board.  The Federal Reserve Board requires all depository
institutions (including savings associations) to maintain reserves against their
transaction accounts (primarily NOW and Super NOW checking accounts) and
non-personal time deposits. Reserves of 3% must be maintained against total
transaction accounts of $52.0 million or less (subject to adjustment by the
Federal Reserve Board) and an initial reserve of $1,560,000 plus 10% (subject to
adjustment by the Federal Reserve Board to a level between 8% and 14%) must be
maintained when total transaction accounts exceed such amount. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve Board
may be used to satisfy liquidity requirements imposed by the OTS. See
"-- Investment Authority -- Liquidity".
 
     Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require savings
associations to exhaust other reasonable alternative sources of funds, including
FHLB advances, before borrowing from the Federal Reserve Bank.
 
     Federal Home Loan Banks.  The Bank is a member of the FHLB Dallas, which is
one of 12 regional FHLBs, each subject to supervision and regulation by the
Federal Housing Finance Board. The FHLBs provide a central credit facility
primarily for member thrift institutions, as well as for qualified commercial
banks and other entities involved in home mortgage finance. The Bank, as a
member of the FHLB Dallas, is required to purchase and hold shares of the
capital stock in that FHLB in an amount at least equal to the greater of: (i) 1%
of the aggregate principal amount of its unpaid mortgage loans, home purchase
contracts and similar obligations at the beginning of each year; (ii) 0.3% of
its assets; or (iii) 5% (or such greater fraction as established by the FHLB) of
its advances (i.e., borrowings) from the FHLB.
 
     Capital Requirements
 
     Requirements and Standards.  The OTS capital regulations have three
components: a leverage limit, a tangible capital requirement, and a risk-based
capital requirement. See Note 15 to the Consolidated Financial Statements for
compliance with the regulatory capital requirements.
 
     Leverage Limit.  The leverage limit requires that a savings association
maintain "core capital" of at least 3% of its adjusted total assets. For
purposes of this requirement, total assets are adjusted to exclude intangible
assets and investments in certain subsidiaries, and to include the assets of
certain other subsidiaries, certain intangibles arising from prior period
supervisory transactions, and permissible MSRs. "Core capital" includes common
shareholders' equity and retained earnings, noncumulative perpetual preferred
stock and related surplus and minority interests in consolidated subsidiaries,
minus intangibles, plus certain MSRs and certain goodwill arising from prior
regulatory accounting practices.
 
     Although accounted for under Generally Accepted Accounting Principles
("GAAP") as an intangible asset, certain MSRs need not be deducted in computing
core and tangible capital. Generally, the lower of 90% of the fair market value
of readily marketable MSRs, or the current unamortized book value as determined
under GAAP may be included in core and tangible capital up to a maximum of 50%
of core capital computed
 
                                       77
80
 
before the deduction of any disallowed qualifying intangible assets. At March
31, 1996, the Bank's core capital included $82.7 million of MSRs.
 
     In determining core capital, all investments in and loans to subsidiaries
engaged in activities not permissible for national banks, which are generally
more limited than activities permissible for savings associations and their
subsidiaries ("nonconforming subsidiaries"), must be deducted. Certain
exceptions are provided, including exceptions for mortgage banking subsidiaries
and subsidiaries engaged in agency activities for customers (unless determined
otherwise by the FDIC on safety and soundness grounds). Generally, all
subsidiaries engaged in activities permissible for national banks are required
to be consolidated for purposes of calculating capital compliance by the parent
savings association.
 
     Tangible Capital Requirement.  The tangible capital requirement mandates
that a savings association maintain tangible capital of at least 1.5% of
adjusted total assets. For purposes of this requirement, adjusted total assets
are calculated on the same basis as for the leverage limit. "Tangible capital"
is defined in the same manner as core capital, except that all intangible assets
except qualifying MSRs must be deducted. At March 31, 1996, the Bank's tangible
capital ratio was 6.88%.
 
     Risk-based Capital Requirement.  The risk-based requirement promulgated by
the OTS is required by the HOLA to track the standard applicable to national
banks, except that the OTS may determine to reflect interest rate and other
risks not specifically included in the national bank standard. However, such
deviations from the national bank standard may not result in a materially lower
risk-based requirement for savings associations than for national banks. The
risk-based standard adopted by the OTS is similar to the OCC standard for
national banks.
 
     The risk-based standards of the OTS require maintenance of core capital
equal to at least 4% of risk-weighted assets and total capital equal to at least
8% of risk-weighted assets. "Total capital" includes core capital plus
supplementary capital (except that includable supplementary capital may not
exceed core capital). Supplementary capital includes: cumulative perpetual
preferred stock; mutual capital certificates, income capital certificates and
net worth certificates; nonwithdrawable accounts and pledged deposits to the
extent not included in core capital; perpetual and mandatory convertible
subordinated debt and maturing capital instruments meeting specified
requirements; and general loan and lease loss allowances, up to a maximum of
1.25% of risk-weighted assets. At March 31, 1996, the Bank's core capital and
total capital ratios were 6.96% and 14.20%, respectively.
 
     In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet assets, are multiplied by a risk factor ranging from
0% to 100%, as assigned by the OTS based on the risks it believes inherent in
the type of asset. Comparable weights are assigned to off-balance sheet
activities.
 
     Interest Rate Risk ("IRR") Component.  OTS regulations add an IRR component
to the 8% risk-based capital requirement discussed above. Only savings
associations with more than a "normal" level of IRR are subject to IRR
requirements. The IRR component is calculated as one-half of the difference
between the institution's measured IRR and 2%, multiplied by the market value of
the institution's assets.
 
     On October 13, 1994, the OTS waived the IRR capital deduction until
guidelines under which institutions may appeal such a deduction were published.
The OTS extended the waiver on March 20, 1995 until further notice. On August
21, 1995, the OTS adopted and approved an appeal process, but again delayed the
IRR capital deduction indefinitely.
 
     Failure to Meet Requirements.  Any savings association that fails to meet
its regulatory capital requirements is subject to enforcement actions by the OTS
or the FDIC. The OTS must limit the asset growth of any undercapitalized
association and issue a capital directive against the association. See
"-- Enforcement -- Prompt Corrective Action".
 
     Capital Distributions.  Limitations are imposed upon all "capital
distributions" by savings associations, including cash dividends, payments by an
institution in a cash-out merger and other distributions charged against
capital. The capital distribution regulation establishes a three-tiered system,
with the greatest flexibility afforded to well-capitalized institutions.
 
                                       78
81
 
     Under the capital distribution regulation, an association that immediately
prior to a proposed capital distribution, and on a pro forma basis after giving
effect to a proposed capital distribution, has capital that is equal to or
greater than the amount of its fully phased-in capital requirement is a "Tier 1
association". To qualify, an association must maintain the following capital
ratios: (i) tangible capital to adjusted total assets ratio of 1.50%, (ii) core
capital to adjusted total assets ratio of 3.00%, and (iii) total risk-based
capital to risk-weighted assets ratio of 8.00%, of which at least 4.00% must be
core capital. An association that immediately prior to a proposed capital
distribution, and on a pro forma basis after giving effect to a proposed capital
distribution, has capital that is equal to or in excess of its minimum capital
requirements is a "Tier 2 association". An association that immediately prior to
a proposed capital distribution, and on a pro forma basis after giving effect to
a proposed capital distribution, has capital that is less than its minimum
regulatory capital requirement is a "Tier 3 association". The Bank currently
qualifies as a Tier 1 association. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital Resources and
Liquidity -- Capital".
 
     Upon 30 days' notice to the OTS, a Tier 1 association may make capital
distributions during a calendar year up to the higher of 100% of its net income
to date during the calendar year, plus the amount that would reduce by one-half
its surplus capital ratio at the beginning of the calendar year or 75% of its
net income over the most recent four quarter period. A Tier 1 association may
not make capital distributions in excess of the foregoing limitations except
upon notice to the OTS and an opportunity for the OTS to object to such capital
distribution. The OTS may prohibit an otherwise permissible capital distribution
upon a determination that making such a distribution would be an unsafe or
unsound practice. The OTS may notify an institution that qualifies as a Tier 1
association that it is subject to more than normal supervision and thereafter,
treat it as a Tier 2 or Tier 3 association.
 
     Under the prompt corrective action provisions discussed below, no insured
depository institution may make a capital distribution if after such
distribution it would be undercapitalized. See "-- Enforcement -- Prompt
Corrective Action". The OTS has proposed to amend its capital distribution
regulation to conform to the prompt corrective action system and to provide
additional flexibility. Under the proposal, savings associations that were
adequately or well capitalized under prompt corrective action and that would
remain at least adequately capitalized after a capital distribution would be
permitted to make a distribution after providing notice to the OTS. "Troubled"
and undercapitalized institutions could make capital distributions only by
filing an application and receiving OTS approval, which would be granted only
under certain limited conditions. The proposal defines "troubled condition" as a
function of an institution's examination rating, its capital condition, or on
the basis of supervisory directives issued or designation made by the OTS.
 
  Investment Authority
 
     Permissible Loans and Investments.  Federally chartered savings banks, such
as the Bank, are authorized to originate, invest in, sell, purchase, service,
participate, and otherwise deal in: (i) loans made on the security of
residential and nonresidential real estate, (ii) commercial loans, and (iii)
consumer loans, including credit card loans. The lending authority of federally
chartered associations is subject to numerous OTS requirements, including, as
applicable, requirements governing amortization, term, loan-to-value ratio,
percentage-of-assets limits, and loans-to-one-borrower limits. In January of
1996, the OTS proposed substantial revisions to its investment and lending
regulations intended to simplify the regulations and to eliminate many of their
specific requirements in favor of a more general standard of "safety and
soundness".
 
     A federally chartered savings association may invest, without limitation,
in the following assets: (i) obligations of the United States government or
certain agencies or instrumentalities thereof; (ii) stock issued or loans made
by the FHLBs or the FNMA; (iii) obligations issued or guaranteed by the FNMA,
the Student Loan Marketing Association, the GNMA or any agency of the United
States government; (iv) certain mortgages, obligations, or other securities that
have been sold by the FHLMC, (v) stock issued by a national housing partnership
corporation; (vi) demand, time or savings deposits, shares, or accounts of any
insured depository institution; (vii) certain "liquidity" investments approved
by the OTS to meet liquidity requirements; (viii) shares of registered
investment companies the portfolios of which are limited to investments that a
federal association is otherwise authorized to make; (ix) certain MBS; (x)
general
 
                                       79
82
 
obligations of any state of the United States or any political subdivision or
municipality thereof, provided that not more than 10% of a savings association's
capital may be invested in the general obligations of any one issuer; and (xi)
loans on the security of liens upon residential real property. Federally
chartered savings associations are authorized by the HOLA to make investments in
business development credit corporations, certain commercial paper and corporate
debt securities, service corporations, and small business investment companies,
all of which investments are subject to percentage-of-assets and various other
limitations.
 
     Lending Limits.  Generally, savings associations, such as the Bank, are
subject to the same loans to one borrower limits that apply to national banks.
Generally, a savings association may lend to a single or related group of
borrowers, on an unsecured basis, in an amount not greater than 15% of its
unimpaired capital and unimpaired surplus (as defined). An additional amount,
not greater than 10% of the savings association's unimpaired capital and
unimpaired surplus (as defined), may be loaned if the loan is secured by readily
marketable collateral, which is defined to include certain securities and
bullion, but generally does not include real estate. Notwithstanding the general
lending limits, a savings association may make loans to one borrower of up to
$500,000, or to develop domestic residential housing units, up to the lesser of
$30 million or 30% of the savings association's unimpaired capital and
unimpaired surplus, if certain conditions are satisfied.
 
     In addition to limits on loans to one borrower, the HOLA also limits a
federal savings association's aggregate nonresidential real property loans to
400% of the savings association's capital as determined pursuant to the OTS's
capital requirements. See "-- Capital Requirements". The OTS may allow a savings
association to exceed the aggregate limitation if the OTS determines that
exceeding the limitation would pose no significant risk to the safe and sound
operations of the association and would be consistent with prudent operating
practices.
 
     Subsidiaries -- Service Corporations.  The HOLA authorizes federally
chartered savings associations, such as the Bank, to invest in the capital
stock, obligations or other securities of service corporations. The HOLA
authorizes a savings association to invest up to a total of 3% of its assets in
service corporations. The last 1% of the 3% statutory investment limit
applicable to service corporations must be primarily invested in community
development investments drawn from a broad list of permissible investments that
include, among others: government guaranteed loans; loans for investment in
small businesses; investments in revitalization and rehabilitation projects; and
investments in low- and moderate-income housing developments.
 
     Service corporations are authorized to engage in a variety of preapproved
activities, some of which (e.g., securities brokerage and real estate
development) are ineligible activities for the parent savings association. The
OTS regulations implementing the service corporation authority contained in the
HOLA also provide that activities reasonably related to the activities of a
federally chartered savings association may be approved on a case-by-case basis
by the Director of the OTS.
 
     Operating Subsidiaries.  All federal savings associations are authorized to
establish or acquire one or more operating subsidiaries. Operating subsidiaries
are subject to examination and supervision by the OTS to the same extent as the
parent thrift. An "operating subsidiary" is a corporation that meets all of the
following requirements: (i) it engages only in activities that a federal savings
association is permitted to engage in directly; (ii) the parent savings
association owns, directly or indirectly, more than 50% of the subsidiary's
voting stock; and (iii) no person or entity other than the parent thrift may
exercise "effective operating control" over the subsidiary. While a savings
association's investment in its service corporations is generally limited to an
amount that does not exceed 3% of the parent savings association's total assets,
OTS regulations do not limit the amount that a parent savings association may
invest in its operating subsidiaries. Operating subsidiaries may be incorporated
and operated in any geographical location where its parent may operate. An
operating subsidiary that is a depository institution may accept deposits in any
location, provided that the subsidiary has federal deposit insurance.
 
     Finance Subsidiaries.  In accordance with OTS regulations, federal savings
associations may establish one or more finance subsidiaries. The sole purpose of
a finance subsidiary is to issue securities that a federal savings association
may issue directly and to remit the net proceeds of the issuance to the parent
savings association.
 
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     QTL Test.  All savings associations are required to meet a QTL test for,
among other things, future eligibility for FHLB advances. An association must
have invested at least 65% of its portfolio assets in qualified thrift
investments and must maintain this level of qualified thrift investments on a
monthly average basis in nine of every 12 months.
 
     "Portfolio assets" is defined as total assets less intangibles, properties
used to conduct business and liquid assets (up to 20% of total assets). The
following assets may be included as qualified thrift investments without limit:
domestic residential housing or manufactured housing loans; home equity loans
and MBS backed by residential housing or manufactured housing loans; FHLB stock
as well as certain obligations of the FDIC and certain other related entities.
Other qualifying assets, which may be included up to an aggregate of 20% of
portfolio assets, are: (i) 50% of originated residential mortgage loans sold
within 90 days of origination; (ii) investments in debt or equity of service
corporations that derive 80% of their gross revenues from housing-related
activities; (iii) 200% of certain loans to, and investment in, low cost one- to
four-family housing; (iv) 200% of loans for residential real property, churches,
nursing homes, schools and small businesses in areas where the credit needs of
low- and moderate-income families are not met; (v) other loans for churches,
schools, nursing homes and hospitals; and (vi) personal, family, household, or
education loans (up to 10% of total portfolio assets).
 
     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies. A savings association may
requalify the next time it meets the requirement in nine of the preceding 12
months, but it may requalify only one time. If a savings association converts to
a bank charter, it must remain SAIF-insured until the expiration of the
moratorium (the moratorium, enacted in 1989, effectively prohibits most
conversions from the SAIF to the BIF insurance fund), which will not occur until
the date on which the SAIF fund meets its designated reserve ratio. If an
institution that fails the QTL test has not yet requalified and has not
converted to a national bank, its new investments and activities are limited to
those permissible for a national bank, it is immediately ineligible to receive
any new FHLB advances, is subject to national bank limits for payment of
dividends, and may not establish a branch office at any location at which a
national bank located in the savings association's home state could not
establish a branch.
 
     Liquidity.  The Bank is required to maintain an average daily balance of
"liquid assets" (cash, certain time deposits, bankers' acceptances, highly rated
corporate debt securities, and commercial paper, securities of certain mutual
funds, reserves maintained pursuant to Federal Reserve Board requirements, and
specified government, state or federal agency obligations) equal to a certain
percentage of net withdrawable deposit accounts and borrowings payable in one
year or less. The liquidity requirement may vary from time to time (between 4%
and 10%) depending upon economic conditions and savings flows of all savings
associations. Currently, OTS regulations require a savings association, such as
the Bank, to maintain liquid assets equal to not less than 5% of its net
withdrawable deposit accounts and borrowings payable in one year or less and
short-term liquid assets of not less than 1%. Penalties may be imposed for
failure to meet the liquidity requirements.
 
  Mergers and Acquisitions
 
     Restrictions on Acquisitions.  As previously described, the Bank is
controlled by the Company. The Company must obtain approval from the OTS before
acquiring control of any other savings association. Such acquisitions are
generally prohibited if they result in a savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in supervisory acquisitions of failing savings associations. The Company may
acquire up to 5%, in the aggregate, of the voting stock of any non-subsidiary
savings association or savings and loan holding company without being deemed to
acquire control of the association or holding company. In addition, a savings
and loan holding company may hold shares of a savings association or a savings
and loan holding company for certain purposes, including as a bona fide
fiduciary, as an underwriter or in an account solely for trading purposes. Under
certain conditions, a savings and loan holding company may acquire up to 15% of
the shares of a savings association or savings and loan holding company in a
"qualified stock issuance".
 
     The Change in Bank Control Act and the savings and loan holding company
provisions of the HOLA, together with the regulations of the OTS under such
Acts, require that the consent of the OTS be obtained
 
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prior to any person or company acquiring control of a savings association or a
savings and loan holding company. Under OTS regulations, "control" is
conclusively presumed to exist if an individual or company acquires more than
25% of any class of voting stock of a savings association or holding company.
Control is rebuttably presumed to exist if a person acquires more than 10% of
any class of voting stock (or more than 25% of any class of non-voting stock)
and is subject to any of several "control factors". The control factors relate,
among other matters, to the relative ownership position of a person, the
percentage of debt and/or equity of the association or holding company
controlled by the person, agreements giving the person influence over a material
aspect of the operations of the association or holding company, and the number
of seats on the board of directors thereof held by the person or his designees.
The regulations provide a procedure for challenge of the rebuttable control
presumption. Certain restrictions applicable to the operations of savings and
loan holding companies and certain conditions imposed by the OTS in connection
with its approval of companies to become savings and loan holding companies may
deter companies from seeking to obtain control of the Bank.
 
     Insured depository institutions are authorized to merge or engage in
purchase and assumption transactions with other insured depository institutions
with the prior approval of the federal banking regulator of the resulting
entity.
 
     Branching.  Subject to certain statutory restrictions in the HOLA and the
Federal Deposit Insurance Act (the "FDIA"), the Bank is authorized to branch on
a nationwide basis. Branching by savings associations is also subject to other
regulatory requirements, including compliance with the Community Reinvestment
Act (the "CRA") and its implementing regulations.
 
  Officers, Directors, and Controlling Shareholders
 
     Insider Loans.  Loans to an executive officer, director, or to any person
who directly or indirectly, or acting through or in concert with one or more
persons, owns, controls, or has the power to vote more than 10% of any class of
voting securities of such institution ("Principal Shareholder") and their
related interests (i.e., any company controlled by such executive officer,
director, or Principal Shareholder), or to any political or campaign committee,
the funds or services of which will benefit such executive officer, director or
Principal Shareholder, or which is controlled by such executive officer,
director or Principal Shareholder, are subject to Sections 22(g) and 22(h) of
the Federal Reserve Act (the "FRA") and the regulations promulgated thereunder.
Among other things, such loans must be made on terms substantially the same as
those prevailing on transactions made to unaffiliated individuals, and certain
extensions of credit to such persons must first be approved in advance by a
disinterested majority of a savings association's entire board of directors.
Section 22(h) of the FRA prohibits loans to any such individuals where the
aggregate amount exceeds an amount equal to 15% of an insured institution's
unimpaired capital and surplus, plus an additional 10% of unimpaired capital and
surplus (as defined) in the case of loans that are fully secured by readily
marketable collateral, or when the aggregate amount on all such extensions of
credit outstanding to all such persons would exceed the Bank's unimpaired
capital and unimpaired surplus. Section 22(g) identifies limited circumstances
in which the Bank is permitted to extend credit to executive officers.
 
     Changes in Directors and Senior Executive Officers.  Section 32 of the FDIA
requires a depository institution or holding company thereof to give 30 days'
prior written notice to its primary federal regulator of any proposed
appointment of a director or senior executive officer if the institution: (i)
has been chartered less than two years; (ii) has undergone a change in control
within the preceding two years; or (iii) is not in compliance with the minimum
capital requirements or otherwise is in a troubled condition. The regulator then
has the opportunity to disapprove any such appointment.
 
  Transactions With Affiliates
 
     Pursuant to Section 11 of the HOLA, savings associations are subject to
restrictions regarding transactions with affiliates ("Covered Transactions")
substantially similar to those imposed upon member banks under Sections 23A and
23B of the FRA. Savings associations are also prohibited from extending credit
to any affiliate engaged in an activity not permissible for a bank holding
company.
 
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     The term "affiliate" includes any company that controls or is controlled by
a company that controls the Bank, or a bank or savings association subsidiary of
the Bank. The term "affiliate" also includes any company controlled by
controlling stockholders of the Bank or the Company and any company sponsored
and advised on a contractual basis by the Bank or any subsidiary or affiliate of
the Bank. The Company is an affiliate of the Bank.
 
     Section 23A of the FRA limits Covered Transactions with any one affiliate
to 10% of an association's capital stock and surplus (as defined therein) and
limits aggregate affiliate transactions to 20% of the Bank's capital stock and
surplus. A Covered Transaction is defined generally as a loan to an affiliate,
the purchase of securities issued by an affiliate, the purchase of assets from
an affiliate, the acceptance of securities issued by an affiliate as collateral
for a loan, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate. In addition, the Bank generally may not purchase
securities issued or underwritten by an affiliate. Sections 23A and 23B of the
FRA provide that a loan transaction with an affiliate generally must be
collateralized (but may not be collateralized by a low quality asset or
securities issued by an affiliate) and that all Covered Transactions, as well as
the sale of assets, the payment of money or the provision of services by the
Bank to an affiliate, must be on terms and conditions that are substantially the
same, or at least as favorable to the Bank, as those prevailing for comparable
nonaffiliate transactions.
 
     The OTS generally requires savings associations, such as the Bank, to
attribute to an affiliate the amounts of all transactions conducted with
subsidiaries of that affiliate and grants the Director of the OTS the authority
to deem certain non-bank or non-thrift subsidiaries of a savings association as
affiliates.
 
  Enforcement
 
     Prompt Corrective Action.  The OTS is required by statute to take certain
actions against savings associations that fail to meet certain capital-based
requirements. Each of the federal banking agencies, including the OTS, is
required to establish five levels of insured depository institutions based on
leverage limit and risk-based capital requirements established for institutions
subject to their jurisdiction plus, in each agency's discretion, individual
additional capital requirements for such institutions.
 
     Under the final rules that have been adopted by each of the federal banking
agencies, an institution will be designated well capitalized if the institution
has a total risk-based capital ratio of 10% or greater, a core risk-based
capital ratio of 6% or greater, and a leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a specific capital level
for any capital measure.
 
     An institution will be designated adequately capitalized if the institution
has a total risk-based capital ratio of 8% or greater, a core risk-based capital
ratio of 4% or greater, and a leverage ratio of 4% or greater (or a leverage
ratio of 3% or greater if the institution is rated a composite 1 in its most
recent report of examination). An institution will be designated
undercapitalized if the institution has a total risk-based capital ratio of less
than 8%, a core risk-based capital ratio of less than 4%, or a leverage ratio of
less than 4% (or a leverage ratio of less than 3% if the institution is rated
composite 1 in its most recent report of examination). An institution will be
designated significantly undercapitalized if the institution has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3%. An institution will be
designated critically undercapitalized if the institution has a ratio of
tangible equity to total assets equal to or less than 2%.
 
     Undercapitalized institutions are required to submit capital restoration
plans to the appropriate federal banking agency and are subject to certain
operational restrictions. Moreover, companies controlling an undercapitalized
institution are required to guarantee the subsidiary institution's compliance
with the capital restoration plan subject to an aggregate limitation of the
lesser of 5% of the institution's assets, or the amount of the capital
deficiency when the institution first failed to meet the plan.
 
     Significantly or critically undercapitalized institutions and
undercapitalized institutions that have not submitted or complied with
acceptable capital restoration plans are subject to regulatory sanctions. A
forced sale of shares or merger, restrictions on affiliate transactions, and
restrictions on rates paid on deposits are
 
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required to be imposed unless the supervisory agency has determined that such
restrictions would not further capital improvement. The agency may impose other
specified regulatory sanctions at its option. Generally, the appropriate federal
banking agency is required to authorize the appointment of a conservator or
receiver within 90 days after an institution becomes critically
undercapitalized.
 
     The federal banking agencies have adopted uniform procedures for the
issuance of directives by the appropriate federal banking agency. Under these
procedures, an institution will generally be provided advance notice when the
appropriate federal banking agency proposes to impose one or more of the
sanctions set forth above. These procedures provide an opportunity for the
institution to respond to the proposed agency action or, where circumstances
warrant immediate agency action, an opportunity for administrative review of the
agency's action.
 
     Administrative Enforcement Authority.  The OTS exercises extensive
enforcement authority over all savings associations and their
"institution-affiliated parties" (i.e., officers, directors, controlling
shareholders, employees, as well as attorneys, appraisers or accountants) who
knowingly or recklessly participate in a wrongful action likely to have adverse
effect on an insured institution. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue
cease-and-desist or removal and prohibition orders, and to initiate injunctive
actions. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. The OTS may use written
agreements to correct compliance deficiencies with respect to applicable laws
and regulations and to ensure safe and sound practices. Except under certain
narrow circumstances, public disclosure of final enforcement actions by the
federal banking agencies, including the OTS, is required.
 
     The OTS has the authority, when statutorily prescribed grounds exist, to
appoint a conservator or receiver for a savings association. Grounds for such
appointment include: insolvency; substantial dissipation of assets or earnings;
existence of an unsafe or unsound condition to transact business; likelihood
that the association will be unable to pay its obligations in the normal course
of business; undercapitalization where the association (i) has no reasonable
prospect of becoming adequately capitalized, (ii) fails to become adequately
capitalized when required to do so, (iii) fails timely to submit an acceptable
capital restoration plan, or (iv) materially fails to implement a capital
restoration plan; or where the association is "critically undercapitalized" or
"otherwise has substantially insufficient capital".
 
CONSUMER PROTECTION REGULATIONS
 
     The Bank is subject to many federal consumer protection statutes and
regulations including, but not limited to, the following:
 
  Mortgage and Consumer Lending
 
     The Truth in Lending Act.  The TILA, enacted into law in 1968, is designed
to ensure that credit terms are disclosed in a meaningful way so that consumers
may compare credit terms more readily and knowledgeably. As a result of the
TILA, all creditors must use the same credit terminology and expressions of
rates, the annual percentage rate, the finance charge, the amount financed, the
total of payments, and the payment schedule.
 
     The TILA is implemented by the FRB's Regulation Z. Regulation Z contains
disclosure and advertising rules, rules related to the calculation of annual
percentage rates, document retention rules, and error resolution procedures. The
appendices to the regulation set forth model forms and clauses that creditors
may use when providing open-end and closed-end disclosures. The appendices also
contain detailed rules for calculating the annual percentage rate. Official
staff interpretations of the regulation are published in the FRB's Commentary.
Good faith compliance with the Commentary protects creditors from civil
liability under the TILA.
 
     Under certain circumstances involving extensions of credit secured by the
borrower's principal dwelling, the TILA and Regulation Z thereunder provide a
right of rescission. The period within which the consumer may exercise the right
to rescind runs for three business days from the last of three events: (i) the
occurrence that gives rise to the right of rescission; (ii) delivery of all
required material disclosures, i.e., the annual percentage rate, the finance
charge, the amount financed, the total of payments, and the payment schedule; or
 
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(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 recission as a defense in a foreclosure action
under certain circumstances. Under the TILA, the consumer cannot be required to
pay any amount in the form of money or property either to the creditor or to a
third party as a part of the transaction in which a consumer exercises the right
of rescission. Any amounts of this nature already paid by the consumer must be
refunded. "Any amount" includes finance charges already accrued, as well as
other charges such as application and commitment fees or fees for a title search
or appraisal. Once the creditor has fulfilled its rescission obligation under
the TILA, the consumer must tender to the creditor any property or money the
creditor has already delivered to the consumer.
 
     The regulatory agencies are authorized to order creditors to make monetary
and other adjustments to the accounts of consumers in cases where an annual
percentage rate or finance charge is inaccurately disclosed. Generally, the
agencies order restitution when such disclosure errors resulted from a clear and
consistent pattern or practice of violation or gross negligence or a willful
violation that was intended to mislead the person to whom the credit was
extended. However, the agencies are not precluded from ordering restitution for
isolated disclosure errors. The TILA also provides for statutory damages of
twice the finance charge, with a minimum of $200 and a maximum of $2,000 for
closed end loans secured by real property or a dwelling. If successful, the
borrower is entitled to reasonable attorneys' fees and the costs of bringing the
action. The TILA also provides for class actions for actual damages and for
statutory damages of the lesser of $500,000 or 1% of the creditor's net worth,
plus court costs and attorneys' fees.
 
     On September 30, 1995, President Clinton signed into law the Truth In
Lending Amendments of 1995 (the "1995 Amendments"). The 1995 Amendments increase
finance charge tolerances, limit the liability of assignees and loan servicers,
and provide protection from civil liability for claims based on certain
disclosure rules covered by the 1995 Amendments, including prohibiting the
maintenance of certain class action cases not certified as class actions prior
to January 1, 1995. The 1995 Amendments also clarify that third party fees not
required or retained by a lender, taxes levied on a security interest, and fees
to prepare all loan-related documents for real estate loans, as well as pest and
flood inspections, are excluded from the finance charge.
 
     The Bank attempts in good faith to comply with the TILA and Regulation Z
thereunder. The requirements are complex, however, and even inadvertent
non-compliance could result in civil liability or the extension of the
rescission period for a mortgage loan for up to three years from the date the
loan was made. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, seeking civil statutory and actual damages and rescission under
the TILA, as well as remedies for alleged violations of various state unfair
trade practices acts and restitution or unjust enrichment in connection with
certain mortgage loan transactions.
 
     The Fair Housing Act.  The FH Act, enacted into law in 1968, regulates many
practices, including making it unlawful for any lender to discriminate in its
housing-related lending activities against any person because of race, color,
religion, national origin, sex, handicap, or familial status.
 
     Section 805 of the FH Act, which applies to the financing of housing, makes
it unlawful for a bank to deny a loan or any other financial assistance for the
purpose of purchasing, constructing, improving, repairing, or maintaining a
dwelling because of the race, color, religion, national origin, sex, handicap,
or familial status of the loan applicant, any person associated with the loan
applicant, any present or prospective owner of the dwelling, any lessees, or any
tenants or occupants. It is also unlawful to discriminate in fixing the amount,
interest rates, duration, or other terms of the credit.
 
     Section 813 of the FH Act provides that aggrieved persons may sue anyone
who they believe has discriminated against them. Section 814 of the FH Act
provides that the Attorney General of the United States may sue for an
injunction against any pattern or practice that denies civil rights granted by
the FH Act. Section 810 of the FH Act allows a person to file a discrimination
complaint with the Department of Housing
 
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and Urban Development ("HUD"). HUD will investigate the complaint and may
attempt to resolve the grievance through conciliation or persuasion. Penalties
for violation of the FH Act include actual damages suffered by the aggrieved
person and injunctive or other equitable relief. The court's order may also
assess civil penalties.
 
     The Equal Credit Opportunity Act.  The ECOA, enacted into law in 1974,
prohibits discrimination in any credit transaction, whether for consumer or
business purposes, on the basis of race, color, religion, national origin, sex,
marital status, age (except in limited circumstances), receipt of income from
public assistance programs, or good faith exercise of any rights under the
Consumer Credit Protection Act. Regulation B, which implements the ECOA, covers
all individuals and institutions that regularly participate in decisions to
extend credit. In addition to prohibiting outright discrimination on any of the
impermissible bases listed above, an effects test has been applied to the
analysis of discrimination under Regulation B. This means that if a creditor's
actions have had the effect of discriminating, the creditor may be held
liable -- even when there is no intent to discriminate.
 
     In addition to actual damages, the ECOA provides for punitive damages of up
to $10,000 in individual lawsuits and up to the lesser of $500,000 or 1% of the
creditor's net worth in class action suits. Successful complainants may also be
entitled to an award of court costs and attorneys' fees.
 
     The Real Estate Settlement Procedures Act.  The RESPA, enacted into law in
1974, requires lenders to provide borrowers with disclosures regarding the
nature and cost of real estate settlements. Also, the RESPA prohibits certain
abusive practices, such as kickbacks, and places limitations on the amount of
money that a lender may require a borrower to place in an escrow account.
Regulation X, which implements RESPA, also establishes escrow accounting
procedures and mandates the use of aggregate accounting for determining the
maximum dollar amount that may be collected in connection with escrow accounts.
 
     RESPA is applicable to all federally related mortgage loans. A "federally
related mortgage loan" includes any loan secured by a first or subordinate lien
on residential real property designed for occupancy by one to four families,
including a refinancing of an existing loan secured by the same property, if:
(i) the loan is made by any lender, the deposits of which are federally insured
or any lender that is regulated by a federal agency; or (ii) the loan is
insured, guaranteed or supplemented by a federal agency; or (iii) the loan is
intended to be sold to the FNMA, the GNMA, or the FHLMC; or (iv) the loan is
made by any creditor who makes or invests in residential real estate loans
aggregating more than $1 million per year.
 
     Section 8 of the RESPA prohibits any person from giving or receiving a fee
or a thing of value (payments, commissions, fees, gifts or special privileges)
for a referral of settlement business. Such "kickbacks" include payments in
excess of the reasonable value of goods provided or services rendered.
Violations of Section 8 of the RESPA may result in imposition of the following
penalties: (i) civil liability equal to three times the amount of any charge
paid for the settlement services; (ii) the possibility that court costs and
attorneys' fees can be recovered; and (iii) a fine of not more than $10,000 or
imprisonment for not more than one year, or both.
 
     The Bank attempts in good faith to comply with the requirements of the
RESPA and its implementing regulations. The requirements are complex, however,
and even inadvertent non-compliance could result in civil or criminal liability.
During the past several years, numerous individual claims and purported consumer
class action claims were commenced against a number of financial institutions,
their subsidiaries, and other mortgage lending institutions alleging violations
of the RESPA's escrow account rules and seeking civil damages, court costs, and
attorneys' fees.
 
     The Home Mortgage Disclosure Act (the "HMDA").  The HMDA, enacted into law
in 1975, is intended to provide public information that can be used to help
determine whether financial institutions are serving the housing credit needs of
the neighborhoods and communities in which they are located and to assist in
identifying possible discriminatory lending patterns.
 
     The HMDA requires institutions to report data regarding applications for
one- to four-family loans, home improvement loans, and multi-family loans, as
well as information concerning originations and purchases of such types of
loans. The HMDA also requires most lenders to report the race, sex, and income
of mortgage
 
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applicants and borrowers. Generally, insured institutions, like the Bank, are
also required to indicate the reasons for decisions not to grant credit.
 
     Compliance with the HMDA implementing regulations is enforced by the
appropriate federal banking agency, or, in some cases, by HUD. Administrative
sanctions, including civil money penalties, may be imposed by supervisory
agencies for violations.
 
     The Community Reinvestment Act.  The CRA, enacted into law in 1977, is
intended to encourage insured depository institutions, while operating safely
and soundly, to help meet the credit needs of their communities. The CRA
specifically directs the federal regulatory agencies, in examining insured
depository institutions, to assess their record of helping to meet the credit
needs of their entire community, including low-and moderate-income
neighborhoods, consistent with safe and sound banking practices. The CRA further
requires the agencies to take a financial institution's record of meeting its
community credit needs into account when evaluating applications for, among
other things, domestic branches, consummating mergers or acquisitions, or
holding company formations. Under the CRA, which is implemented by uniform
regulations adopted by each of the bank regulatory agencies, including the OTS,
financial institutions are required to describe their local community by
outlining the community on a map. If the financial institution has more than one
local community, it must describe each one. A financial institution's local
community consists of the areas surrounding each deposit-taking office or
cluster of offices, including any low- or moderate-income neighborhoods within
that area.
 
     The regulations require the banking agencies to assess each financial
institution's record of performance in helping to meet the credit needs of its
community by reviewing 12 assessment factors. These assessment factors include:
(i) activities conducted by a financial institution to ascertain the credit
needs of its community; (ii) the extent of marketing and special credit related
programs to make members of the community aware of credit services; (iii) the
extent of participation of the financial institution's board of directors in
formulating policy and reviewing performance; (iv) the presence or absence of
practices intended to discourage applications for types of credit set forth in
the institution's CRA statement; (v) the geographic distribution for the
financial institution's credit extensions, credit applications, and denials;
(vi) the presence or absence of evidence of prohibited discriminatory or other
illegal credit practices; (vii) the financial institution's record of opening
and closing offices and providing services at offices; (viii) the financial
institution's participation, including investments, in local community
development projects; (ix) the financial institution's origination or purchase
of residential mortgage loans, housing rehabilitation loans, home improvement
loans, and small business and farm loans within its community; (x) the financial
institution's participation in governmentally insured, guaranteed, or subsidized
loan programs for housing and small farms and businesses; (xi) the financial
institution's ability to meet various community credit needs based on its
financial condition, size, and other factors; and (xii) any other factors, that
in the agencies' judgment, reasonably bear on the extent to which a financial
institution has helped to meet the credit needs of its community.
 
     The agencies use the CRA assessment factors in order to provide a rating to
the financial institution. The ratings range from a high of "outstanding" to a
low of "substantial noncompliance".
 
     On April 19, 1995, the agencies jointly adopted revised CRA regulations.
Under the new system, the 12 assessment factors used to evaluate the CRA
performance of most large retail institutions, such as the Bank, will be
replaced with three tests, the lending, investment, and service tests, with the
lending test carrying the primary importance. To receive a satisfactory or
better rating, an institution must achieve at least a satisfactory lending
performance.
 
     The lending test evaluates an institution's record of helping to meet the
credit needs of its assessment area(s) through its lending activities by
considering, among other things, the number, amount, geographic distribution,
and certain borrower characteristics of the institution's home mortgage, small
business, small farm, and community development lending. The investment test
evaluates an institution's record of helping to meet the credit needs of its
assessment area or areas through "qualified investments" (lawful investments,
deposits, membership shares, or grants that have community development as their
primary purpose). The service test evaluates an institution's record of helping
to meet the credit needs of its assessment area or areas
 
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by analyzing the availability and effectiveness of an institution's systems for
delivering retail banking services and an institution's community development
services. An institution may elect to be evaluated on the basis of a strategic
plan approved by its primary regulator rather than the three tests.
 
     Although the regulations became effective on July 1, 1995, the primary
provisions are subject to a two-year phase-in period. Most large retail
institutions will become subject to the new examination criteria beginning July
1, 1997, although institutions may elect to be examined with the new tests
beginning January 1, 1996. Finally, new data collection requirements that became
effective on January 1, 1996 are included in the new regulations.
 
     While the Bank is strongly committed to serving all of its CRA communities,
including its low- and moderate-income neighborhoods, the OTS might determine
the Bank's CRA-related programs to be insufficient. The Bank was last examined
for CRA compliance by its primary regulator, the OTS, on October 14, 1995 and
received a CRA assessment rating of "outstanding". The Bank's previous CRA
assessment rating, as of March 8, 1993, was also "outstanding".
 
  Savings and Checking Accounts and Public Accommodations
 
     The Bank Secrecy Act ("BSA") and Money Laundering Laws.  The BSA, enacted
into law in 1970, requires every financial institution within the United States
to file a Currency Transaction Report with the IRS for each transaction in
currency of more than $10,000 not exempted by the Treasury Department. The
reports must be filed within 15 days of the transaction. A "transaction in
currency" is defined by the regulations to include any transaction "involving
the physical transfer of currency from one person to another". The Treasury
Department deems multiple transactions by the same person on the same day
exceeding $10,000 in the aggregate to be reportable. Financial institutions are
also required to file a Suspicious Activity Report with respect to any known or
suspected criminal conduct or suspicious activities, including transactions
valued at more than $5,000 that the institution knows or suspects involve funds
derived from illegal activities, are designed to evade the requirements of the
BSA, have no business or apparent lawful purpose, or are not the sort in which
the particular customer would normally be expected to engage.
 
     In 1988, Congress enacted the Money Laundering Prosecution Improvements Act
(the "1988 Act"). The 1988 Act expanded the BSA's definition of "financial
institution" and broadened the BSA's reporting requirements to require financial
institutions, typically banks, to verify and record the identity of the
purchaser upon the issuance or sale of bank checks or drafts, cashier's checks,
traveler's checks, or money orders involving $3,000 or more in cash.
Institutions must also verify and record the identity of the originator and
beneficiary of certain funds transfers.
 
     Under the FDIA, a receiver or conservator may be appointed for an insured
depository institution on the receipt of written notice from the Attorney
General that an insured depository institution has been found guilty of a
criminal money laundering offense or criminal offense under the BSA. The FDIC
may also take action to terminate the deposit insurance of an institution
convicted of criminal violations of the BSA and money laundering offenses. Any
person who willfully causes a violation of the BSA's record-keeping requirements
for insured institutions is subject to the imposition of up to a $50,000 civil
money penalty, in addition to any other applicable penalties.
 
     The Bank has instituted a policy against money laundering that is
communicated by top management to the Bank's employees. The policy includes
safeguards to prevent money laundering, including, but not limited to, regular
education programs to teach employees the requirements of the federal money
laundering laws and to make them aware of the innovative and ever-changing
techniques employed by money launderers.
 
     Electronic Fund Transfer Act (the "EFTA").  The EFTA, enacted into law in
1978, provides a basic framework establishing the rights, liabilities, and
responsibilities of participants in "electronic fund transfer systems", defined
to include automated teller machine transfers, telephone bill-payment services,
point-of-sale terminal transfers, and preauthorized transfers from or to a
consumer's account (e.g., direct deposit of Social Security payments). Its
primary objective is to protect the rights of individuals using these systems.
The
 
                                       88
91
 
EFTA limits a consumer's liability for certain unauthorized electronic fund
transfers and requires certain error resolution procedures.
 
     Unless an error is resolved in accordance with the error-resolution
procedures specified in the EFTA, the institution may be liable for civil
damages. The statutory damages the institution would have to pay in a successful
individual action are actual damages and statutory damages between $100 and
$1,000, as determined by the court, plus court costs and attorneys' fees. In a
successful class action, the institution would have to pay actual damages and
statutory damages up to the lesser of $500,000 or 1% of the institution's net
worth, plus court costs and reasonable attorneys' fees. The EFTA also sets forth
provisions for criminal liability for certain EFTA violations. Penalties under
these provisions run from a $5,000 fine and one year's imprisonment for
knowingly and willfully failing to comply with the EFTA, to a $10,000 fine and
10 years' imprisonment for fraudulent use of a debit card.
 
     The Expedited Funds Availability Act ("Expedited Funds Act").  The
Expedited Funds Act, enacted into law in 1987, seeks to insure prompt
availability of funds deposited into a customer's account and to expedite the
return of checks. The Expedited Funds Act is implemented by the Federal Reserve
Board's Regulation CC. The Act and Regulation CC include specific detailed
provisions requiring a financial institution to: (i) make funds available to its
customers within specified time frames; (ii) ensure that interest accrues on
funds in interest-bearing transaction accounts not later than the day the
financial institution receives credit; and (iii) disclose the financial
institution's funds-availability policies to its customers.
 
     In addition to administrative enforcement, there is civil liability for
violations of the Expedited Funds Act. Any depository institution that fails to
comply with any requirement of the Expedited Funds Act or regulation with
respect to any person other than another depository institution is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.
 
     The Truth in Savings Act (the "TISA").  The TISA, enacted into law in 1991,
is principally a disclosure law, the purpose of which is to encourage
comparative shopping for deposit products. The common denominator used by the
TISA to facilitate comparison shopping of interest payable on deposit accounts
is the Annual Percentage Yield (the "APY"). TISA is implemented by Regulation
DD. The TISA and Regulation DD thereunder require depository institutions to pay
interest on the full amount of the principal in the account for each day, under
either the "daily balance method" or the "average daily balance method". No
other balance calculation methods are permitted by the TISA.
 
     In addition to administrative enforcement, TISA violations carry civil
liability. Any depository institution that fails to comply with any requirement
of the TISA with respect to any person who is an account holder is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.
 
     The Americans with Disabilities Act (the "ADA").  The ADA, enacted into law
in 1990, prohibits private employers, state and local governments, employment
agencies, and labor unions from discriminating against qualified individuals
with disabilities in connection with job application procedures, hiring, firing,
advancement, compensation, job training, and other terms, conditions, and
privileges of employment. An individual with a disability is a person who: (i)
has a physical or mental impairment that substantially limits one or more major
life activities; (ii) has a record of such an impairment; or (iii) is regarded
as having such an impairment.
 
     Title 3 of the ADA covers banks, thrifts, credit unions, and finance
companies -- all of which are considered to be "public accommodations". Section
302(a) of the ADA provides that "no individual shall be discriminated against on
the basis of disability in the full and equal enjoyment of the goods, services,
or facilities, privileges, advantages, or accommodations of any place of public
accommodation". Section 302(b) of the ADA sets forth specific requirements and
prohibitions for public accommodations; for example, a place
 
                                       89
92
 
of public accommodation, such as the Bank's retail branch offices, may not
impose eligibility criteria that screen out persons with disabilities.
Discrimination also includes the failure to provide the auxiliary aids and
services necessary to enable individuals with disabilities to take advantage of
a financial institution's services, unless the financial institution can
demonstrate that providing the aids and services would "fundamentally" alter the
nature of the service or would result in an "undue burden". Another significant
provision of Section 302 of the ADA is the requirement to remove from public
accommodations all architectural barriers and communication barriers that are
structural in nature if the removal is "readily achievable". "Readily
achievable" is defined as "easily accomplishable and able to be carried out
without much difficulty or expense". In deciding whether a particular action is
readily achievable, the size of the institution and the nature and the cost of
the action will be considered. The last substantive provision of Title 3 of the
ADA that applies to financial institutions is Section 303, dealing with new
construction. It provides that any building opening to the public after January
26, 1993 must be "readily accessible to and useable by individuals with
disabilities" unless doing so is structurally impracticable.
 
     Anyone who has been discriminated against on the basis of a disability in
relation to employment may file an action with the United States Equal
Employment Opportunity Commission and may be entitled to remedies that include
rehiring, promotion, reinstatement, back pay or remuneration, or reasonable
accommodation including reassignment. Such individuals may also be entitled to
damages intended to compensate for future pecuniary losses, mental anguish, and
inconvenience. The ADA authorizes the Attorney General to sue institutions that
are engaged in a pattern or practice of discrimination. At the Attorney
General's request, the court may impose civil penalties of $50,000 for a first
violation and $100,000 for any subsequent violation or certain other remedies.
 
     The Bank attempts in good faith to assure compliance with the requirements
of the consumer protection statutes to which it is subject, as well as the
regulations that implement the statutory provisions. The requirements are
complex, however, and even inadvertent non-compliance could result in civil and,
in some cases, criminal liability. Based on the Bank's history of claims under
the consumer protection statutes and regulations to which it is subject,
management does not believe that claims are likely to be asserted that will have
a material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.
 
LEGISLATION
 
     Federal legislation and regulation have significantly affected the
operations of federally insured savings associations, such as the Bank, and
other federally regulated financial institutions in the past several years and
have increased competition among savings associations, commercial banks, and
other financial institutions. The operations of regulated depository
institutions will continue to be subject to changes in applicable statutes and
regulations from time to time, which changes could adversely affect the Bank and
its affiliates. See "Risk Factors -- Recapitalization of the SAIF and Its Impact
on SAIF Premiums; Other Legislative Proposals" and "-- Taxation -- Proposed
Legislation".
 
TAXATION
 
  Federal Taxation
 
     The Company is a savings and loan holding company and the Bank is a federal
savings bank. Both are subject to provisions of the Code, in the same manner,
with certain exceptions, as other corporations. The Company and the Bank
participate in the filing of a consolidated federal income tax return with their
"affiliated group", as defined by the Code. For financial reporting purposes,
however, the Company and the Bank compute their tax on a separate company basis.
The accompanying Consolidated Financial Statements include provisions for income
taxes as a result of the Company's and the Bank's taxable income for the six
months ended March 31, 1996 and 1995, and fiscal 1995. For fiscal 1994 and 1993,
the provision for income taxes includes a deferred tax benefit as a result of
the Bank's expected utilization of its NOLs against future taxable income in
accordance with SFAS 109, "Accounting for Income Taxes". No tax benefit for
income taxes was recognized as a result of the Company's stand alone losses. See
"-- Residual Interest", "--
 
                                       90
93
 
Alternative Minimum Tax", and "-- Accounting for Income Taxes". The Company and
the Bank have generated losses creating NOLs. See "-- Net Operating Losses". In
addition to federal income taxes, the Bank is required to make payments in lieu
of federal income taxes pursuant to the Assistance Agreement with the FSLIC. The
tax benefit sharing provisions contained in the Assistance Agreement were
replaced by similar provisions contained in the tax benefits agreement ("Tax
Benefits Agreement") entered into in connection with the Settlement Agreement;
these provisions, relating to the obligation to share tax benefit utilization,
will continue through the taxable year ending nearest to September 30, 2003. See
"-- FSLIC Assistance", and Note 13 to the Consolidated Financial Statements. See
"-- Proposed Legislation" for changes which would affect the bad debt deduction
and the bad debt reserve.
 
  Residual Interest
 
     The Bank is a holder of residual interests in Real Estate Mortgage
Investment Conduits ("REMICs") as defined by the Code. The Code limits the
amount of NOLs that may be used to offset the taxable income derived by holders
of residual interests in a REMIC. However, the Code states that this limitation
does not apply to certain financial institutions that are holders of residual
interests that meet a significant value test prescribed by applicable Treasury
regulations. The Bank incurs taxable income from residual interests that meet
such test and, therefore, may be offset by NOLs without respect to this
limitation. Also, the Bank incurs taxable income from residual interests that
does not meet such test and, therefore, may not be offset by NOLs. This income
caused the Bank to incur a regular tax liability for the six months ended March
31, 1995, and fiscal 1994.
 
  Domestic Building and Loan ("DBL") Test
 
     Savings institutions such as the Bank that meet the definitional DBL test
prescribed by the Code may benefit from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. The DBL test consists of a supervisory test, a business operations
test, and an asset test. If the Bank fails to meet these tests, the transition
from the reserve method to the direct charge-off method of tax accounting for
bad debts would result in a recapture of this reserve into taxable income. At
September 30, 1995, the Bank was in excess of the minimum thresholds. There can
be no assurance that the Bank will meet these tests for subsequent tax years.
 
  Bad Debt Deduction
 
     For purposes of the bad debt reserve deduction, loans are separated into
"qualifying real property loans", which generally are loans secured by certain
interests in real property, and "non-qualifying loans", which are all other
loans. The deduction with respect to non-qualifying loans must be computed under
the experience method, which generally allows a deduction based on a savings
association's actual bad debt loss experience, consisting of the current year
and the prior five years. The bad debt reserve deduction with respect to
qualifying real property loans, however, may be the larger of the amounts
computed under (i) the experience method, or (ii) the percentage of taxable
income method. The percentage of taxable income method generally permits a
qualifying savings association to deduct 8% of its taxable income prior to such
deduction, as adjusted for certain items.
 
     Savings associations, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income, for purposes of computing the
percentage of taxable income deduction, for losses attributable to activities of
the non-savings association members of the consolidated group that are
functionally related to the activities of the savings association member.
Currently, the Bank is computing its bad debt deduction pursuant to the
experience method. All or a portion of the Bank's tax reserve for bad debts may
be required to be includible in taxable income in a subsequent taxable year
under certain circumstances, including the Bank's failure to meet the definition
of a savings institution for federal income tax purposes, dividend distributions
in excess of the Bank's then current or accumulated earnings and profits, or as
a result of distributions in liquidation or redemption of the Bank Common Stock
or the Bank Preferred Stock.
 
                                       91
94
 
  Proposed Legislation
 
     For a discussion of proposed legislation which could, if enacted, have a
material effect on the financial condition and results of operations of the
Company and the Bank, see "Risk Factors -- Recapitalization of the SAIF and Its
Impact on SAIF Premiums; Other Legislative Proposals".
 
  Alternative Minimum Tax ("AMT")
 
     In addition to regular income taxes, corporations including saving and loan
holding companies and savings associations are subject to an AMT, which is
generally equal to 20% of alternative minimum taxable income ("AMTI") (taxable
income increased by tax preference items and adjusted for other items). The
preference item principally affecting the Bank relates to the adjusted current
earnings ("ACE") adjustment, which includes FRF assistance. See "Business -- The
Assistance Agreement". Although the amounts received by the Bank pursuant to the
Assistance Agreement are not taxable for federal income tax purposes, a portion
of such amounts are considered to be an ACE adjustment. For the six months ended
March 31, 1996, and for fiscal 1995 and 1993, the Bank incurred AMTI that was
offset by the utilization of AMT NOLs. However, corporations may offset only 90%
of their AMTI with the related NOLs. For the six months ended March 31, 1995,
and for fiscal 1994, 1992, and 1991, the Bank did not incur an AMT liability.
 
  Environmental Tax
 
     The Code imposes an additional tax at the rate of .12% on the modified AMTI
of a corporation. Because the tax was enacted to provide funds for various
environmental programs, it is denominated as an environmental tax. Modified AMTI
is essentially AMTI without regard to any utilization of available AMT NOLs less
$2 million.
 
  FSLIC Assistance
 
     Pursuant to the Assistance Agreement, the FRF, as successor to the FSLIC,
was obligated to provide the Bank with financial assistance in connection with
various matters that arose under the Assistance Agreement. See "Business -- The
Assistance Agreement". The tax treatment of the assistance payments to savings
associations that acquire assets from institutions in receivership (such as the
predecessor to the Company) has been amended several times in recent years.
Payments to the Bank pursuant to the Assistance Agreement were subject to the
applicable provisions of the Code that were in effect in 1988, the year of the
Acquisition. Payments from the FRF to the Bank pursuant to the Assistance
Agreement were not included in the Bank's taxable income, and the Bank was not
required to reduce its basis in the Covered Assets by the amount of such
financial assistance; however, certain writedowns and losses are limited as
discussed below. Accordingly, there was no requirement to pay federal income
taxes with respect to any amount of the assistance payments received pursuant to
the Assistance Agreement. The Bank also succeeded to substantial NOLs as a
result of the Acquisition.
 
     The Assistance Agreement did, however, require the Bank, in effect, to pay
to the FRF an amount equal to one-third of the sum of federal and state net tax
benefits ("Net Tax Benefits") (as defined by the Assistance Agreement). The Net
Tax Benefits shall be equal to the excess of any of the federal income tax
liability which would have been incurred if the tax benefit item had not been
deducted or excluded from income over the federal income tax liability actually
incurred. The Net Tax Benefits items are the tax savings resulting from (i) the
utilization of the deduction by the Bank of any amount of NOLs, capital loss
carryforwards, and certain other carryforwards on the books and records of Old
USAT, (ii) the exclusion from gross income of the amount of certain interest or
assistance payments made to the Bank by the FRF, and (iii) the deduction of
certain costs, expenses, or losses incurred by the Bank for which the FRF has
made tax-free assistance payments. These provisions were replaced by similar
provisions in the Tax Benefits Agreement entered into in connection with the
termination of the Assistance Agreement. Pursuant to the Tax Benefits Agreement,
these provisions relating to the obligation to share tax benefit utilization
will continue through the taxable year ending nearest to September 30, 2003.
 
                                       92
95
 
     Under the Assistance Agreement, the Bank received assistance payments from
the FRF for writedowns and losses from the sales of Covered Assets. For federal
income tax purposes, the Bank included the writedowns and losses from the sale
of Covered Assets in its calculation of the bad debt deduction, using the
experience method. However, the Revenue Reconciliation Act of 1993 denied the
inclusion of writedowns and losses from the sale of Covered Assets in the
calculation of bad debt deductions for assistance payments credited on or after
March 4, 1991. Amendment of federal tax returns for fiscal 1991 and 1992 did not
cause any additional federal tax liabilities to be incurred. However, the new
tax law reduced the Bank's federal NOLs in the amount of approximately $259
million.
 
     The aforementioned tax relief provided savings (costs) on the amount of
taxes required to be paid. The estimated tax savings (costs), by year, were as
follows (in millions):
FOR THE YEAR ENDED
  SEPTEMBER 30,                                               SAVINGS (COSTS)
- ------------------                                            ---------------
1991..................................................       $(1.7)
      1992..................................................        (2.8)
      1993..................................................        10.5
      1994..................................................         3.6
      1995..................................................        31.8
FOR THE SIX MONTHS
 ENDED MARCH 31,
- ------------------
1996..................................................        17.2
The remaining NOLs associated with this tax relief aggregated approximately
$745 million at March 31, 1996.
 
  Net Operating Losses
 
     There are federal income tax NOLs of approximately $808 million as of March
31, 1996. Included in the $808 million is $24 million of Old USAT's NOLs that
will expire in fiscal 2003 if not utilized. Because Old USAT's NOLs are
"separate return limitation year" losses within the meaning of the consolidated
return Treasury regulations, their utilization is limited to future taxable
income of the Bank. The remaining $784 million of NOLs are attributable to
operations for fiscal 1989 to 1994, and will begin expiring in fiscal 2004 if
not utilized. See Note 13 to the Consolidated Financial Statements. These NOLs
may be utilized against the taxable income of the other companies within the
consolidated group of which the Company and the Bank are members.
 
  Net Operating Loss Limitations
 
     In the event of an Ownership Change, Section 382 of the Code imposes an
annual limitation on the amount of taxable income a corporation may offset with
NOLs and certain recognized built-in losses. The limitation imposed by Section
382 of the Code for any post-change year would be determined by multiplying the
value of the Company's stock (including both Common Stock and Preferred Stock)
at the time of the Ownership Change by the applicable long-term tax exempt rate
(which was 5.78% for June 1996). Any unused annual limitation may be carried
over to later years, and the limitation may under certain circumstances be
increased by the built-in gains in assets held by the Company at the time of the
change that are recognized in the five-year period after the change. Under
current conditions, if an Ownership Change were to occur, the Company's annual
NOL utilization would be limited to a minimum of approximately $31.8 million.
 
     The Company would undergo an Ownership Change if, among other things, 5%
Stockholders increase their aggregate percentage ownership of such stock by more
than 50 percentage points over the lowest percentage of such stock owned by such
stockholders at any time during the Testing Period (generally the preceding
three years). In applying Section 382 of the Code, at least a portion of the
stock sold pursuant to the Offering would be considered to be acquired by a new
5% stockholder even if no person acquiring the stock in
 
                                       93
96
 
fact owns as much as 5% of the issuer's stock. While the application of Section
382 of the Code is highly complex and uncertain in some respects, the sale of
shares of Class A Common Stock as contemplated by this Prospectus is not
expected to cause an Ownership Change. In addition, events could occur prior to
or after the Offering that are beyond the control of the Company which could
result in an Ownership Change.
 
     In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Offering
of shares of Common Stock that would either cause a person or entity to become a
5% Stockholder or increase a 5% Stockholder's percentage ownership interest.
While such Transfers are deemed prohibited by the Certificate and the Company is
authorized not to recognize any transferee of such a Transfer as a stockholder
to the extent of such Transfer, these restrictions are incomplete since the
Company cannot, consistent with NASDAQ requirements, prevent the settlement of
transactions through NASDAQ, and because the prohibition on Transfers by 5%
Stockholders does not limit transactions in the securities of such 5%
Stockholders that could give rise to ownership shifts within the meaning of the
applicable Section 382 rules. Moreover, the Company Board retains the discretion
to waive these limitations or to take certain other actions that could trigger
an Ownership Change, including through the issuance of additional shares of
Common Stock in subsequent public or private offerings or through subsequent
merger or acquisition transactions.
 
     Because the Company will have utilized a substantial portion of its
available ownership limitation in connection with the Offering, the Company may
not be able to engage in significant transactions that would create a further
shift in ownership within the meaning of Section 382 of the Code within the
following three-year period without triggering an Ownership Change. There can be
no assurance that future actions on the part of the Company's stockholders or
the Company itself will not result in the occurrence of an Ownership Change.
 
     See "Risk Factors -- Limitations on Use of Tax Losses, Restrictions on
Transfer of Stock", "Selling Stockholders -- Selling Stockholder Letter
Agreements" and "Description of Capital Stock -- Common Stock -- Restrictions on
Transfer of Stock".
 
     Preferred stock that meets the requirements of section 1504(a)(4) of the
Code is not considered stock when calculating an Ownership Change. Preferred
stock meets the definition under section 1504(a)(4) of the Code if such stock:
(i) is not entitled to vote; (ii) is limited and preferred as to dividends and
does not participate in corporate growth to any significant extent; (iii) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium); and (iv) is
not convertible into another class of stock.
 
     In fiscal 1995, the Bank publicly issued 4,000,000 shares, $25 liquidation
preference per share, of 9.60% Preferred Stock, Series B (par value $0.01). In
fiscal 1993, the Bank publicly issued 3,420,000 shares, $25 liquidation
preference per share, of 10.12% noncumulative Preferred Stock, Series A (par
value $0.01). Management believes that the Bank's issuance of the Bank Preferred
Stock met the requirements of Section 1504(a)(4) of the Code and, therefore, did
not result in an Ownership Change.
 
     The tax laws in effect in 1988 that applied to the Acquisition provided
that generally applicable limitations on the ability of an acquiring corporation
to utilize the NOLs, and built-in losses, of acquired savings associations did
not apply in the case of the acquisition of assets from insolvent savings and
loan associations. Pursuant to this exception to the generally applicable law,
which existed in 1988, the Bank is allowed to use the NOLs and built-in losses
of Old USAT without limitation.
 
     If an Ownership Change should occur, the Company's ability to utilize its
NOLs will be limited as described above, and the Company's ability to deduct its
built-in losses, if any, as they are realized will be subject to the same
limitation. Limitation of the utilization of these tax benefits could have a
material impact on the Company's financial condition.
 
                                       94
97
 
  Consolidated Group
 
     The Company and the Bank were and are members of an "affiliated group" of
corporations, as defined in the Code and, accordingly, participate in the filing
of a consolidated tax return. One of the requirements of being a member of an
affiliated group is that 80% of the total voting power and 80% of the total
value of stock be owned, directly or indirectly, by other members of the
affiliated group. Stock for this purpose does not include preferred stock that
meets certain definitional requirements prescribed by the Code. Therefore, the
Bank did not cease to be a member of an affiliated group as a result of the
prior issuance of the Bank Preferred Stock. However, if subsequent events occur
that cause the Bank Preferred Stock to no longer meet these requirements (as
could occur if a default in dividends permitted the holders of such stock to
vote in the election of Bank directors), the Bank may cease to be a member of
the affiliated group. If the Bank ceases to be a member of the affiliated group,
other members of the affiliated group will lose their ability to utilize the
Bank's nonseparate return year limitation NOLs in the amount of $736 million.
See "-- Net Operating Losses".
 
  Accounting for Income Taxes
 
     Effective October 1, 1992, the Company and the Bank adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 changes the method of computing
income taxes for financial statement purposes by adopting the liability method
under which the net deferred tax asset or liability is determined based on the
tax effects of tax benefits attributable to tax carryforwards such as NOLs,
investment tax credits and capital losses, and the differences between the book
and tax bases of the various assets and liabilities. The deferred tax asset must
be reduced by a valuation allowance if, based on available evidence, it is more
likely than not that some portion of the tax benefit will not be realized.
Accounting guidance under Accounting Principles Board No. 11, "Accounting for
Income Taxes", did not require these amounts to be recognized previously. During
the fourth quarter of fiscal 1993, the Bank recognized $59 million as a tax
benefit for the expected utilization of $252 million in NOLs against future
taxable income. SFAS No. 109 requires that tax benefits arising from an
acquisition should be used first to reduce to zero any goodwill related to that
acquisition, second to decrease other non-current intangible assets resulting
from that acquisition, and finally to reduce income tax expense. As a result of
the recognition of $59 million in tax benefits, income tax expense was reduced
$44 million, and goodwill associated with the Acquisition was reduced $15
million during the fourth quarter of fiscal 1993. During fiscal 1994, the
Company recognized an additional $58 million as a tax benefit for the expected
utilization of $249 million in NOLs against future taxable income. For fiscal
1994 and 1993, the Company recognized no tax benefit for income taxes for its
NOLs because the criteria to recognize a tax benefit under SFAS No. 109 was not
met. For the six months ended March 31, 1996 and 1995 and fiscal 1995, there
have been no tax benefits recognized by the Company or the Bank for the expected
utilization of NOLs against future taxable income. See "-- Net Operating Loss
Limitations". During the third quarter of 1996, the Company recognized a tax
benefit of $101.7 million for the expected utilization of NOLs against future
taxable income. See Note 21 to the Consolidated Financial Statements.
 
  State Taxation
 
     The Company and the Bank file unitary and combined state returns with
certain subsidiaries and also file separate state returns. The location of
mortgage bank branches, loan solicitations, or real property securing loans
creates jurisdiction for taxation in certain states, which results in the filing
of state income tax returns. Amounts for state tax liabilities are included in
the statements of operations for the six months ended March 31, 1996 and 1995,
and fiscal 1995, 1994, and 1993. See Note 13 to the Consolidated Financial
Statements.
 
                                       95
98
 
                           DESCRIPTION OF PROPERTIES
 
     The Company's offices are located at 50 Charles Lindbergh Boulevard, Suite
500, Uniondale, New York 11553, in space provided by an affiliate of the
Company. The headquarters of the Bank is located in leased premises in Houston,
Texas. The leases for the Bank's headquarters have terms expiring from one to
five years, with annual rental expenses of $4.3 million, subject to increases
under certain circumstances. The following table sets forth the number and
location of the community banking, commercial banking, and mortgage banking
offices of the Company as of March 31, 1996:
NUMBER OF OFFICES
                                    ------------------------------------------------------------------
                                       COMMUNITY
                                    BANKING BRANCHES       COMMERCIAL
                                    ----------------        BANKING         MORTGAGE BANKING
               LOCATION             OWNED     LEASED     OFFICES LEASED      OFFICES LEASED      TOTAL
    ------------------------------  -----     ------     --------------     ----------------     -----
Houston Area..................    14        20              1                    5             40
    Dallas/Ft. Worth Area.........    12        17              1                    3             33
    Other Texas...................    --         4             --                    3              7
    California....................    --        --              1                   25             26
    Florida.......................    --        --              1                    6              7
    Other U.S.....................    --        --              5                   70             75
                                      --        --              -
                                                                                   ---            ---
              Total...............    26        41              9                  112            188
                                      ==        ==              =                  ===            ===
A majority of leases outstanding at March 31, 1996 expire within five years
or less. See Note 17 to the Consolidated Financial Statements.
 
     Net investment in premises and equipment totaled $36.2 million at March 31,
1996.
 
                               LEGAL PROCEEDINGS
 
     On December 7, 1995, Maxxam filed a Petition for Review in the United
States Court of Appeals for the Fifth Circuit seeking to modify, terminate, and
set aside the order, dated December 30, 1988 (the "Order"), of the FSLIC
approving the Acquisition, which was consummated on December 31, 1988 and
involved substantially all the Bank's initial assets and liabilities. See "The
Company -- History". On December 8, 1995, Maxxam filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the U.S. District Court for
the Southern District of Texas, entitled Federal Deposit Insurance Corporation
v. Charles E. Hurwitz, also seeking to set aside the Order. Maxxam contends, in
both cases, that it submitted the most favorable bid to acquire the assets and
liabilities of Old USAT and that it should have been selected as the winning
bidder.
 
     The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of Maxxam are barred by applicable time
limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.
 
     The Bank's operations are subject to various consumer protection statutes
and regulations, including, for example, the TILA, the FH Act, the CRA, the
ECOA, the HMDA, the RESPA, the EFTA, the Expedited Funds Act, the TISA, and the
ADA. See "Regulation -- Consumer Protection Regulations". During the past
several years, numerous individual claims and purported consumer class action
claims were commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking civil statutory
and actual damages and rescission under the TILA, as well as remedies for
alleged violations of various state unfair trade practices laws and restitution
or unjust enrichment in connection with certain mortgage loan transactions.
Also, there have been numerous individual claims and purported consumer class
action claims commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the
RESPA and breach the lenders' contracts with borrowers. Such claims also
generally seek actual damages and attorneys' fees.
 
     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
 
                                       96
99
 
disclosure, breach of contract, breach of fiduciary duty, or violation of
federal or state laws. Claims have involved, among other things, interest rates
and fees charged in connection with loans, interest rate adjustments on
adjustable-rate mortgage loans, timely release of liens upon loan payoffs, the
disclosure and imposition of various fees and charges, and the placing of
collateral protection insurance. While the Bank has had various claims asserted
against it similar to those discussed above, management does not expect these
claims to have a material adverse effect on the Bank's or the Company's
financial condition, results of operations or liquidity.
 
     On July 25, 1995, the Bank, the Company and Hyperion Partners filed suit in
the United States Court of Federal Claims against the United States of America
for breach of contract and taking of property without compensation in
contravention of the Fifth Amendment of the United States Constitution. The
action arose because the passage of FIRREA and the regulations adopted by the
OTS pursuant to FIRREA deprived the Company of its contractual rights against
the United States.
 
     In December 1988, the United States, through its agencies, entered into
certain agreements with the Company that resulted in contractual obligations
owed to the Company. The Company contends that the obligations were undertaken
to induce, and did induce, the Company's acquisition of substantially all of the
assets and the secured, deposit, and certain tax liabilities of Old USAT, an
insolvent savings and loan association, thereby relieving the FSLIC of the
immense costs and burdens of taking over and managing or liquidating the
institution. The FSLIC, an agency of the United States government, actively
solicited buyers for Old USAT, and in the weeks preceding the acquisition the
Company and the FSLIC negotiated the terms of a complex transaction involving
some six contractual documents. To accomplish this transaction, the FSLIC and
its regulating agency, the Federal Home Loan Bank Board (the "FHLBB"), which was
also an agency of the United States government, were required to undertake to
pay certain other amounts of money over time and to count for regulatory
purposes certain monies and book entries of the Bank in ways that allowed the
Company greater leverage to increase the size of the Bank prudently and
profitably. The United States obtained the right to share in this leveraged
growth through warrants for stock and through so-called "tax benefit payments"
to the United States from the Company.
 
     The lawsuit involves the United States' contractual obligations (i) to
abide by a capital forbearance, which allowed the Bank to operate for ten years
under negotiated capital levels lower than the levels required by the then
existing regulations or successor regulations, (ii) to abide by its commitment
to allow the Bank to count subordinated debt as regulatory capital for all
purposes and (iii) to abide by an accounting forbearance, which allowed the Bank
to count as capital for regulatory purposes, and to amortize over a period of
twenty-five years, the difference between certain FSLIC payment obligations to
the Bank, denominated "Reimbursable Goodwill," and the discounted present value
of those future FSLIC payments. The lawsuit seeks monetary relief for the
breaches by the United States of its contractual obligations to plaintiffs and,
in the alternative, seeks just compensation for a taking of property and for a
denial of due process under the Fifth Amendment to the United States
Constitution.
 
     There are over 100 similar cases pending in the United States Court of
Federal Claims, which has entered summary judgment for the plaintiffs as to
liability, but not damages, in three of the cases. These three cases (the
"Winstar cases") were appealed to the United States Court of Appeals for the
Federal Circuit, which affirmed the judgment for the plaintiffs following a
hearing en banc after a three-judge panel had found for the United States. The
United States Supreme Court has agreed to review the decision in the Winstar
cases, oral argument occurred on April 24, 1996, and the Supreme Court is
expected to issue a decision during 1996. The Company's claim has been stayed,
pending the decisions of the Supreme Court in the Winstar cases. There have been
no decisions determining damages in any of the similar cases. The Company is
unable to predict the outcome of its claim against the United States and the
amount of any damages that may be awarded to the Bank or the Company, if any, in
the event that judgment is made in favor of the Bank or the Company.
Consequently, no assurances can be given as to the results of this claim or the
timing of any proceeding in relation thereto.
 
     The Bank is involved in other legal proceedings occurring in the ordinary
course of business that management believes, after consultation with legal
counsel, are not, in the aggregate, material to the financial condition, results
of operations, or liquidity of the Bank or the Company.
 
                                       97
100
 
                                   MANAGEMENT
 
DIRECTORS
 
     The Company Board consists of three members and is divided into three
classes. The members of each class are elected for a term of three years with
one class being elected annually. Each director of the Company is also a
director of the Bank. The following table sets forth certain information with
respect to the directors of the Company, including information regarding their
ages and when they became directors.
DIRECTOR OF       DIRECTOR OF
                                                      THE COMPANY        THE BANK        TERM
                       NAME                  AGE         SINCE             SINCE        EXPIRES
        -----------------------------------  ---     --------------     -----------     -------
Lewis S. Ranieri...................  49           1988              1988
        Salvatore A. Ranieri...............  47           1988              1988
        Scott A. Shay......................  38           1988              1988
The principal occupation and position with the Company and the Bank of each
director is set forth below.
 
     LEWIS S. RANIERI.  Mr. Ranieri is the Chairman of the Company. He was also
the President of the Company and Chairman of the Bank from 1988 until
               1996. Mr. Ranieri is the Chairman and CEO of Ranieri & Co.,
positions he has held since founding Ranieri & Co. in 1988. Mr. Ranieri is a
founder of Hyperion Partners and of Hyperion Partners II. He is also Chairman of
Hyperion Capital Management, Inc., a registered investment advisor and an
affiliate of the Bank ("Hyperion Capital") and The Hyperion Total Return Fund,
Inc. He is director of the Hyperion 1999 Term Trust, Inc., the Hyperion 1997
Term Trust, Inc., the Hyperion 2002 Term Trust, Inc. and Hyperion 2005
Investment Grade Opportunity Trust, Inc. Mr. Ranieri is also Chairman and
President of various other indirect subsidiaries of Hyperion Partners. Along
with his brother, Salvatore A. Ranieri, and Scott A. Shay, Mr. Ranieri controls
the general partner of Hyperion Partners. Along with Mr. Shay, Mr. Ranieri
controls the general partner of Hyperion Partners II, a recently formed
investment partnership which plans to make investments primarily in the
financial and real estate sectors of the economy. He is also Chairman of the
Board and a director of American Marine Holdings, Inc. ("American Marine"). Mr.
Ranieri is also a director of Delphi Financial Group, Inc.
 
     Mr. Ranieri is a former Vice Chairman of Salomon Brothers Inc ("Salomon")
where he was employed from 1968 to 1987, and was one of the principal developers
of the secondary mortgage market. While at Salomon, Mr. Ranieri helped to
develop the capital markets as a source of funds for housing and commercial real
estate and to establish Salomon's then leading position in the MBS area. He is a
member of the National Association of Home Builders Mortgage Roundtable.
 
     Mr. Ranieri is a Trustee for the Parish of Our Lady of the Rosary/Shrine of
St. Elizabeth Ann Seton and the Environmental Defense Fund. Mr. Ranieri is also
a director of the Peninsula Hospital Center in Queens, New York. Mr. Ranieri
received his Bachelor of Arts degree from St. John's University.
 
     SALVATORE A. RANIERI.  Mr. Ranieri is the General Counsel and a Managing
Director of Ranieri & Co. He was also the Vice President, Secretary and General
Counsel of the Company from 1988 until                1996. He is a director of
Hyperion Capital, as well as of various other direct and indirect subsidiaries
of Hyperion Partners. Along with his brother, Lewis S. Ranieri, and Scott A.
Shay, Mr. Ranieri controls the general partner of Hyperion Partners. He is also
a director of American Marine. Mr. Ranieri was one of the original founders of
Ranieri & Co. and of Hyperion Partners. Prior to joining Ranieri & Co., he had
been President of Livia Enterprises, Inc., a private venture capital and real
estate investment company that oversaw investments in the real estate,
construction, and manufacturing sectors. In addition to his business experience,
Mr. Ranieri is also a lawyer. During his career, his practice has included the
areas of corporate, litigation, real estate and regulatory matters. Until 1984,
he had been a member of a law firm in New York City. He is admitted to practice
law in New York and various federal courts. He received his Bachelor of Arts
degree from New York University and his Juris Doctor degree from Columbia
University School of Law.
 
     SCOTT A. SHAY.  Mr. Shay has been a Managing Director of Ranieri & Co.
since its formation in 1988. He was also a Vice President of the Company from
1988 until                1996. Mr. Shay is a founder of
 
                                       98
101
 
Hyperion Partners and Hyperion Partners II. Mr. Shay is currently a director of
Hyperion Capital and Transworld Home Healthcare, Inc., as well as an officer or
director of other direct and indirect subsidiaries of Hyperion Partners and
Hyperion Partners II. Along with Lewis S. Ranieri and Salvatore A. Ranieri, Mr.
Shay controls the general partner of Hyperion Partners. Along with Mr. Lewis S.
Ranieri, Mr. Shay controls the general partner of Hyperion Partners II. Prior to
joining Ranieri & Co., Mr. Shay was a director of Salomon where he was employed
from 1980 to 1988. Mr. Shay was involved with Salomon's thrift mergers and
acquisitions practice and with mortgage banking financing and mergers and
acquisitions. Mr. Shay also worked on acquisitions of real estate investment
trusts while at Salomon. Mr. Shay graduated Phi Beta Kappa from Northwestern
University with a B.A. degree in economics and received a Master of Management
degree with distinction from Northwestern's Kellogg Graduate School of
Management. Mr. Shay has lectured at the School of Mortgage Banking and has
written articles on the strategic environment for mortgage banking and on merger
and acquisition theory. Mr. Shay currently serves as a member of the board and
was President of Hillel of New York from 1990 until June 30, 1992. He is also on
the board of UJA-Federation of New York.
 
     The principal occupation of each director of the Bank is set forth below.
 
     BARRY C. BURKHOLDER.  Mr. Burkholder has been the President and CEO of the
Company since                1996, and has held similar positions with the Bank
since joining it on April 10, 1991. Since      , 1996, Mr. Burkholder has also
been Chairman of the Bank. In May 1994, Mr. Burkholder assumed the additional
responsibilities of managing the Bank's retail banking operations. Prior to
joining the Bank, Mr. Burkholder was employed at Citicorp/Citibank for 15 years.
Mr. Burkholder became associated with Citicorp through its then newly formed
Consumer Services Group in 1976, and then became a member of its International
Staff. Mr. Burkholder moved to Citibank Savings in London where he was named
Chairman and Managing Director in 1977. Mr. Burkholder returned to the United
States in 1981 to become President of Citicorp Person-to-Person, now part of
Citicorp Mortgage, Inc., a nationwide mortgage lending business with related
mortgage banking, servicing, and insurance activities. In 1984, he was named
Chairman and CEO of Citibank Illinois, and two years later became Central
Division Executive for the U.S. Consumer Bank. As Central Division Executive,
Mr. Burkholder was responsible for Citicorp's consumer banking activities in the
Midwest and Southeast. Mr. Burkholder began his career at Ford Motor Company in
the financial planning area and moved to Certain-teed Corporation where his last
position prior to joining Citicorp was as President of its real estate
development subsidiary. Mr. Burkholder received a B.S. and an M.B.A. from Drexel
University. Mr. Burkholder is President elect of the Houston Symphony, and
serves on the Board of Trustees of the Texas Gulf Coast United Way.
 
     LAWRENCE CHIMERINE, PH.D.  Dr. Chimerine has served as President of his own
economic consulting firm, Radnor Consulting Services, since 1990, and as a
Senior Economic Counselor for Data Resources Inc. since 1990. He is currently
also the Managing Director and Chief Economist of the Economic Strategy
Institute in Washington, D.C. Dr. Chimerine served as Chairman and Chief
Executive Officer of the WEFA Group from 1987 to 1990 and of Chase Econometrics
from 1979 to 1987, both of which provide economic consulting. Dr. Chimerine
received a B.S. from Brooklyn College and a Ph.D. from Brown University.
 
     DAVID M. GOLUSH.  Mr. Golush is a Managing Director of Ranieri & Co. with
which he has been associated since the firm's founding in 1988. He is an officer
of direct and indirect subsidiaries of Hyperion Partners and Hyperion Partners
II, and has an economic interest in Hyperion Partners and Hyperion Partners II.
Mr. Golush was at Salomon from 1972 to 1987 and was a Vice President from 1975.
From 1984 to 1987, he was Chief Administrative Officer of Salomon's Mortgage and
Real Estate Department at Salomon. From 1966 to 1972, he held positions in
public accounting and private industry. He has been a certified public
accountant in New York since 1972. Mr. Golush received a B.B.A. from the
University of Cincinnati. He is Treasurer of the New York Police & Fire Widows'
and Children's Fund, Inc. and a member of the board of the Jewish Federation of
Central New Jersey.
 
     PAUL M. HORVITZ, PH.D.  Dr. Horvitz has been on the faculty of the
University of Houston since 1977, and holds the University's Judge James Elkins
Chair of Banking and Finance. From 1967 to 1977, Dr. Horvitz held positions as
Assistant Director of Research, Director of Research and Deputy to the Chairman
at the FDIC. Prior to joining the FDIC he was an economist at the Federal
Reserve Bank of Boston and the Office of
 
                                       99
102
 
Comptroller of the Currency. From 1983 to 1990, Dr. Horvitz was a member of the
Board of Directors of the FHLB Dallas, and in 1986 and 1987 he was a member of
the Federal Savings and Loan Advisory Council. He is currently a director of the
Pulse EFT Association, and a member of the Shadow Financial Regulatory
Committee. Dr. Horvitz received a B.A. from the University of Chicago, an M.B.A.
from Boston University, and a Ph.D. from MIT.
 
     ALAN E. MASTER.  Mr. Master began his career with Chemical Bank in 1961 as
a commercial lending officer, became a Branch Office Head, and worked on
start-ups or clean-ups of banks in Miami, Florida. In 1973, he joined Barnett
Banks of Florida ("Barnett") and led a unit of Barnett formed from the
reorganization and merger of five subsidiaries of Barnett. In 1977, he became
President, CEO, and Chief Financial Officer, and in 1978 was elected Vice
Chairman of United Americas Bank of New York. Mr. Master joined The Merchants
Bank of New York in 1979 as Executive Vice President and was elected a director
in 1980. In 1983, Mr. Master joined Ensign Bank FSB in New York City as
President and CEO. In 1991, Mr. Master established a consulting practice
specializing in the financial services and banking sectors. Mr. Master has
served on the Board of Trustees of the Hyperion Government Mortgage Trust II,
has participated in meetings of the Advisory Board of Hyperion Partners, is a
member of the Advisory Board of the Johnson Graduate School of Management of
Cornell University and joined PaineWebber Incorporated in April 1996. Mr. Master
received a B.A. from Cornell University and has completed course work in finance
and accounting at the New York University Graduate School of Business
Administration.
 
     ANTHONY J. NOCELLA.  Mr. Nocella has been the Executive Vice President and
Chief Financial Officer of the Company since                1996, and has held
those same positions with the Bank since joining it in July 1990. He manages the
Financial Markets and Commercial Banking Groups of the Bank. From 1988 to 1990,
Mr. Nocella provided consulting services to the Bank as President of Nocella
Management Company, a firm that specialized in asset and liability management
consulting for financial institutions. From 1981 to 1987, Mr. Nocella served as
Executive Vice President and Chief Financial Officer of Meritor Financial Group,
as well as President of the Company's Commercial banking/financial markets arm,
Meritor Financial Markets ("Meritor"). During his 13 years at Meritor
(1974-1987), he also served as President of PSFS Management Company, Inc., the
holding company of The Philadelphia Saving Fund Society, the nation's largest
savings institution at the time. Other career positions include Controller and
Director of Financial Services for American Medicorp (now Humana), Managing
Auditor and Consultant for Peat Marwick and adjunct professor of finance at St.
Joseph's University and Drexel University. Mr. Nocella, a Certified Public
Accountant, received an undergraduate degree in accounting from LaSalle
University, and an M.B.A. in computer science and finance from Temple
University. He also completed the graduate Bank Financial Management Program of
the Wharton School at the University of Pennsylvania. Mr. Nocella is the
President and a director of the Community Bankers Association of Southeast
Texas, a delegate and member of the Mortgage Finance and Accounting Committees
of the America's Community Bankers, a director of the Texas Community Bankers
Association, and delegate and past President of the Financial Executives
Institute.
 
     PATRICIA A. SLOAN.  Ms. Sloan is a Managing Director of Ranieri & Co. and
has an economic interest in Hyperion Partners and Hyperion Partners II. She is
also a director of certain funds managed by Hyperion Capital Management,
including Hyperion 1999 Term Trust, Inc., Hyperion 1997 Term Trust, Inc.,
Hyperion 2002 Term Trust, Inc., Hyperion Investment Grade Opportunity Term
Trust., Inc., and the Hyperion Total Return Fund, Inc. Prior to joining Ranieri
& Co. in 1988, Ms. Sloan was employed at Salomon from 1972 to 1988, where she
served as Director of the Company's Financial Institutions Group. Prior to
joining Salomon, Ms. Sloan was employed at Bache & Co., Inc. from 1965 to 1972.
Ms. Sloan received a B.A. from Radcliffe College and an M.B.A. from Northwestern
University.
 
     KENDRICK R. WILSON III.  Mr. Wilson currently is a Managing Director and
head of investment banking of Lazard Freres & Co. LLC, a New York-based
investment banking firm. Prior to his joining Lazard Freres & Co. LLC in 1990,
Mr. Wilson served as President of Ranieri & Co. from March 1988 to December
1989, and Senior Executive Vice President for E.F. Hutton from April 1987 to
February 1988. Mr. Wilson was also employed at Salomon from June 1978 to April
1987 where he became a Managing Director. Mr. Wilson has an economic interest in
Hyperion Partners. He is a director of ITT Corporation, Black Rock Asset
Investors,
 
                                       100
103
 
American Marine Holdings, American Buildings Company, Inc., and Meigher
Communications, Inc. Mr. Wilson received a B.A. from Dartmouth College and an
M.B.A. from Harvard Business School.
 
     Mr. Lewis Ranieri and Mr. Salvatore Ranieri are brothers. No other director
or executive officer is related to any other director or executive officer by
blood, marriage, or adoption. Mr. Lewis Ranieri, Mr. Salvatore Ranieri and Mr.
Shay served since 1990 as directors of the Company pursuant to an agreement
entered into in 1990 between the owners of certain non-voting stock of the
Company and Hyperion Partners, which was terminated in     1996. There are no
existing arrangements or understandings between a director and any other person
pursuant to which such person was elected a director.
 
ANNUAL MEETING
 
     The By-Laws provide that annual meetings of stockholders will be held at
the Company's principal office or at such other place and on such date as may be
fixed from time to time by resolution of the Company Board. The first annual
meeting for which proxies will be solicited from stockholders will be held on
              , 1996.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Company Board has established      committees:
 
COMPENSATION OF DIRECTORS
 
     Non-employee directors currently receive an annual retainer of $          .
The chair of each committee will receive an additional annual retainer of
$          . Directors will not receive separate meeting fees.
 
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
 
     The following table sets forth information concerning executive officers of
the Company and principal executive officers of the Bank who do not serve on the
Company Board. All executive officers of the Company and the Bank are elected by
the Company Board and the Board of Directors of the Bank, respectively, and
serve until their successors are elected and qualified. There are no
arrangements or understandings between any director and any other person
pursuant to which such individual was elected an executive officer.
 
                                       101
104
 
                  PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
NAME               AGE                   POSITION AND OCCUPATION
- ------------------------------  ---   --------------------------------------------------------
George R. Bender..............  56    Executive Vice President -- Mortgage Banking of the
                                      Company since     1996 and of the Bank since July 1990.
                                      Prior to joining the Bank, Mr. Bender was employed by
                                      CenTrust Mortgage Corporation as President and CEO from
                                      June 1985 to February 1990. As President and CEO, Mr.
                                      Bender was responsible for the overall management of
                                      this mortgage banking subsidiary of CenTrust Savings.
                                      Mr. Bender's career also includes positions as Chairman
                                      and CEO of WestAmerica Mortgage Company in Denver,
                                      President and CEO of Unity Mortgage Corporation in
                                      Chicago; Senior Vice President of United First Mortgage
                                      Corporation of San Diego; and Senior Vice President of
                                      Production and Marketing at Advance Mortgage
                                      Corporation. Mr. Bender attended the University of
                                      Michigan in Ann Arbor.
Jonathon K. Heffron...........  43    Executive Vice President and General Counsel of the
                                      Company since     1996 and of the Bank since May 1990,
                                      named Chief Operating Officer of the Bank in May, 1994.
                                      Prior to joining the Bank, Mr. Heffron served for two
                                      years as President and CEO of First Northern Bank,
                                      Keene, New Hampshire. Prior to joining First Northern
                                      Bank, Mr. Heffron served for more than 10 years in
                                      several capacities at the FHLB Board, Washington, D.C.
                                      and at the FHLB Dallas, including Attorney Advisor,
                                      Trial Attorney, General Counsel, Chief Administrative
                                      Officer, and Chief Operating Officer. Mr. Heffron
                                      received a B.A. Magna Cum Laude from the University of
                                      Minnesota, a J.D. from Southwestern University School of
                                      Law, and an LL.M. from the National Law Center of George
                                      Washington University. Mr. Heffron serves on the Boards
                                      of Directors of the FHLB Dallas, the Credit Coalition of
                                      Greater Houston and the Texas Conference for Homeowners'
                                      Rights.
Leslie H. Green...............  57    Senior Vice President -- Operations and Technology of
                                      the Company since             1996 and of the Bank since
                                      June 1991. Prior to joining the Bank, Mr. Green was
                                      employed by Equimark since 1988 as Executive Vice
                                      President -- Systems and Operations. Prior to joining
                                      Equimark, Mr. Green served in several capacities at
                                      Keystone Computer Association, Fidelity Bank, National
                                      Information Systems and RCA Computer Systems. Mr. Green
                                      received a degree in Business Management from Rutgers
                                      University.
Karen J. Hartnett.............  48    Senior Vice President -- Human Resources of the Company
                                      since     1996 and of the Bank since January 1991. Prior
                                      to joining the Bank, Ms. Hartnett was employed by
                                      Equimark as Senior Vice President Human Resources since
                                      1989. From 1988 to 1989, Ms. Hartnett was Senior Vice
                                      President and Chief Personnel Officer for NCNB Texas.
                                      Ms. Hartnett served NCNB Texas, and predecessor
                                      organizations, as Vice President and as Director of
                                      Human Resources. Ms. Hartnett's human resources
                                      experiences include positions at Zale Corporation,
                                      Mobile 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.
102
105
NAME               AGE             POSITION AND OCCUPATION
- ------------------------------  --- ------------------------------------------
Sonny H. Lyles................  50  Senior Vice President and Chief Credit
                                    Officer of the Company since  
                                    1996 and of the Bank since February 1991.
                                    Prior to joining the Bank, Mr. Lyles 
                                    was employed by First Union National Bank
                                    as Senior Credit Officer beginning in 1983.
                                    Prior to joining First Union National Bank,
                                    Mr. Lyles was employed at First Tulsa 
                                    Bank, Florida National Bank and South
                                    Carolina National Bank. Mr. Lyles
                                    received a B.A. from Wofford College. Mr.
                                    Lyles is a member of the Board, First Vice
                                    President of the Texas Chapter, and a
                                    national member, of the Credit and Risk
                                    Management Council of Robert Morris
                                    Associates, a trade association of bank 
                                    lending and credit officers. Mr. Lyles
                                    is the Wofford College alumni
                                    representative from Houston.
EXECUTIVE COMPENSATION
 
  Summary of Cash and Certain Compensation
 
     The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the CEO of the Company
and the other four most highly compensated executive officers of the Company and
the Bank:
 
                           SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION                     LONG-TERM COMPENSATION
                                    -------------------------------------    ---------------------------------
                                                                                      AWARDS
                                                                             -----------------------
                                                                  OTHER                   SECURITIES   PAYOUTS       ALL
                                                                  ANNUAL                  UNDERLYING   -------      OTHER         
                                                                 COMPEN-      RESTRICTED   OPTIONS/      LTIP      COMPEN-
                                             SALARY  BONUS(1)  SATION(2)(3)     STOCK        SAR        PAYOUTS   SATION(4)
NAME AND PRINCIPAL POSITION          YEAR     ($)       ($)        ($)           (#)         (#)          ($)        ($)
- ---------------------------          ----    ------  --------  ------------    ---------   ---------     -------   --------
Barry C. Burkholder.................  1995   375,000   594,000           --        --           --          --        9,240
  President and                       1994   375,000   607,500           --        --           --          --        9,240
  Chief Executive Officer             1993   375,000   500,000        1,328        --           --          --        8,994
Anthony J. Nocella..................  1995   315,000   235,000           --        --           --          --        9,402
  Executive Vice President and        1994   315,000   200,000           --        --           --          --        8,878
  Chief Financial Officer             1993   315,000   210,000        1,323        --           --          --        9,069
  Financial Markets/Treasury
  Commercial Banking
Jonathon K. Heffron.................  1995   225,000   200,000           --        --           --          --        9,402
  Executive Vice President,           1994   225,000   175,000           --        --           --          --        8,984
  General Counsel, and                1993   225,000   185,000          118        --           --          --        5,386
  Chief Operating Officer
George R. Bender....................  1995   200,000    75,000           --        --           --          --       13,980
  Executive Vice President            1994   200,000   408,900           --        --           --          --        4,500
  Mortgage Banking                    1993   200,000   703,601        1,341        --           --          --        8,994
Leslie H. Green.....................  1995   175,000    75,000           --        --           --          --        4,620
  Senior Vice President               1994   175,000    70,000           --        --           --          --        4,615
  Operations & Technology             1993   167,500    70,000           --        --           --          --        6,320
- ---------------
(1) Mr. Burkholder was hired on April 10, 1991, and was paid a bonus based on
    the financial performance of the Bank, according to the provisions of his
    employment contract, for each of the first five full years of his
    employment. Amounts indicated represent the amount paid in the respective
    fiscal year. For the 12-month period ended April 10, 1996, Mr. Burkholder
    was paid a bonus of $550,000. See "-- Management Employment Arrangements".
    All other management bonuses were paid as determined by the Compensation
    Committee of the Bank's Board of Directors, based on the Bank's financial
    and individual performance for 1995. The Bank's financial performance is
    measured by net income, return on assets, and return on equity as compared
    to the Bank's annual business plan and a specified peer group of other
    thrifts of comparable size.
 
(2) "Other Annual Compensation" for 1993 includes a tax equalization amount paid
    to Messrs. Burkholder, Bender, Nocella, and Heffron to offset a failed
    401(k) discrimination test for calendar year 1992.
 
(3) Messrs. Burkholder, Bender, Nocella, and Heffron are each provided an auto
    allowance and a country club and/or dining club membership. However, in no
    case does the aggregated value of such auto allowance and memberships exceed
    the lesser of $50,000 or 10% of such officer's annual cash
 
                                       103
106
 
compensation. Therefore, the value of auto allowances and club memberships are
excluded from these numbers.
 
(4) "All Other Compensation" amounts represent contributions by the Bank to each
    executive's account in the Bank's 401(k) Plan.
 
EXECUTIVE MANAGEMENT COMPENSATION PLAN
 
     In June 1996, the Company Board approved an Executive Management
Compensation Plan (the "Compensation Plan") containing the following provisions:
(i) a cash bonus of $   million payable by June 30, 1996; (ii) the award of
       shares of Company common stock with restrictions on its transferability
for a period of three years from its issuance; and (iii) the issuance of
       options for purchase of an equivalent number of shares of common stock:
such options vest ratably over three years from the date of grant. The options'
exercise price approximates the fair market value at the date of the grant and
will expire if not exercised by June 2003.
 
THE 1996 INCENTIVE COMPENSATION PLAN
 
     The Company has adopted the Bank United 1996 Incentive Compensation Plan
(the "1996 Incentive Compensation Plan"). The 1996 Incentive Compensation Plan
is designed to promote the success and enhance the value of the Company by
linking the interests of certain of the full-time employees of the Company
("Participants") to those of the Company's stockholders and by providing
Participants with an incentive for outstanding performance. The 1996 Incentive
Compensation Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract and retain Participants upon whose judgment,
interest and special efforts the Company's successful operation largely is
dependent. As determined by the Compensation and Directors Committee of the
Company Board, or any other designated committee of the Company Board, the
Company employees, including employees who are members of the Company Board, are
eligible to participate in the 1996 Incentive Compensation Plan. Non-employee
directors are not eligible to participate in the 1996 Incentive Compensation
Plan. The Company Board has provided for the 1996 Incentive Compensation Plan to
remain in effect for 10 years, to 2006. The description below is intended as a
summary only and is qualified in its entirety by reference to the 1996 Incentive
Compensation Plan, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
 
  General
 
     The 1996 Incentive Compensation Plan will be administered by the
Compensation and Directors Committee of the Company Board or, at the discretion
of the Company Board, any other committee appointed by the Company for such
purpose (the "Committee"). Four types of awards may be granted to Participants
under the 1996 Incentive Compensation Plan: (i) stock options (both
non-qualified and incentive) ("Options"), (ii) stock appreciation rights
("SARs"), (iii) restricted Common Stock ("Restricted Stock") and (iv)
performance awards ("Performance Awards," and together with the Options, SARs
and Restricted Stock, the "Awards").
 
     The 1996 Incentive Compensation Plan provides that the total number of
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan may not exceed             shares; provided that, if during
the term of the 1996 Incentive Compensation Plan, the Company repurchases shares
of Class A Common Stock additional shares equal to the number of such
repurchased shares, up to             outstanding shares; provided that, if
during the term of the 1996 Incentive Compensation Plan, the Company repurchases
shares of Class A Common Stock additional shares equal to the number of such
repurchased shares, up to             shares, will be available for Options; and
provided, further, that the total number of shares of Class A Common Stock
Available for Restricted Stock awards is not to exceed   . No Participant may be
granted Awards covering in excess of 10% of the shares of Class A Common Stock
available for issuance over the life of the 1996 Incentive Compensation Plan. If
any Award is cancelled or forfeited or terminates, expires, or lapses (other
than a termination of a Tandem SAR (as defined below)), upon exercise of the
related Option or the termination of a related Option upon exercise of the
corresponding Tandem SAR, shares subject to such Award will be available for the
grant of an Award under the 1996 Incentive Compensation Plan.
 
                                       104
107
 
     In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization or partial or complete liquidation of the
Company, the Committee or the Company Board may make such substitutions or
adjustments in the aggregate number and class of shares reserved for issuance or
subject to outstanding Awards and in the number, kind and price of shares
subject to outstanding Options of SAR's as it may determine to be appropriate.
 
     The 1996 Incentive Compensation Plan is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
is not qualified under Section 401(a) of the Code.
 
  Options
 
     The term of Options granted under the 1996 Incentive Compensation Plan may
not exceed 10 years. The exercise price for each Option granted will be
determined by the Committee; provided that the exercise price may not be less
than 100% of the fair market value (as defined in the 1996 Incentive
Compensation Plan) of a share of Class A Common Stock on the date of grant.
 
     A Participant exercising an Option may pay the exercise price in full in
cash, or, if approved by the Committee, with previously acquired shares of Class
A Common Stock. The Committee, in its discretion, may allow cashless exercise of
Options.
 
     Options are nontransferable other than by will or laws of descent and
distribution (and, in the case of a nonqualified Option, pursuant to a domestic
relations order or by gift to members of the holder's immediate family, whether
directly or indirectly or by means of a trust or partnership), and, during the
Participant's lifetime, may be exercised only by the Participant or his legal
representative.
 
  SARs
 
     SARs may be granted by the Committee in connection with all or part of any
Option grant ("Tandem SARs"), or granted separately and unrelated to any Option
("Freestanding SARs"). A Tandem SAR may be exercised only with respect to the
shares for which its related Option is then exercisable. SARs permit the
Participant to receive in cash or shares of Class A Common Stock (or a
combination of both) an amount equal to the excess of the fair market value of a
share of Class A Common Stock on the date the SAR is exercised over the exercise
price for the SAR times the number of shares of Class A Common Stock with
respect to which such SAR is exercised.
 
     The term of SARs granted under the 1996 Incentive Compensation Plan may not
exceed 10 years. The exercise price of a Freestanding SAR will be determined by
the Committee. The exercise price of a Tandem SAR will equal the exercise price
of the related Option.
 
     SARs are nontransferable other than by will or laws of descent and
distribution, and, during the Participant's lifetime, may be exercised only by
the Participant; provided that, at the discretion of the Committee, an Award
agreement may permit transfer of an SAR by a Participant solely to members of
the Participant's immediate family or trusts or partnerships for the benefit of
such persons.
 
  Restricted Stock
 
     The Committee may grant Restricted Stock to eligible employees in such
amounts as the Committee determines. At the time of each award of Restricted
Stock the Committee will establish a restricted period, which may not, unless
specified conditions described below are satisfied, be less than three years
from the grant date (the "Restricted Period") during which such stock may not be
sold, transferred, pledged, assigned or otherwise alienated; provided that the
Committee may permit transfers of Restricted Stock during such period to members
of the Participant's immediate family or trusts or partnerships for the benefit
of such persons. If a Participant terminates his employment or is involuntarily
terminated for cause during the Restricted Period, all Restricted Stock held by
such Participant will be forfeited. If a Participant is involuntarily terminated
other than for cause, the Committee may waive all or part of any remaining
 
                                       105
108
 
restrictions on such Participant's Restricted Stock. Up to one-third of the
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan as Restricted Stock awards may be issued without a minimum
Restricted Period. After the Restricted Period has expired, the related
Restricted Stock is freely transferable.
 
     The Committee has discretion to determine whether holders of Restricted
Stock will be entitled to dividends or other distributions thereon. If any such
dividends or distributions are in shares of Class A Common Stock, such shares
will be subject to the same restrictions as the related Restricted Stock. In the
event the holder of Restricted Stock on which dividends or distributions are
made is subject to Section 16 of the Exchange Act, the vesting period for such
dividend or distribution will be the longer of (i) the remaining vesting period
on the related Restricted Stock and (ii) six months.
 
  Performance Awards
 
     The Committee may from time to time grant Performance Awards, which, as
determined by the Committee, may include, without limitation, cash, Common
Stock, performance units, performance shares or any combination thereof. The
Committee will set the performance goals and restrictions applicable to each
Performance Award, including establishing the applicable performance period and
the value of the Performance Award. After the applicable performance period has
ended, the holder of a Performance Award will be entitled to receive the payout
earned to the extent to which the corresponding performance goals were
satisfied.
 
     Performance Awards are nontransferable other than by will or laws of
descent and distribution and during the Participant's lifetime may be exercised
only by the Participants; provided that, at the discretion of the Committee, an
award agreement may permit transfer of a Performance Award by a Participant
solely to members of the Participant's immediate family or trusts or
partnerships for the benefit of such persons.
 
  Change of Control
 
     In the event of a Change of Control (as defined in the 1996 Incentive
Compensation Plan), (i) any Option or SAR that is not then exercisable and
vested will become fully exercisable and vested (provided that in the case of
any holder of an Option or SAR who is subject to Section 16(b) of the Exchange
Act, such Option or SAR has been outstanding for at least six months as of the
date of such Change of Control), (ii) the restrictions on any Restricted Stock
will lapse and (iii) all Performance Awards will be deemed earned.
 
     During the 60-day period following a Change of Control, any Participant
will have the right to surrender all or part of any Option held by such
Participant, in lieu of payment of the exercise price, and to receive cash in an
amount equal to the difference between (i) the higher of the price received for
Common Stock in connection with the Change of Control and the fair market value
of a share of Common Stock in connection with the Change of Control and the fair
market value of a share of Common Stock on the date, if any, that such Option is
cancelled (the "Change of Control Price"), and (ii) the exercise price (the
difference between (i) and (ii) being referred to as the "Spread") multiplied by
the number of shares of Class A Common Stock granted in connection with the
exercise of such Option; provided that such Change of Control transaction would
not thereby be made ineligible for pooling of interests accounting; and
provided, further, that, if the Change of Control is within six months of the
grant date for any such Option, no such election may be made prior to six months
from such grant date; and provided, further, that, if the Option is an
"incentive stock option" under Section 422 of the Code, the Change of Control
Price will equal the fair market value of a share of the Class A Common Stock on
the date, if any, that such Option is cancelled. If such 60-day period ends
within the period six months after the grant date for an Option, any such Option
held by a Participant subject to Section 16 of the Exchange Act will be
cancelled and the holder thereof will receive six months and one day after the
grant of such Option, an amount equal to the Spread multiplied times the number
of shares of Class A Common Stock granted under or comprising such Option.
 
                                       106
109
 
  Deferrals
 
     The Committee may permit a Participant to elect, or the Committee may
require, at its sole discretion, subject to the proviso set forth below, any one
or more of the following: (i) the deferral of a Participant's receipt of cash,
(ii) a delay in the exercise of an Option or SAR, (iii) a delay in the lapse or
waiver of restrictions with respect to Restricted Stock, or (iv) a delay of the
satisfaction of any requirements or goals with respect to Performance Awards;
provided that the Committee's authority to take such actions exists only to the
extent necessary to reduce or eliminate a limitation on the deductibility of
compensation paid to a Participant pursuant to (and so long as such action in
and of itself does not constitute the exercise of impermissible discretion
under) Section 162(m) of the Code, or any successor provision thereunder. If any
such deferral is required or permitted, the Committee will establish rules and
procedures for such deferrals, including provisions relating to periods of
deferral, the terms of payment following the expiration of the deferral periods,
and the rate of earnings, if any, to be credited to any amounts deferred
thereunder.
 
  Amendments
 
     The Company Board may at any time terminate, amend, or modify the 1996
Incentive Compensation Plan; provided that no amendment, alteration or
discontinuation will be made which will disqualify the 1996 Incentive
Compensation Plan from the exemption provided by Rule 16b-3 promulgated under
the Exchange Act, and, to the extent required by law, no such amendment will be
made without the approval of the Company's stockholders.
 
  Federal Income Tax Considerations
 
     The following brief summary of the United States federal income tax rules
currently applicable to nonqualified stock options, incentive stock options,
SARs, restricted stock and performance awards is not intended to be specific tax
advice to Participants under the 1996 Incentive Compensation Plan.
 
     Two types of stock options may be granted under the 1996 Incentive
Compensation Plan: nonqualified stock Options ("NQOs") and incentive stock
Options ("ISOs"). SARs, Restricted Stock and Performance Awards may also be
granted under the Plan. The grant of an Award generally has no immediate tax
consequences to the Participant or the Company. Generally, Participants will
recognize ordinary income upon: (i) the exercise of NQOs or SARs; (ii) the
vesting of shares of Restricted Stock; and (iii) the actual receipt of cash or
stock pursuant to Performance Awards. In the case of NQOs and SARs, the amount
of income recognized is measured by the difference between the exercise price
and the fair market value of Common Stock on the date of exercise. In the case
of Restricted Stock and Performance awards, the amount of income is equal to the
fair market value of the stock or other property (including cash) received. The
exercise of an ISO for cash generally has no immediate tax consequences to a
Participant or to the Company. Participants may, in certain circumstances,
recognize ordinary income upon the disposition of shares acquired by exercise of
an ISO, depending upon how long such shares were held prior to disposition.
Special rules apply to shares acquired by exercise of ISOs for previously held
shares. In addition, special tax rules may result in the imposition of a 20%
excise tax on any "excess parachute payments" that result from the acceleration
of the vesting or exercisability of Awards upon a Change of Control.
 
     The Company is generally required to withhold applicable income and Social
Security taxes ("employment taxes") from ordinary income which a Participant
recognizes on the exercise or receipt of an Award. The Company thus may either
require Participants to pay to the Company an amount equal to the employment
taxes the Company is required to withhold or retain or sell without notice a
sufficient number of the shares to cover the amount required to be withheld.
 
     The Company generally will be entitled to a deduction for the amount
includible in a Participant's gross income for federal income tax purposes upon
the exercise or actual receipt of an Award. However, such deduction generally is
available only if the Company timely complies with applicable information
reporting requirements under Sections 6041 and 6041A of the Code. Furthermore,
Section 162(m) of the Code and the regulations thereunder may, in some
circumstances, limit deductibility with respect to "covered employees" whose
total annual compensation exceeds one million dollars, and Section 280G of the
Code and the
 
                                       107
110
 
regulations thereunder may render nondeductible amounts includible in income by
employees that are contingent upon a Change of Control and that are
characterized as "excess parachute payments".
 
  Resale of Shares
 
     The registration requirements of any applicable state securities laws and
the resale restrictions of Rule 144 under the Securities Act may restrict the
sale of shares of Class A Common Stock acquired pursuant to the exercise of
Awards by "affiliates" of the Company within the meaning of the Securities Act.
For purposes of creating short-swing profit liability under Section 16 of the
Exchange Act, sales of such shares by affiliates will be matchable with market
purchases within less than six months before or after such sales.
 
THE DIRECTOR STOCK COMPENSATION PLAN
 
     The Company has adopted the Bank United Director Stock Compensation Plan
(the "Director Stock Plan"). The purposes of the Director Stock Plan are to (i)
promote a greater identity of interest between the Company's non-employee
directors and its stockholders, and (ii) attract and retain individuals to serve
as directors and to provide a more direct link between directors' compensation
and stockholder value.
 
  General
 
     The Director Stock Plan will be administered by the Company Board or a
committee of the Company Board designated for such purpose.
 
     Pursuant to the terms of the Director Stock Plan, non-employee directors of
the Company will be eligible to participant in the Director Stock Plan following
the Distribution (each, an "Eligible Director"). A total of
shares of Class A Common Stock will be reserved for issuance and available for
grants under the Director Stock Plan.
 
     In the event of any change in corporate capitalization (such as a stock
split) or a corporate transaction (such as a merger, consolidation, separation
including a spin-off or other distribution of stock or property of the Company,
any reorganization or any complete liquidation of the Company), the Company
Board or the designated committee may make such substitution or adjustments in
the aggregate number and class of shares reserved for issuance under the
Director Stock Plan, in the number, kind and option price of shares subject to
outstanding Options, in the number and kind of shares subject to other
outstanding awards granted under the Director Stock Plan, and/or such other
equitable substitution or adjustments as it may determine to be appropriate in
its sole discretion; provided, however, that the number of shares subject to any
award must always be a whole number.
 
     Pursuant to the Director Stock Plan, each Eligible Director will receive an
initial award of        shares of Class A Common Stock after serving the first
three months as a member of the Company Board.
 
  Class A Common Stock
 
     With respect to the annual retainer paid to directors (the "Annual
Retainer"), each Eligible Director may make an annual irrevocable election to
receive shares of Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer; provided that the election of cash, Class A
Common Stock and options under the Director Stock Compensation Plan are
alternatives and taken together, may not exceed 100% of such Annual Retainer.
The number of shares of Class A Common Stock granted to an Eligible Director
will be equal to the appropriate percentage of the Annual Retainer payable in
each fiscal quarter divided by the fair market value (as defined in the Director
Stock Compensation Plan) of a share of Class A Common Stock on the last business
day of such fiscal quarter rounded to nearest number of shares of Class A Common
Stock. Fractional shares of Class A Common Stock will not be granted and any
remainder in Annual Retainer which otherwise would have purchased fractional
shares will be paid in cash.
 
                                       108
111
 
  Options Class A
 
     Each Eligible Director may also make an irrevocable election to receive an
Option for Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer equal to:
PERCENT OF ANNUAL
              NUMBER OF OPTIONS                              RETAINER FORGONE
- ---------------------------------------------------------------------------------------------
100%
                                                                    75%
                                                                    50%
                                                                    25%
The election of cash, Class A Common Stock and options under the Director Stock
Compensation Plan are alternatives and, taken together, may not exceed 100% of
such Annual Retainer. The exercise price for the options will be based on the
fair market value of Class A Common Stock on the date of the grant of such
option adjusted for the percentage of the Annual Retainer forgone, but in no
event will the exercise price be less than 50% of such fair market value. The
date of grant of any option will be the later of (i) the date of the annual
stockholders' meeting following the Eligible Director's election to receive an
Option in lieu of the Annual Retainer and (ii) six months and one day after such
election.
 
     Except in the case of death, disability, retirement or termination, options
granted under the Director Stock Compensation Plan will have a term of ten years
and will vest and become exercisable on the last day of the fiscal year in which
such option is granted, provided that the Eligible Director remains on the
Company Board. An option shall vest immediately in the event of death. In the
event that an Eligible Director terminates his or her membership on the Company
Board due to disability or retirement, the amount of any outstanding options
which are not then vested will be adjusted to reflect that portion of such
Eligible Director's Annual Retainer actually earned in the year. In the event
that an Eligible Director's membership on the Company Board is terminated by the
Company for cause, options which have not become vested will be forfeited. As
used in the Director Stock Compensation Plan, "cause" means (i) the conviction
of a felony, or (ii) dishonesty in the course of performing the duties as a
director.
 
  Transferability
 
     Grants and awards under the Director Stock Plan are not assignable or
transferable nor may they be pledged or hypothecated. Any grant or award that
constitutes a "derivative security" within the meaning of the Exchange Act may
not be transferred other than by will or Laws of descent and distribution or
pursuant to domestic relations order or qualified domestic relations order.
 
  Amendments
 
     The Director Stock Compensation Plan may be amended by the Company Board,
provided that, to the extent required to qualify transactions under the Director
Stock Plan for exemption under Rule 16b-3 promulgated under the Exchange Act, no
amendment to the Director Stock Compensation Plan may be adopted without further
approval by the holders of at least a majority of the shares of Class A Common
Stock present, or represented, and entitled to vote at a meeting held for such
purpose; and provided, further, that, if and to the extent required for the
Director Stock Compensation Plan to comply with Rule 16b-3, no amendment to the
Director Stock Compensation Plan shall be made more than once in any six-month
period that would change the amount, price or timing of the grants of awards or
Options thereunder other than to comply with changes in the Code, ERISA, or the
regulations thereunder.
 
  Termination
 
     The Director Stock Compensation Plan may be terminated at any time by
either the Company Board or by holders of a majority of the shares of Class A
Common Stock present and entitled to vote at a duly convened meeting of
stockholders.
 
                                       109
112
 
  Change of Control
 
     In the event of a Change of Control (as defined in the Director Stock
Plan), any outstanding options that are not then exercisable and vested will
become fully exercisable and vested. During the 60-day period following a Change
of Control, any Eligible Director will have the right to surrender all or part
of any option or award of Class A Common Stock held by such Eligible Director,
and, in the case of an option, in lieu of payment of the exercise price, to
receive cash in an amount equal to the Spread multiplied by the number of shares
of Class A Common Stock granted in connection with the exercise of such option
so surrendered, or, in the case of an award of Class A Common Stock, to receive
cash in an amount equal to the Change of Control Price multiplied by the number
of shares of Class A Common Stock so surrendered; provided that, if the Change
of control is within six months of the grant date for any such option or award,
no such election may be made prior to six months from such grant date. If such
60-day period ends within the period six months after the grant date for an
option or award, such option or award will be cancelled and the holder thereof
will receive six months and one day after the grant of such option or award, an
amount equal, in the case of an option, to the Spread multiplied times the
number of shares of Class A Common Stock granted under such option and in the
case of an award, the Change of Control Price multiplied by the number of Class
A Common Stock so awarded.
 
  Federal Income Tax Considerations
 
     Eligible Directors electing Class A Common Stock in lieu of cash fees will
be taxed on the value of the Class A Common Stock at the time of receipt.
Eligible Directors making an irrevocable election to receive an option in lieu
of cash fees will be taxed at the time of exercise of the option on the
difference between the exercise price and the fair market value of the Class A
Common Stock covered by the option. In each case, the Company will receive a
corresponding deduction; provided that Section 280G of the Code and the
regulations thereunder may render nondeductible amounts that are contingent upon
a Change of Control and are characterized as "excess parachute payments".
 
     Resale of Shares.  The holders of shares of Class A Common Stock received
upon the exercise of an option must comply with the resale requirements of the
Securities Act and the rules and regulations promulgated thereunder. Securities
registration requirements under the Securities Act may be applicable to resales
by any Eligible Director. The restrictions imposed by Section 16 of the Exchange
Act upon any Eligible Director and the registration requirements of any
applicable state securities laws may restrict the resales of shares acquired
pursuant to the exercise of options by an Eligible Director.
 
MANAGEMENT EMPLOYMENT ARRANGEMENTS
 
     Mr. Burkholder's employment contract, which was recently amended and
extended for one year to April 10, 1997, provides for payment of an annual
salary of $375,000 and a discretionary bonus. In addition, as a result of this
transaction, Mr. Burkholder will receive 38% of the Executive Management
Compensation Plan, which satisfies the terms of his present employment
agreement.
 
     Mr. Bender's employment letter provides for payment of an annual salary and
a bonus up to 2.86% of the added economic value of the mortgage banking segment.
The employment letter provides that added economic value is defined to be the
sum of pre-tax income and the value of new loan servicing reduced by the sum of
excess servicing revenues and revenues from the sale of servicing.
 
     Mr. Nocella's employment letter provides for the payment of an annual
salary, a discretionary bonus, and in the event Mr. Nocella's employment is
terminated without cause, payment of six months' base salary (or $157,500 based
on 1995 base salary).
 
NON-QUALIFIED RETIREMENT SAVINGS PLAN
 
     In June 1995, the Board of Directors of the Bank approved the
implementation of a Supplemental Executive Savings Plan ("SESP"). The SESP was
effective on August 1, 1995. The 1995 SESP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the SESP plan year will coincide
 
                                       110
113
 
with the calendar year. The SESP is available to a select group of management
and other highly compensated employees. Eligible employees are allowed to make
irrevocable decisions prior to the beginning of the plan year to defer up to 20%
of compensation (as defined in the SESP) and up to 100% of bonus income. The
monies deferred earn interest at a rate approximately equal to the Bank's one
year certificate of deposit rate. The Bank does not contribute to the SESP.
 
     The SESP is funded from the general assets of the Bank and participants are
general unsecured creditors of the Bank. As of March 31, 1996, there were 17
participants in the SESP, and the total amount of deferrals and interest equaled
approximately $380,000. The rate of interest for the SESP was 4.42% as of March
31, 1996.
 
DIRECTORS SUPPLEMENTAL SAVINGS PLAN
 
     In June 1995, the Board of Directors of the Bank approved the
implementation of a Directors Supplemental Savings Plan ("DSSP"). The DSSP was
effective on August 1, 1995. The 1995 DSSP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the plan year will coincide with
the calendar year. The DSSP is available to outside directors. Eligible
Directors are allowed to make irrevocable decisions prior to the beginning of
the plan year to defer up to 100% of retainer and meeting fees. The monies
deferred earn interest at a rate approximately equal to the Bank's one year CD
rate. The Bank does not contribute to the DSSP.
 
     The DSSP is funded from the general assets of the Bank, and participants
are general unsecured creditors of the Bank. As of March 31, 1996, there was one
participant in the DSSP and the total amount of deferrals and interest equaled
approximately $29,000. The rate of interest for the DSSP was 4.42% as of March
31, 1996.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee of the Company Board determines the compensation
of the Company's executive officers. The members of the Compensation Committee
are Lewis S. Ranieri, Salvatore A. Ranieri and Scott A. Shay, none of whom is an
executive officer of the Company. Lewis S. Ranieri, Salvatore A. Ranieri and
Scott A. Shay are also members of the Compensation Committee of the Board of
Directors of the Bank. No other member of the Bank Compensation Committee is an
officer or employee of the Company or the Bank.
 
     The Bank is a party to a written investment advisory services agreement
which provides for payment by the Bank to Hyperion Capital, an affiliate of the
Bank, of $175,000 per year for investment advisory services and for payment by
Hyperion Capital to the Bank of $175,000 for information regarding the Bank's
mortgage pipeline.
 
                                       111
114
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  Security Ownership of Certain Beneficial Owners
 
     As of June 18, 1996 the outstanding capital stock of the Company consists
of 381,925 shares of Class A Common Stock, which entitles the holder thereof to
one vote per share on each matter on which the stockholders of the Company are
entitled to vote, and 28,481,075 shares of Class B Common Stock, which have no
voting rights. Shares of Class B Common Stock are convertible, at the election
of the holder thereof, into shares of Class A Common Stock, subject to certain
restrictions set forth in the Certificate and the Letter Agreement, and except
to the extent that the holder of the Class B Common Stock is prohibited by any
applicable Federal or state regulation from holding voting securities of the
type or in the amount represented by the shares of Class A Common Stock that
such holder would hold upon such conversion. See "Description of Capital
Stock -- Common Stock -- Conversion." Certain Selling Stockholders hold
significant shares of Class B Common Stock and are expected to continue to hold
such shares after the Offering. See "Selling Stockholders". Conversion of such
shares of Class B Common Stock by a holder thereof to shares of Class A Common
Stock would have the effect of diluting the voting power of the existing holders
of Class A Common Stock and would increase the voting power of such holder
commensurately.
 
     The following table sets forth information concerning the persons who
beneficially own more than 5% of the Company's voting stock assuming no
elective, nonsale conversion of Class B Common Stock.
 
                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- -----------------------------------------------------------------------------------------------
        (1)                (2)                (3)                (4)                (5)
                        NAME AND          AMOUNT AND                             ESTIMATED
                         ADDRESS           NATURE OF         PERCENT OF         PERCENT OF
     TITLE OF         OF BENEFICIAL       BENEFICIAL         CLASS AS OF      CLASS FOLLOWING
       CLASS              OWNER            OWNERSHIP        JUNE 18, 1996       OFFERING(4)
- -----------------------------------------------------------------------------------------------
  Class A Common      LSR Hyperion          188,747              49%               2.1%
        Stock           Corp.(1)
- -----------------------------------------------------------------------------------------------
  Class A Common      SAR Hyperion          93,906               25%               1.1%
        Stock           Corp.(2)
- -----------------------------------------------------------------------------------------------
  Class A Common      SAS Hyperion          93,906               25%               1.1%
        Stock           Corp.(3)
- -----------------------------------------------------------------------------------------------
  Class A Common    Hyperion Funding         5,366               1%                  *
        Stock           Corp.(5)
- -----------------------------------------------------------------------------------------------
* Percentage does not exceed 1% of the issued and outstanding shares.
 
(1) The sole shareholder of LSR Hyperion Corp. is Lewis S. Ranieri, a Director
    of the Company and the Chairman of the Company.
 
(2) The sole shareholder of SAR Hyperion Corp. is Salvatore A. Ranieri, a
Director of the Company.
 
(3) The sole shareholder of SAS Hyperion Corp. is Scott A. Shay, a Director of
the Company.
 
(4) Assumes the sale of 8,480,000 shares of Common Stock in the Offering, that
    each such share is a share of Class B Common Stock immediately prior to such
    sale, and that no elective, nonsale conversion of Class B Common Stock
    occurs.
 
(5) Hyperion Funding Corp. is controlled by Lewis S. Ranieri, Salvatore A.
    Ranieri and Scott A Shay.
 
                                       112
115
 
     The following table sets forth information about certain persons who would
own 5% or more of the Company's voting stock, assuming that each holder of
shares of Class B Common Stock converts each such share into one share of Class
A Common Stock, and assuming that each Selling Stockholder sells the maximum
number of shares such Selling Stockholder may sell in the Offering pursuant to
the Letter Agreement and this prospectus. Significant restrictions apply to such
conversions. See "Description of Capital Stock -- Common Stock -- Conversion".
- --------------------------------------------------------------------------------------------
   NAME AND ADDRESS       AMOUNT AND NATURE     PERCENT OF CLASS AS   ESTIMATED PERCENT OF
  OF BENEFICIAL OWNER  OF BENEFICIAL OWNERSHIP    OF JUNE 18, 1996       CLASS FOLLOWING
                                                                            OFFERING
- --------------------------------------------------------------------------------------------
 Prudential Insurance         5,279,895               18.29%                 10.06%
    Co. of America
- --------------------------------------------------------------------------------------------
     American Home            2,790,772                9.67%                  5.32%
     Assurance Co.
- --------------------------------------------------------------------------------------------
   Ameritech Pension          2,817,209                9.76%                  5.37%
         Trust
- --------------------------------------------------------------------------------------------
   LW-SP1, L.P. and           2,146,748                7.44%                  7.44%
    LW-SP2, L.P.(6)
- --------------------------------------------------------------------------------------------
  Lewis S. Ranieri(7)         1,926,879                6.68%                  3.7%
- --------------------------------------------------------------------------------------------
    Equitable Life            1,730,705                6.0%                   3.3%
 Assurance Society of
         the US
and Equitable Variable
  Life Insurance Co.
- --------------------------------------------------------------------------------------------
(6) LW-SP1 and LW-SP2 are each limited partnerships in which an affiliate of
    Lehman Brothers Inc. is general partner and owns a 99% interest. See
    "Underwriting".
 
(7) Includes 752 shares held as custodian for two minors, as to which Mr.
    Ranieri disclaims beneficial ownership.
 
                                       113
116
 
  Security Ownership of Management
 
     The following table sets forth information, as of June   , 1996, regarding
each class of equity securities of the Company beneficially owned by all
directors and each of the executive officers set forth in the Summary
Compensation Table.
 
                        SECURITY OWNERSHIP OF MANAGEMENT
- ------------------------------------------------------------
 (1)         (2)               (3)               (4)
                            AMOUNT AND
                            NATURE OF
TITLE                       BENEFICIAL        PERCENT OF
   OF NAME OF BENEFICIAL     OWNERSHIP          CLASS
CLASS       OWNER
- ------------------------------------------------------------
  --       Barry C.             --                --
         Burkholder,
        President and
       Chief Executive
           Officer
- ------------------------------------------------------------
  --      Anthony J.            --                --
      Nocella, Executive
      Vice President and
       Chief Financial
           Officer
- ------------------------------------------------------------
  --     Jonathon K.            --                --
      Heffron, Executive
       Vice President,
       General Counsel,
             and
       Chief Operation
           Officer
- ------------------------------------------------------------
  --  George R. Bender,         --                --
        Executive Vice
          President
- ------------------------------------------------------------
  --   Leslie H. Green,         --                --
            Senior
        Vice President
         Operations &
          Technology
- ------------------------------------------------------------
Class Lewis R. Ranieri,      188,747             49%
   A     Director(1)
Common
 Stock
- ------------------------------------------------------------
Class    Salvatore A.         93,906             25%
   A       Ranieri,
Common    Director(2)
 Stock
- ------------------------------------------------------------
Class   Scott A. Shay,        93,906             25%
   A     Director(3)
Common
 Stock
- ------------------------------------------------------------
Class Lewis R. Ranieri,    1,738,132(4)          6.1%
   B       Director
Common
 Stock
- ------------------------------------------------------------
Class    Salvatore A.       866,310(5)           3.0%
   B  Ranieri, Director
Common
 Stock
- ------------------------------------------------------------
Class   Scott A. Shay,       864,163             3.0%
   B       Director
Common
 Stock
- ------------------------------------------------------------
Directors and Executive     3,845,162            (6)
   Officers as a Group
- ------------------------------------------------------------
(1) See Notes 1 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(2) See Notes 2 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(3) See Notes 3 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.
 
(4) Includes 752 shares held as custodian for two minors as to which Mr. Ranieri
    disclaims beneficial ownership.
 
(5) Includes 7,513 shares held as custodian for a minor as to which Mr. Ranieri
    disclaims beneficial ownership.
 
(6) 100% of the outstanding Class A Common Stock and 13.32% of the outstanding
    Common Stock.
 
                                       114
117
 
  Principal Stockholders, Bank Preferred Stock
 
     The following tables set forth with respect to the Bank Preferred Stock as
of             , 1996: (i) shares beneficially owned by all directors of the
Company; (ii) each of the executive officers named in the Summary Compensation
Table set forth herein; and (iii) shares beneficially owned by all directors of
the Company, and executive officers as a group.
 
  Preferred Stock, Series A
NUMBER OF SHARES
                                                                  AND NATURE OF
                                                                    BENEFICIAL        PERCENT
                               NAME                                OWNERSHIP(1)       OF CLASS
    -----------------------------------------------------------  ----------------     --------
Lewis S. Ranieri...........................................           --            *
    Salvatore A. Ranieri.......................................           --            *
    Scott A. Shay..............................................           --            *
    Barry C. Burkholder........................................        8,000            *
    George R. Bender...........................................        4,000            *
    Anthony J. Nocella.........................................        1,000            *
    Jonathon K. Heffron........................................        1,400(2)         *
    Leslie H. Green............................................           --            *
    Directors and Executive Officers as a Group................       14,400            *
Preferred Stock, Series B
NUMBER OF SHARES
                                                                  AND NATURE OF
                                                                    BENEFICIAL        PERCENT
                               NAME                                OWNERSHIP(1)       OF CLASS
    -----------------------------------------------------------  ----------------     --------
Lewis S. Ranieri...........................................           --            *
    Salvatore A. Ranieri.......................................           --            *
    Scott A. Shay..............................................           --            *
    Barry C. Burkholder........................................           --            *
    George R. Bender...........................................           --            *
    Anthony J. Nocella.........................................        2,000            *
    Jonathon K. Heffron........................................           --            *
    Leslie H. Green............................................           --            *
    Directors and Executive Officers as a Group................        2,000            *
- ---------------
  * Percentages do not exceed 1% of the issued and outstanding shares.
 
(1) Calculated in accordance with Rule 13d-3 under the Exchange Act. Nature of
    beneficial ownership is direct unless indicated otherwise by footnote.
    Beneficial ownership as shown in the table arises from sole investment power
    unless otherwise indicated by footnote.
 
(2) 1,000 shares direct, 400 shares held as custodian for minor children.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  Certain Transactions
 
     The Bank may from time to time make home mortgage or consumer loans to
directors, officers, and employees. Any such loan will be made in the ordinary
course of business, and on the same terms and conditions, including interest
rates and collateral, as those of comparable transactions prevailing at the time
with non-affiliated parties. The Bank had no loans to directors or executive
officers outstanding during the six months ended March 31, 1996, or in fiscal
1995 or 1994.
 
     Historically, expenses paid to related parties were (i) for services
provided in connection with hedging and asset and liability management
strategies, and (ii) for services provided in connection with the
 
                                       115
118
 
management and marketing of real estate properties. No such expenses were
incurred during the six months ended March 31, 1996, or fiscal 1995 or 1994. At
March 31, 1996 and September 30, 1995 and 1994, the Company and the Bank had no
outstanding receivables from or payables to related parties other than those
related to participation in the filing of the consolidated tax return and there
are no loans outstanding to directors, executive officers, or principal holders
of the Company's equity securities.
 
     As a general benefit to all full-time employees with at least six months of
service (excluding executive officers), the Bank, through its Mortgage Banking
Group, will waive the 1% origination fee for a mortgage loan for the purchase or
refinance of the employee's principal residence. In addition, the Bank offers a
0.50% discount on its posted rates for consumer installment loans made to
employees.
 
     The Company is contemplating entering into a consulting agreement pursuant
to which Lewis S. Ranieri would serve as a consultant to the Company for a
three-year period.
 
                                       116
119
 
                              SELLING STOCKHOLDERS
 
     The Selling Stockholders consist of the limited and general partners of
Hyperion Partners. LW-SP1 and LW-SP2 are limited partners of Hyperion Partners
but are not Selling Stockholders. See "Underwriting". The partners received
Class A Common Stock and Class B Common Stock in the Restructuring which was
effected in June 18, 1996 and LW-SP1 and LW-SP2 received shares of Class B
Common Stock. See "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, LW-SP1 and LW-SP2 as of
the date of this Prospectus and as adjusted to reflect the sale of the Class A
Common Stock offered hereby (assuming no exercise of the Underwriters'
over-allotment option).
SHARES OF                         SHARES OF                                           SHARES OF
                                 CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                                 COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                              STOCK-- OWNED    PERCENT OWNED     STOCK-OWNED     PERCENT OWNED    STOCK OFFERED      STOCK-OWNED
                             BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                             ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
LSR Hyperion Corp.(1).......     188,747             49%          1,698,725            6.0%
Hyperion Funding Corp.(2)...       5,366              1%             48,298            0.2%
SAR Hyperion Corp.(3).......      93,906             25%            845,153            3.0%
SAS Hyperion Corp.(4).......      93,906             25%            845,153            3.0%
KRW Hyperion Corp.(5).......          --             --             281,036            1.0%
CJK Hyperion Corp.(6).......          --             --             226,676            0.8%
David M. Golush(7)..........          --             --             423,251            1.5%
Patricia A. Sloan(8)........          --             --             193,979            0.7%
David A. Marcus(9)..........          --             --             176,630            0.6%
Jeffrey P. Cheesman(10).....          --             --             152,709            0.5%
Robert A. Perro(11).........          --             --              98,149            0.3%
Prudential Insurance Co. of
  America...................          --             --           5,279,895           18.6%
SHARES OF       CLASS B
                                                  CLASS B        COMMON
                                  CLASS A          COMMON        STOCK--
                               COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                               PERCENT OWNED       AFTER          AFTER
                               AFTER OFFERING     OFFERING      OFFERING
                              ----------------  ------------  -------------
LSR Hyperion Corp.(1).......
Hyperion Funding Corp.(2)...
SAR Hyperion Corp.(3).......
SAS Hyperion Corp.(4).......
KRW Hyperion Corp.(5).......
CJK Hyperion Corp.(6).......
David M. Golush(7)..........
Patricia A. Sloan(8)........
David A. Marcus(9)..........
Jeffrey P. Cheesman(10).....
Robert A. Perro(11).........
Prudential Insurance Co. of
  America...................
American Home Assurance
  Company...................          --             --           2,790,772            9.8%
LW-SP1 L.P. ................          --             --           2,029,372            7.1%
LW-SP2 L.P. ................          --             --             117,376            0.4%
Ameritech Pension Trust.....          --             --           2,817,209            9.8%
Equitable Life Assurance
  Society of the
  United States.............          --             --           1,623,368            5.7%
Equitable Variable Life
  Insurance Company.........          --             --             107,337            0.4%
Equitable Deal Flow
  Fund LP...................          --             --             907,200            3.2%
Equitable Capital
  Partners LP...............          --             --           1,085,400            3.8%
Equitable Capital Partners
  (Retirement Fund) LP......          --             --             534,600            1.9%
Lewis S. Ranieri............          --             --              11,404            0.0%
Salvatore A. Ranieri Cust
  for Margaret Ranieri NY
  UGMA-AGE 21...............          --             --               7,513            0.0%
Lewis S. Ranieri A/C/F Eric
  Jimenez NJ UTMA-21........          --             --                 376            0.0%
Lewis S. Ranieri A/C/F Jason
  Jimenez NJ UTMA-21........          --             --                 376            0.0%
Ranieri Family Trust F/B/O
  Claudia L. Ranieri U/A
  7/1/93....................          --             --               4,938            0.0%
Ranieri Family Trust F/B/O
  Angela S. Ranieri U/A
  7/1/93....................          --             --               4,938            0.0%
Scott A. Shay...............          --             --               5,366            0.0%
Trust F/B/O Benjamin Jacob
  Shay U/A 7/23/93..........          --             --               2,254            0.0%
Trust F/B/O Ariel Rebecca
  Shay U/A 7/23/93..........          --             --               2,254            0.0%
Trust F/B/O Dara Jen Golush
  U/A 12/20/84..............          --             --               3,086            0.0%
Trust F/B/O Jason Reid
  Golush U/A 12/20/84.......          --             --               2,683            0.0%
Gail W. Marcus..............          --             --               2,281            0.0%
Janet L. Perro..............          --             --               1,073            0.0%
Ranieri Bros. Shay &
  Co., Inc. ................          --             --              24,117            0.1%
The Sweater Trust...........          --             --             644,024            2.3%
American Home Assurance
LW-SP1 L.P. ................
LW-SP2 L.P. ................
Ameritech Pension Trust.....
Equitable Life Assurance
  Society of the
  United States.............
Equitable Variable Life
  Insurance Company.........
Equitable Deal Flow
  Fund LP...................
Equitable Capital
  Partners LP...............
Equitable Capital Partners
  (Retirement Fund) LP......
Lewis S. Ranieri............
Salvatore A. Ranieri Cust
  for Margaret Ranieri NY
  UGMA-AGE 21...............
Lewis S. Ranieri A/C/F Eric
  Jimenez NJ UTMA-21........
Lewis S. Ranieri A/C/F Jason
  Jimenez NJ UTMA-21........
Ranieri Family Trust F/B/O
  Claudia L. Ranieri U/A
  7/1/93....................
Ranieri Family Trust F/B/O
  Angela S. Ranieri U/A
  7/1/93....................
Scott A. Shay...............
Trust F/B/O Benjamin Jacob
  Shay U/A 7/23/93..........
Trust F/B/O Ariel Rebecca
  Shay U/A 7/23/93..........
Trust F/B/O Dara Jen Golush
  U/A 12/20/84..............
Trust F/B/O Jason Reid
  Golush U/A 12/20/84.......
Gail W. Marcus..............
Janet L. Perro..............
Ranieri Bros. Shay &
  Co., Inc. ................
The Sweater Trust...........
Company...................
117
120
SHARES OF                         SHARES OF                                           SHARES OF
                                 CLASS A          CLASS A          CLASS B          CLASS B          CLASS A           CLASS A
                                 COMMON       COMMON STOCK--       COMMON       COMMON STOCK--        COMMON           COMMON
                              STOCK-- OWNED    PERCENT OWNED     STOCK-OWNED     PERCENT OWNED    STOCK OFFERED      STOCK-OWNED
                             BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING  BEFORE OFFERING       HEREBY       AFTER OFFERING
                             ---------------  ---------------  ---------------  ---------------  ----------------  ---------------
Sun Life Insurance Co. of
  America...................          --             --           1,073,374            3.8%
SHARES OF       CLASS B
                                                  CLASS B        COMMON
                                  CLASS A          COMMON        STOCK--
                               COMMON STOCK--   STOCK OWNED   PERCENT OWNED
                               PERCENT OWNED       AFTER          AFTER
                               AFTER OFFERING     OFFERING      OFFERING
                              ----------------  ------------  -------------
Sun Life Insurance Co. of
  America...................
Marilyn B. Arison...........          --             --             858,699            3.0%
Masco Capital Corp..........          --             --             536,687            1.9%
Wolfson Descendants' 1983
  Trust.....................          --             --             214,675            0.8%
South Ferry #2, L.P.........          --             --             271,921            1.0%
EDN Equities................          --             --             135,961            0.5%
Leslie Wexner...............          --             --             429,350            1.5%
The Airlie Group, L.P.......          --             --             429,350            1.5%
Julius Berman...............          --             --             126,975            0.4%
FAME Associates.............          --             --             193,207            0.7%
Institutional Interests.....          --             --             336,097            1.2%
Houston Firemen's Relief and
  Retirement Fund...........          --             --             536,687            1.9%
Alpine Investment
  Partners..................          --             --             214,675            0.8%
Mortimer Zuckerman..........          --             --              21,467            0.1%
Edward Linde................          --             --              21,467            0.1%
Connie S. Maniatty..........          --             --              21,467            0.1%
Micha Astrachan.............          --             --              66,232            0.2%
Marilyn B. Arison...........
Masco Capital Corp..........
Wolfson Descendants' 1983
  Trust.....................
South Ferry #2, L.P.........
EDN Equities................
Leslie Wexner...............
The Airlie Group, L.P.......
Julius Berman...............
FAME Associates.............
Institutional Interests.....
Houston Firemen's Relief and
  Retirement Fund...........
Alpine Investment
  Partners..................
Mortimer Zuckerman..........
Edward Linde................
Connie S. Maniatty..........
Micha Astrachan.............
- ---------------
 
(1) All stock owned by Lewis S. Ranieri.
 
(2) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay and
Kendrick R. Wilson III.
 
(3) All stock owned by Salvatore A. Ranieri.
 
(4) All stock owned by Scott A. Shay.
 
(5) All stock owned by Kendrick R. Wilson III.
 
(6) All stock owned by Clinton J. Kendrick.
 
(7)
 
(8)
 
(9)
 
(10)
 
(11)
 
     Since its formation in 1988, Hyperion Partners directly or indirectly has
made a number of investments, other than in the Bank, including: (i) Hyperion
Credit Capital Partners L.P., the partnership which purchased a portfolio of
commercial and multifamily loans and real estate from the RTC; (ii) Hyperion
Credit Services Corporation, which was formed to service the portfolio of real
estate loans owned by Hyperion Credit Capital Partners L.P., (iii) Suntex
Ventures, which made real estate investments in multifamily apartments and in
high-rise residential condominiums; (iv) the Centeq Companies, which are real
estate service companies, (v) Hyperion Capital, a Commission-registered
investment advisory firm; (vi) Cardholder Partners L.P., which held accounts and
other intangibles related to a credit card portfolio; (vii) de minimis minority
equity investments in a Spanish mortgage banker and a mortgage conduit vehicle
for the securitization of Spanish residential mortgage loans; and (viii)
miscellaneous investments in marketable financial instruments.
 
     The general partner of Hyperion Partners is Hyperion Ventures L.P.
("Hyperion Ventures"). Four corporations are general partners of Hyperion
Ventures: (i) LSR Hyperion Corp., which is wholly owned by Lewis S. Ranieri;
(ii) Hyperion Funding Corp., which is owned by Lewis S. Ranieri, Salvatore A.
Ranieri, Scott A. Shay and Kendrick R. Wilson III; (iii) SAR Hyperion Corp.,
which is wholly owned by Salvatore A. Ranieri; and (iv) SAS Hyperion Corp.,
which is wholly owned by Scott A. Shay.
 
     In June 1995, Lewis S. Ranieri and Scott A. Shay established a new private
equity fund, Hyperion Partners II. Hyperion Partners II follows many of the same
investment strategies as Hyperion Partners. Both the general partner of and the
advisor to Hyperion Partners II are controlled by Lewis S. Ranieri and Scott A.
Shay, who were also among the founders, and remain two of the three control
persons, of Hyperion Partners and are members of the Company Board. See "Risk
Factors -- Concentration of Ownership".
 
     Prior to the Restructuring, Hyperion Partners held all of the Company's
common stock, other than the Class C Common Stock, through its wholly owned
subsidiary, Hyperion Holdings. On June 18, 1996, Hyperion Holdings was merged
with and into the Company in the Merger.
 
                                       118
121
 
SELLING STOCKHOLDER LETTER AGREEMENTS
 
     Each of the Selling Stockholders, LW-SP1 and LW-SP2 (which are subject to
each of the provisions described herein as applicable to Selling Stockholders,
except as otherwise indicated) have entered into a Letter Agreement, dated as of
June 17, with each of Hyperion Partners and the Company (the "Letter
Agreement"). Pursuant to the Letter Agreement, each Selling Stockholder
consented to the Distribution and agreed to hold the common stock of Hyperion
Holdings received pursuant to the Distribution according to the terms of such
Letter Agreement. Also, each Selling Stockholder (including those who prior to
the Merger held voting shares of capital stock of Hyperion Holdings and those
who prior to the Merger held shares of Class C Common Stock), by executing the
Letter Agreement and agreeing to be bound thereby, consented to and approved of,
for purposes of Section 228 of the DGCL and otherwise, the Merger Agreement,
dated as of June 17, 1996, by and between Hyperion Holdings and the Company (the
"Merger Agreement"), and the Merger.
 
     Pursuant to the Letter Agreement, each Selling Stockholder acknowledged (i)
that under the By-laws of Hyperion Holdings, it is not permitted to Transfer any
shares of capital stock of Hyperion Holdings except pursuant to the Merger
Agreement and (ii) that, under the By-Laws, after the Distribution and prior to
the consummation of the Offering, such Selling Stockholder would not effect any
Transfer of shares of capital stock of the Company (a) in the case of such
shares received in respect of Class C Common Stock in the Merger, except as such
Selling Stockholder would have been permitted to transfer such Class C Common
Stock under the Stockholders' Agreement, dated as of August 1, 1989, by and
among the Company and the other parties specified therein, and (b) in the case
of any other such shares, except in accordance with the terms of the limited
partnership agreement of Hyperion Partners applicable to the transfer of
partnership interests of Hyperion Partners. Each 5% Stockholder acknowledged
that it is not permitted, prior to the earlier of an IPO or October 31, 1996, to
Transfer any such shares owned by such 5% Stockholder or its affiliates (other
than to a person of whom the 5% Stockholder is a wholly-owned subsidiary) or
acquire any additional such shares. If an IPO is not consummated within six
months of the date of the Transaction Agreement, the Company is obligated to
provide each Selling Stockholder with registration and tag-along rights
substantially similar to those set forth in the Stock Purchase Agreement, dated
as of August 1, 1989, by and among the Company and certain Selling Stockholders
and the Stockholders' Agreement. Under the Letter Agreements, each Selling
Stockholder is also obligated to provide certain cooperation to the Company in
the case of an IPO, including entering into customary underwriting and lockup
agreements.
 
     Selling Stockholders retaining shares of Common Stock may not sell such
shares for (1) one year after the Offering, if such stock was received in
respect of general partnership interests in Hyperion Partners or (2) six months
after the Offering, if such shares were received in respect of limited
partnership interests in Hyperion Partners (although a regulated insurance
company may sell shares in a private off-market transaction subject to Rule 144
limits and reasonable representations requested by the Underwriters). Subject to
certain adjustments by the Company Board based upon advice of the Underwriters
to improve the marketability of the shares of Common Stock to be sold in the
Offering, each 5% Stockholder may sell up to 45% of such holder's shares of
Common Stock in the Offering, except for LW-SP1 and LW-SP2, affiliates of Lehman
Brothers Inc., which are prohibited from selling any shares until August 8,
1998, and any other Selling Stockholder may sell up to 16% of its shares in the
Offering (subject to increase pro rata in the discretion of the Company Board if
the 5% Stockholders elect to sell fewer than the maximum number of shares they
are permitted to sell in the Offering). Each Selling Stockholder acknowledged
that, except for shares that could have been sold pursuant to the Offering but
were not sold at the election of such 5% Stockholder, no 5% Stockholder is
permitted by the By-Laws to acquire or Transfer any shares of capital stock of
the Company for three years following the Offering (or upon termination of the
Letter Agreement, if earlier) unless as of an earlier date the Company Board
determines that such acquisition or Transfer would not be reasonably likely to
have a material adverse effect on the tax position of the Company.
 
     Pursuant to the Letter Agreement, as soon as practicable after the
Offering, the Company is obligated to file, and to use best efforts to cause to
promptly become effective, a registration statement under the Securities Act
with respect to shares of class A or Class B Common Stock then held by any
Selling Stockholder. The Company is also obligated to take action to keep such
registration statement effective (subject to occasional periods of suspension of
such effectiveness as necessary) until all Common Stock registered thereunder
has been sold pursuant thereto or until such registration under the Securities
Act is no longer required to sell such shares without restriction but in no case
later than December 31, 1999.
 
     The Letter Agreement also restricts the conversion rights of holders of
Class B Common Stock. See "Description of Capital Stock -- Common Stock --
Conversion".
 
     In connection with the Letter Agreement, each of the Selling Stockholders,
Hyperion Partners, Hyperion Holdings and the Company have made certain
representations and warranties. The Letter Agreement may be terminated by
consent of each of the parties thereto and if not earlier terminated will
terminate on the earlier of the third anniversary of the Offering or of October
31, 1996 (except for certain provisions restricting transfers and pertaining to
registration rights and conversion of Class B Common Stock).
 
                                       119
122
 
                          DESCRIPTION OF CAPITAL STOCK
 
AUTHORIZED CAPITAL STOCK
 
     Immediately following the Offering, the Company's authorized capital stock
will consist of 10 million shares of preferred stock, par value $0.01 per share
("Preferred Stock"), 40 million shares of Class A Common Stock and, 40 million
shares of Class B Common Stock. Immediately following the Offering,
shares of Class A Common Stock will be outstanding and           shares of Class
B Common Stock will be outstanding. All of the shares of Class A Common Stock
that will be outstanding immediately following the Offering, including the
shares of Class A Common Stock sold in the Offering, will be validly issued,
fully paid and nonassessable.
 
COMMON STOCK
 
  Dividends
 
     The holders of each class of Common Stock, to the exclusion of the holders
of Preferred Stock, share equally 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.
 
  Liquidation Rights
 
     In the event of a liquidation, dissolution or winding up of the affairs of
the Company, after payment has been made to the holders of Preferred Stock of
the full amount to which they are entitled, the holders of Common Stock share
ratably according to the number of shares of Common Stock held by them, in all
remaining assets of the Company available for distribution to its stockholders.
 
  Voting Rights
 
     The holders of Class A Common Stock are entitled to vote on each matter on
which the stockholders of the Company are entitled to vote, and each holder of
Class A Common Stock is entitled to one vote for each share held. The holders of
Class B Common Stock do not have any voting rights except as otherwise required
by applicable law.
 
  Conversion
 
     Each share of Class B Common Stock is convertible into one share of Class A
Common Stock (a) automatically, upon the sale or other transfer of the 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 (except that such election shall not apply to shares of
Class B Common Stock held by any person that is prohibited under applicable
federal or state statute or regulation from holding voting securities of the
type or in an amount represented by the shares of Class A Common Stock that
could otherwise be held by such person upon such conversion). 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 may not be effected by a Selling Stockholder prior to
the earlier to occur of the consummation of an initial public offering of shares
of capital stock of the Company (including the Offering) or October 31, 1996,
unless the Company Board agrees to such conversion or unless such holder is
subject to Title I of ERISA. In addition, 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
 
                                       120
123
 
the outstanding shares of Class A Common Stock (or such lower percentage as may
apply to such holder under regulatory restrictions).
 
  Restrictions on Transfers of Stock
 
     The Certificate limits transfers of shares of Common Stock and other
interests that would be treated as stock of the Company under the Code or
applicable IRS regulations and certain options that would cause either a person
or an entity to become a 5% Stockholder or increase a 5% Stockholder's
percentage ownership interest in the Company. This limitation is intended to
prevent transfers of stock of the Company from triggering an Ownership Change
which would result in the limitation of certain potential tax benefits available
to the Company. See "Regulation -- Taxation". The By-Laws prohibit any 5%
Stockholder from acquiring or transferring any shares of Common Stock received
by such 5% Stockholder in the Merger for three years following the consummation
of an IPO, such as the Offering, unless as of an earlier date such acquisition
or transfer would not, as determined by the Company Board, be reasonably likely
to have a material adverse effect on the tax position of the Corporation.
 
     Also, pursuant to the Letter Agreements, the holders of shares of Class B
Common Stock which such holders may not elect to convert to shares of Class A
Common Stock because of the restrictions described in the last sentence of
"-- Conversion", may not transfer such shares of Class B Common Stock other than
to an affiliate, in a widely-dispersed offering of shares of the Company's
capital stock under an effective registration statement filed under the
Securities Act or in a transaction in which no single person or group acting in
concert would, as a result of such transfer and assuming the conversion of such
shares of Class B Common Stock into shares of Class A Common Stock, possess more
than 2% of the voting power of the shares of Class A Common Stock.
 
PREFERRED STOCK
 
     The Certificate authorizes the Company Board to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the terms and rights of such series, including (i) the
designation of the series, (ii) the number of shares of the series, which number
the Company Board may thereafter (except where otherwise provided in the
applicable certificate of designation) increase or decrease (but not below the
number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative, and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series shall be
cumulative, (iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any conditions
upon which such dividends will be paid and the date or dates or the method for
determining the date or dates upon which such dividends will be payable; (v) the
redemption rights and price or prices, if any, for shares of the series, (vi)
the terms and amounts of any sinking funds provided for the purchase or
redemption of shares of the series, (vii) the amounts payable on and the
preferences, if any, of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible or
exchangeable into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates as of
which such shares will be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made, (ix) restrictions
on the issuance of shares of the same series or of any other class or series,
(x) the voting rights, if any, of the holders of the shares of the series, and
(xi) any other relative rights, preferences and limitations of such series.
 
     The Company believes that the ability of the Company Board to issue one or
more series of Preferred Stock, while providing the Company with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs which might arise, could make it more difficult for a third
party to acquire a majority of the outstanding voting stock. The authorized
shares of Preferred Stock, as well as shares of Common Stock, will be available
for issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on
 
                                       121
124
 
which the Company's securities may be listed or traded. If the approval of the
Company's stockholders is not required for the issuance of shares of Preferred
Stock or Common Stock, the Company Board may determine not to seek stockholder
approval. Accordingly, the issuance of Preferred Stock may be used as an "anti-
takeover" device without further action on the part of the Company's
stockholders.
 
     Although the Company Board has no intention at the present time of doing
so, it could issue a series of Preferred Stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. The Company Board will make any determination to issue such
shares based on its judgment as to the best interests of the Company and its
stockholders. The Company Board, in so acting, could issue Preferred Stock
having terms that could discourage an acquisition attempt through which an
acquirer may be able to change the composition of the Company Board, including a
tender offer or other transaction that some, or a majority, of the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
 
CERTAIN PROVISIONS OF THE CERTIFICATE AND BY-LAWS; ANTI-TAKEOVER EFFECTS
 
  Board of Directors
 
     The Certificate provides that, except as otherwise fixed by or pursuant to
the provisions of a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, the number of the directors
of the Company will be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the total number of directors which the
Company would have if there were no vacancies (the "Whole Board") (but shall not
be less than three). The directors, other than those who may be elected by the
holders of Preferred Stock, will be classified with respect to the time for
which they severally hold office into three classes, as nearly equal in number
as possible, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1996, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1997 and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1998, with each director to
hold office until its successor is duly elected and qualified. Commencing with
the 1996 annual meeting of stockholders, directors elected to succeed directors
whose terms then expire will be elected for a term of office to expire at the
third succeeding annual meeting of stockholders after their election, with each
director to hold office until such person's successor is duly elected and
qualified.
 
     The Certificate provides that, except as otherwise provided for or fixed by
or pursuant to a certificate of designations setting forth the rights of the
holders of any class or series of Preferred Stock, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Company Board resulting from death, resignation, disqualification, removal or
other cause will be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Company Board, and not by the stockholders. Any director elected in accordance
with the preceding sentence will hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
Company Board will shorten the term of any incumbent director. Subject to the
rights of holders of Preferred Stock, any director may be removed from office
only for cause by the affirmative vote of the holders of at least a majority of
the voting power of all Voting Stock then outstanding, voting together as a
single class.
 
     These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of the Company Board by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of the Company Board. Accordingly,
these provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of the Company.
 
                                       122
125
 
  Stockholder Action by Unanimous Written Consent; Special Meetings
 
     Except as otherwise required by law and subject to the rights of the
holders of any Preferred Stock, special meetings of stockholders of the Company
for any purpose or purposes may be called only by the Company Board pursuant to
a resolution stating the purpose or purposes thereof approved by a majority of
the Whole Board or by the Chairman of the Board. Any power of stockholders to
call a special meeting is specifically denied. No business other than that
stated in the notice shall be transacted at any special meeting. Stockholders
entitled to vote at an annual or special meeting may act by written consent in
lieu of such meeting only if such consent is unanimous. These provisions may
have the effect of delaying consideration of a stockholder proposal until the
next annual meeting unless a special meeting is called by the Company Board or
the Chairman of the Board.
 
  Advance Notice Procedures
 
     The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure"). The Stockholder Notice Procedure provides that only individuals who
are nominated by, or at the direction of, the Chairman of the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Chairman of the
Board or the Company Board, or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. Under the Stockholder Notice Procedure, for
notice of stockholder nominations to be made at an annual meeting to be timely,
such notice must be received by the Company not later than the close of business
on the 90th calendar day nor earlier than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting (except that, in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th calendar day prior to such
annual meeting and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting or the 10th calendar day following the
day on which public announcement of a meeting date is first made by the
Company).
 
     Notwithstanding the foregoing, in the event that the number of directors to
be elected to the Company Board is increased and there is no public announcement
by the Company naming all of the nominees for director or specifying the size of
the increased Company Board at least 100 calendar days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice also
will be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered not later than the
close of business on the 10th calendar day following the day on which such
public announcement is first made by the Company. Under the Stockholder Notice
Procedure, for notice of a stockholder nomination to be made at a special
meeting at which directors are to be elected to be timely, such notice must be
received by the Company not earlier than the close of business on the 120th
calendar day prior to such special meeting and not later than the close of
business on the 90th calendar day prior to such special meeting or the 10th
calendar day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Company Board to
be elected at such meeting.
 
     In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate an individual for election as a director or
relating to the conduct of business other than the nomination of directors must
contain certain specified information. If the chairman of a meeting determines
that an individual was not nominated, or other business was not brought before
the meeting, in accordance with the Stockholder Notice Procedure, such
individual will not be eligible for election as a director, or such business
will not be conducted at such meeting, as the case may be.
 
                                       123
126
 
  Amendment
 
     The Certificate provides that the affirmative vote of the holders of at
least 80% of the Voting Stock, voting together as a single class, is required to
amend provisions of the Certificate relating to stockholder action without a
meeting; the calling of special meetings; the number, election and term of the
Company's directors; the filling of vacancies; and the removal of directors. The
Certificate further provides that the related By-Laws described above (including
the Stockholder Notice Procedure) may be amended only by the Company Board or by
the affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of Voting Stock, voting together as a single class.
 
DELAWARE BUSINESS COMBINATION STATUTE
 
     Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, 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) on or subsequent to such date,
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 (x) any person that
is the owner of 15% or more of the outstanding voting stock of the corporation,
or is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within three
years immediately prior to the date of determination and (y) the affiliate and
associates of any such person.
 
     Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring the
Company to negotiate in advance with the Company Board, since the stockholder
approval requirement would be avoided if a majority of the directors then in
office approves either the business combination or the transaction which results
in any such person becoming an interested shareholder. Such provisions also may
have the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which the Company's stockholders may otherwise deem to be in their
best interests.
 
LIABILITY OF DIRECTORS; INDEMNIFICATION
 
     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.
 
                                       124
127
 
     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
 
                 will be the transfer agent and registrar for the Class A Common
Stock.
 
                                       125
128
 
                                  UNDERWRITING
 
     Subject to the terms and conditions set forth in the purchase agreement
(the "Purchase Agreement") among the Selling Stockholders, the Company and each
of the underwriters named below (the "Underwriters"), the Selling Stockholders
have agreed to sell to each of the Underwriters, and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, is acting as
representative (the "Representative"), has severally agreed to purchase from the
Selling Stockholders the aggregate number of shares of Class A Common Stock set
forth opposite its name below:
NUMBER OF
                                   UNDERWRITERS                              SHARES
        ------------------------------------------------------------------  ---------
Merrill Lynch, Pierce, Fenner & Smith
                     Incorporated.........................................
        Lehman Brothers Inc. .............................................
        Smith Barney Inc. ................................................
                                                                             -------
                  Total...................................................
                                                                             =======
In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Class A
Common Stock being sold pursuant to such Purchase Agreement if any of the shares
of Class A Common Stock being sold pursuant to such Purchase Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased.
 
     The Underwriters have advised the Company and the Selling Stockholders that
the Underwriters propose to offer the shares of Class A Common Stock offered
hereby to the public initially at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price, less a
concession not in excess of $     per share of Class A Common Stock. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $     per share of Class A Common Stock on sales to certain other dealers.
After the public offering, the public offering price, concession and discount
may be changed.
 
     The Selling Stockholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to an aggregate of an additional           shares of Class A Common
Stock at the initial public offering price set forth on the cover page of this
Prospectus, less the underwriting discount. The Underwriters may exercise the
option only to cover over-allotments, if any, made on the sale of shares of
Class A Common Stock offered hereby. To the extent that the Underwriters
exercise the option, each Underwriter will be obligated, subject to certain
conditions, to purchase the same percentage of such additional shares of Class A
Common Stock as the number of shares of Class A Common Stock to be purchased by
it bears to the total number of shares of Class A Common Stock initially offered
by the Underwriters.
 
     The Company and the Selling Stockholders have agreed with the Underwriters
not to directly or indirectly offer, sell, contract to sell or otherwise dispose
of any shares of Class A Common Stock of the Company or any interests therein or
securities convertible into or exchangeable or exercisable for shares of Class A
Common Stock of the Company (except, in the case of the Selling Stockholders,
for the shares of Class A Common Stock offered hereby), for a period of   days
after the date of this Prospectus, without the prior written consent of the
Representative.
 
     At the request of the Company, the Underwriters have initially reserved up
to           shares of Class A Common Stock for sale at the price at which the
shares of Class A Common Stock are being offered to the public to certain
employees and retirees of the Company and its affiliates. The number of shares
of Class A Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
which are not so purchased will be offered by the Underwriters to the general
public on the same basis as other shares offered hereby.
 
                                       126
129
 
     The Company and the Selling Stockholders have severally agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
 
     Certain of the Underwriters or their affiliates have provided from time to
time, and may provide in the future, investment banking services to the Company
and its affiliates, for which such Underwriters or their affiliates have
received or will receive fees and commissions.
 
     LW-SP1 L.P. ("LW-SP1") and LW-SP2 L.P. ("LW-SP2") are limited partnerships
of which LW Real Estate Investments, L.P. is general partner and of which it
owns a 99% interest. Lehman Brothers Inc. owns an approximately 75% partnership
interest in LW Real Estate Investments, L.P. LW-SP1 and LW-SP2 hold a limited
partnership interest in Hyperion Partners. Accordingly, as a result of the
Restructuring, LW-SP1 and LW-SP2 became owners of Class B Common Stock. Although
LW-SP1 and LW-SP2 have indicated their intention not to participate in the
Offering and, accordingly, are not among the Selling Stockholders, they have
entered into the Letter Agreement pursuant to which, among other things, they
have agreed not to transfer their Common Stock until August 8, 1998. See
"Selling Stockholders". In light of this indirect beneficial ownership interest
of Lehman Brothers Inc. in the Company, the Offering is being made pursuant to
the provisions of Rule 2720 ("Schedule E") of the NASD Conduct Rules. Merrill
Lynch Pierce Fenner & Smith Incorporated will act as qualified independent
underwriter as defined in Schedule E and in accordance with Schedule E will
conduct due diligence and recommend the initial public offering price of the
shares of Class A Common Stock offered hereby.
 
     Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock was
determined by negotiations between the Company and the Underwriters. Among the
factors considered in determining the initial public offering price were the
sales, earnings and certain other pro forma financial and operating information
of the Company in recent periods, the future prospects of the Company and its
industry in general, and certain ratios and market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company.
 
                                 LEGAL MATTERS
 
     The validity of the Class A Common Stock offered hereby and certain other
legal matters will be passed upon for the Company by Bryan Cave LLP, Washington
D.C. and Wachtell, Lipton, Rosen & Katz, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Cleary, Gottlieb, Steen and
Hamilton, New York, New York.
 
                                    EXPERTS
 
     The consolidated financial statements of the Company as of September 30,
1995 and 1994 and for each of the three years in the period ended September 30,
1995 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
 
                             AVAILABLE INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock offered
hereby (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement"). This Prospectus, which forms a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract, agreement or other document
are not necessarily complete, and, in each instance, reference is made to the
 
                                       127
130
 
copy of the document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and 7
World Trade Center (13th Floor), New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
 
     The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the Offering, the Company will become subject
to the informational requirements of the Exchange Act. The Company will fulfill
its obligations with respect to such requirements by filing periodic reports and
other information with the Commission. In addition, the Company intends to
furnish to its stockholders annual reports containing consolidated financial
statements examined by an independent public accounting firm.
 
                                       128
131
 
                             INDEX OF DEFINED TERMS
TERM                    PAGE
- ---------------------------------------  ----
1988 Act...............................    88
1995 Amendments........................    85
1996 Incentive Compensation Plan.......   104
15.75% Notes...........................    48
5% Stockholders........................    13
Acquisition............................     6
ACE....................................    92
ADA....................................    89
adequately capitalized.................    75
affiliate..............................    83
ALCO...................................     4
American Marine........................    98
AMT....................................    92
AMTI...................................    92
Annual Retainer........................   108
APY....................................    89
Assistance Agreement...................    72
Awards.................................   104
Bank...................................     3
Bank Common Stock......................     8
Bank Preferred Stock...................     8
Barnett................................   100
BIF....................................    14
BSA....................................    88
By-Laws................................    10
capital distributions..................    78
CDs....................................    40
CEO....................................     5
Certificate............................    10
CGSA...................................    71
Change of Control Price................   106
Class A Common Stock...................     1
Class B Common Stock...................     1
Class C Common Stock...................    20
CMOs...................................    64
Code...................................    13
Commission.............................     1
Committee..............................   104
Common Stock...........................     1
Company................................     1
Company Board..........................     6
Compensation Plan......................   104
Consolidated Financial Statements......     7
core capital...........................    77
Covered Assets.........................    72
Covered Transactions...................    82
TERM                    PAGE
- ---------------------------------------  ----
CRA....................................    82
DBL....................................    91
DGCL...................................    16
Director Stock Plan....................   108
Distribution...........................     5
DSSP...................................   111
ECOA...................................    17
EFTA...................................    88
Eligible Director......................   108
employment taxes.......................   107
ERISA..................................   105
Exchange Act...........................     9
Exchange Offer.........................     6
Expedited Funds Act....................    89
FASB...................................    38
FDIA...................................    82
FDIC...................................     1
Federal Reserve Board..................    11
federally related mortgage loan........    86
FH Act.................................    17
FHA....................................    15
FHLB...................................     6
FHLB Dallas............................    12
FHLBB..................................    97
FHLMC..................................    15
FIRREA.................................     6
First Amendment to Warrant Agreement...    73
FNMA...................................    15
Forbearance Agreement..................     6
FRA....................................    82
Freestanding SARs......................   105
FRF....................................     6
FSLIC..................................     6
GAAP...................................    77
GNMA...................................    15
HELOCs.................................    54
HMDA...................................    86
HOLA...................................    74
HUD....................................    86
Hyperion Capital.......................    98
Hyperion Holdings......................     5
Hyperion Partners......................     1
Hyperion Partners II...................    16
Hyperion Ventures......................   118
institution-affiliated parties.........    84
interest rate sensitivity gap..........    68
129
132
TERM                    PAGE
- ---------------------------------------  ----
IRR....................................    78
ISOs...................................   107
Letter Agreement.......................   119
leverage capital.......................    75
LW-SP1.................................   127
LW-SP2.................................   127
Maxxam.................................    17
MBF....................................     4
MBS....................................     3
Merger.................................     5
Meritor................................   100
MSRs...................................     3
Merger Agreement.......................   119
NASD...................................    72
NASDAQ.................................     1
Net Tax Benefits.......................    92
NOLs...................................     6
non-agency securities..................    64
non-qualifying loans...................    91
nonconforming subsidiaries.............    78
NQOs...................................   107
Offering...............................     1
Old USAT...............................     6
operating subsidiary...................    80
Options................................   104
Order..................................    96
OTS....................................     1
Ownership Change.......................    13
Participants...........................   104
Performance Awards.....................   104
portfolio assets.......................    81
Preferred Stock........................   120
Principal Shareholder..................    82
Purchase Agreement.....................   126
QTL....................................    74
qualified investments..................    87
qualifying real property loans.........    91
Registration Statement.................   127
REMICs.................................    91
REO....................................    34
Representative.........................   126
TERM                    PAGE
- ---------------------------------------  ----
repurchase agreements..................    37
RESPA..................................    17
Restricted Period......................   105
Restricted Stock.......................   104
reverse repurchase agreement...........    12
Restructuring..........................     5
RTC....................................     8
SAIF...................................     3
Salomon................................    98
SARs...................................   104
Schedule E.............................   127
Section 203............................    16
Securities Act.........................     1
Selling Stockholders...................     1
Senior Notes...........................     6
SESP...................................   110
Settlement Agreement...................    72
SFAS...................................    25
Stockholder Notice Procedure...........   123
Tandem SARs............................   105
tangible capital.......................    78
Tax Benefits Agreement.................    91
Tier 1 Association.....................    79
Tier 2 Association.....................    79
Tier 3 Association.....................    79
Tier 1 risk-based capital..............    75
TILA...................................    17
TISA...................................    89
total capital..........................    78
total risk-based capital...............    75
Transfers..............................    13
UFM....................................    72
undercapitalized.......................    75
Underwriters...........................   126
VA.....................................    15
Voting Stock...........................    16
Warrant Agreement......................    73
Warrants...............................     8
well capitalized.......................    75
Whole Board............................   122
Winstar cases..........................    97
130
133
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
                                                                                        -----
Independent Auditors' Report..........................................................    F-2
Consolidated Statements of Financial Condition as of March 31, 1996 (unaudited) and
  September 30, 1995 and 1994.........................................................    F-3
Consolidated Statements of Operations for the Six Months Ended March 31, 1996
  (unaudited) and March 31, 1995 (unaudited) and for the Years Ended September 30,
  1995, 1994, and 1993................................................................    F-4
Consolidated Statements of Stockholders' Equity for the Six Months Ended March 31,
  1996 (unaudited) and March 31, 1995 (unaudited) and for the Years Ended September
  30, 1995, 1994, and 1993............................................................    F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1994,
  and 1993............................................................................    F-6
Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1996
  (unaudited) and March 31, 1995 (unaudited)..........................................    F-8
Notes to Consolidated Financial Statements............................................   F-10
All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or
Notes thereto.
 
                                       F-1
134
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors of Bank United Corp. (formerly USAT Holdings Inc.):
 
     We have audited the accompanying consolidated statements of financial
condition of Bank United Corp. (formerly USAT Holdings Inc.) and its subsidiary
(collectively known as the "Company") as of September 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company at
September 30, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
 
     Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The information as of
September 30, 1993, 1992 and 1991 and for the years ended September 30, 1992 and
1991 included in notes 3, 4, 5 and 8 are presented for the purpose of additional
analysis, and are not a required part of the basic consolidated financial
statements. This information is the responsibility of the Company's management.
Such information has been subjected to the auditing procedures applied in our
audits of the basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic consolidated
financial statements from which such information has been derived.
 
     As discussed in notes 1 and 6 to the consolidated financial statements,
effective October 1, 1994, the Company changed its method of accounting for
mortgage servicing rights to conform with Statement of Financial Accounting
Standards No. 122.
 
DELOITTE & TOUCHE LLP
New York, New York
October 31, 1995, except for Note 21, as to
which the date is June      , 1996
 
                                       F-2
135
 
                               BANK UNITED CORP.
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31,
                                                                      -----------        SEPTEMBER 30,
                                                                         1996       ------------------------
                                                             NOTES    -----------      1995          1994
                                                           ---------  (UNAUDITED)   -----------   ----------
ASSETS
Cash and cash equivalents.................................    21      $   135,691   $   112,931   $   76,938
Securities purchased under agreements to resell and
  federal funds sold......................................     2          659,279       471,052      358,710
Trading account assets, at fair value.....................                  1,267         1,081        1,011
Securities                                                   3, 12
     Held to maturity, at amortized cost (fair value of
       $3.0 million in 1996, $2.7 million in 1995, and
       $2.8 million in 1994)..............................                  1,903         1,902        2,358
     Available for sale, at fair value....................                 56,448       114,111      111,757
Mortgage-backed securities                                 4, 9, 10
     Held to maturity, at amortized cost (fair value of
       $657.6 million in 1996, $2,031 million in 1995, and
       $2,341 million in 1994)............................                674,488     2,051,304    2,394,978
     Available for sale, at fair value....................              1,279,582       346,959      433,925
Loans                                                        5, 9
     Held to maturity (net of the allowance for credit
       losses of $36.4 million in 1996, $36.8 million in
       1995, and $23.4 million in 1994)...................              7,447,500     7,763,676    4,780,328
     Held for sale (net of the allowance for credit losses
       of $44 thousand in 1996, $38 thousand in 1995, and
       $76 thousand in 1994)..............................                430,580       496,564      265,846
FHLB stock................................................                233,038       225,952      132,816
Premises and equipment....................................                 36,157        37,687       40,537
Mortgage servicing rights.................................     6           83,383        75,097       56,677
Intangible assets.........................................                 23,105        26,519       36,446
Real estate owned (net of allowance for losses of
  $727 thousand in 1996, $1.1 million in 1995, and
  $373 thousand in 1994)..................................                 27,539        23,764       20,311
Other assets.............................................. 4, 13, 21      176,676       234,935      197,523
                                                                      -----------   -----------   ----------
TOTAL ASSETS..............................................            $11,266,636   $11,983,534   $8,910,161
                                                                       ==========    ==========    =========
LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits..................................................     8      $ 4,963,321   $ 5,182,220   $4,764,204
FHLB advances.............................................  4, 5, 9     4,139,023     4,383,895    2,620,329
Securities sold under agreements to repurchase and federal
  funds purchased.........................................   4, 10        949,936     1,172,533      553,000
Senior Notes..............................................    11          115,000       115,000      115,000
Advances from borrowers for taxes and insurance...........                104,749       183,968      145,383
Other liabilities.........................................                282,666       264,315      175,383
                                                                      -----------   -----------   ----------
          Total liabilities...............................             10,554,695    11,301,931    8,373,299
                                                                      -----------   -----------   ----------
COMMITMENTS AND CONTINGENCIES                               12, 17
MINORITY INTEREST
Preferred stock issued by consolidated subsidiary.........    16          185,500       185,500       85,500
                                                                      -----------   -----------   ----------
STOCKHOLDERS' EQUITY......................................  15, 16
Common stock
     Class A: 13,238 shares outstanding...................    21                1             1            1
     Class C: 2,797 shares outstanding....................    21                1             1            1
Paid-in capital...........................................                118,009       118,009      121,767
Retained earnings.........................................    21          411,498       384,739      343,020
Unrealized gains (losses) on securities and
  mortgage-backed securities available for sale, net of
  tax.....................................................     4           (3,068)       (6,647)     (13,427)
                                                                      -----------   -----------   ----------
          Total stockholders' equity......................                526,441       496,103      451,362
                                                                      -----------   -----------   ----------
TOTAL LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS'
  EQUITY..................................................            $11,266,636   $11,983,534   $8,910,161
                                                                       ==========    ==========    =========
See accompanying Notes to Consolidated Financial Statements.
 
                                       F-3
136
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE SIX
                                                                                MONTHS ENDED             FOR THE YEAR ENDED
                                                                                  MARCH 31,                SEPTEMBER 30,
                                                                             -------------------   ------------------------------
                                                                     NOTES     1996       1995       1995       1994       1993
                                                                    -------  --------   --------   --------   --------   --------
(UNAUDITED)
INTEREST INCOME
Short-term interest-earning assets...............................            $ 17,360   $ 14,415   $ 29,675   $ 19,019   $ 14,301
Trading account assets...........................................                  35         29         62       (144)     6,224
Securities.......................................................      3        2,112      2,950      5,893      5,007         63
Mortgage-backed securities.......................................      4       70,699     87,134    173,155    151,972     83,525
Loans............................................................      5      323,930    218,370    526,528    308,804    344,515
FHLB stock.......................................................               7,085      4,688     11,446      5,558      3,095
Covered Assets and related assets................................      7        --         --         --         4,490     30,767
                                                                             --------   --------   --------   --------   --------
        Total interest income....................................             421,221    327,586    746,759    494,706    482,490
                                                                             --------   --------   --------   --------   --------
INTEREST EXPENSE
Deposits.........................................................      8      138,510    122,504    264,366    209,034    225,983
FHLB advances....................................................      9      136,501     92,281    224,767     91,060     48,594
Securities sold under agreements to repurchase and
  federal funds purchased........................................     10       29,073     19,973     53,220     10,574     11,180
Long-term debt...................................................     11        --         --         --         --        10,214
Senior Notes.....................................................     11        5,205      5,202     10,407     10,177      3,446
Other............................................................               --         --         --            79      1,414
                                                                             --------   --------   --------   --------   --------
        Total interest expense...................................             309,289    239,960    552,760    320,924    300,831
                                                                             --------   --------   --------   --------   --------
        Net interest income......................................             111,932     87,626    193,999    173,782    181,659
PROVISION FOR CREDIT LOSSES......................................      5        5,850      4,157     24,293      6,997      4,083
                                                                             --------   --------   --------   --------   --------
        Net interest income after provision for credit
          losses.................................................             106,082     83,469    169,706    166,785    177,576
                                                                             --------   --------   --------   --------   --------
NON-INTEREST INCOME
Net gains (losses)
    Sales of single family servicing rights and single
      family warehouse loans.....................................              19,157     38,464     60,495     63,286     67,403
    Securities and mortgage-backed securities....................     3,4       2,863          8         26     10,404     43,702
    Other loans..................................................               3,485       (380)    (1,210)       163      1,496
Loan servicing fees and charges..................................              22,107     22,813     43,508     31,741     21,780
Other fees and charges...........................................               6,997      5,748     12,162     13,295     12,310
                                                                             --------   --------   --------   --------   --------
        Total non-interest income................................              54,609     66,653    114,981    118,889    146,691
                                                                             --------   --------   --------   --------   --------
NON-INTEREST EXPENSE
Compensation and benefits........................................     14       39,898     43,192     83,520     86,504     81,472
Occupancy........................................................     17        9,439      9,072     18,713     17,196     15,971
Data processing..................................................     17        8,120      8,116     16,360     15,821     15,072
Advertising and marketing........................................               4,053      4,782      9,262     10,796      8,772
Amortization of intangibles......................................               9,801     10,718     21,856     18,247     24,469
SAIF deposit insurance premiums..................................               6,129      5,630     11,428     11,329     10,162
Furniture and equipment..........................................               3,128      3,219      6,428      6,810      5,535
Other............................................................              18,736     16,916     27,009     32,890     40,511
                                                                             --------   --------   --------   --------   --------
        Total non-interest expense...............................              99,304    101,645    194,576    199,593    201,964
                                                                             --------   --------   --------   --------   --------
        Income before income taxes, minority interest, and
          extraordinary loss.....................................              61,387     48,477     90,111     86,081    122,303
INCOME TAX EXPENSE (BENEFIT).....................................   13, 21     25,278     20,186     37,415    (31,899)   (26,153)
                                                                             --------   --------   --------   --------   --------
INCOME BEFORE MINORITY INTEREST AND
  EXTRAORDINARY LOSS.............................................              36,109     28,291     52,696    117,980    148,456
Less minority interest:
    Subsidiary preferred stock dividends.........................               9,126      4,326     10,600      8,653      6,537
    Payments in lieu of dividends................................   16, 21        224        306        377        357      --
                                                                             --------   --------   --------   --------   --------
INCOME BEFORE EXTRAORDINARY LOSS.................................              26,759     23,659     41,719    108,970    141,919
Extraordinary loss -- early extinguishment of debt...............     11        --         --         --         --        14,549
                                                                             --------   --------   --------   --------   --------
NET INCOME.......................................................            $ 26,759   $ 23,659   $ 41,719   $108,970   $127,370
                                                                             ========   ========   ========   ========   ========
EARNINGS PER COMMON SHARE:
Income before extraordinary loss.................................   16, 21   $   0.87   $   0.76   $   1.35   $   3.55   $   4.61
Extraordinary loss...............................................               --         --         --         --          0.50
                                                                             --------   --------   --------   --------   --------
Net income.......................................................            $   0.87   $   0.76   $   1.35   $   3.55   $   4.11
                                                                             ========   ========   ========   ========   ========
See accompanying Notes to Consolidated Financial Statements.
 
                                       F-4
137
 
                               BANK UNITED CORP.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
                                   --------------------------------------
                                        CLASS A              CLASS C                                    UNREALIZED      TOTAL
                                   ------------------   -----------------    PAID-IN       RETAINED       GAINS      STOCKHOLDERS'
                                   SHARES    AMOUNT     SHARES   AMOUNT      CAPITAL       EARNINGS      (LOSSES)       EQUITY
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT SEPTEMBER 30, 1992..... 13,238      $1       2,797      $1        $125,691      $106,680      $   --        $232,373
    Net income....................   --        --        --        --            --         127,370          --         127,370
    Cost of subsidiary's preferred
      stock issuance..............   --        --        --        --          (3,924)         --            --          (3,924)
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --          33,384        33,384
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT SEPTEMBER 30, 1993..... 13,238       1       2,797       1         121,767       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..... 13,238       1       2,797       1         121,767       343,020       (13,427)      451,362
    Net income....................   --        --        --        --            --          41,719          --          41,719
    Cost of subsidiary's preferred
      stock issuance..............   --        --        --        --          (3,758)         --            --          (3,758)
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --           6,780         6,780
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT SEPTEMBER 30, 1995..... 13,238      $1       2,797      $1        $118,009      $384,739      $ (6,647)     $496,103
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
                                                                            (UNAUDITED)
BALANCE AT SEPTEMBER 30, 1994..... 13,238      $1       2,797      $1        $121,767      $343,020      $(13,427)     $451,362
    Net income....................   --        --        --        --            --          23,659          --          23,659
    Change in unrealized gains
      (losses)....................   --        --        --        --            --            --           1,672         1,672
                                   ------  ----------   -----  ----------  ------------  ------------  ------------  ------------
BALANCE AT MARCH 31, 1995......... 13,238      $1       2,797      $1        $121,767      $366,679      $(11,755)     $476,693
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
                                                                            (UNAUDITED)
BALANCE AT SEPTEMBER 30, 1995..... 13,238      $1       2,797      $1        $118,009      $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......... 13,238      $1       2,797      $1        $118,009      $411,498      $ (3,068)     $526,441
                                   ======  ==========   =====  ==========  ============  ============  ============  ============
See accompanying Notes to Consolidated Financial Statements.
 
                                       F-5
138
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
FOR THE YEAR ENDED SEPTEMBER 30,
                                                                 -----------------------------------------
                                                                    1995           1994           1993
                                                                 -----------    -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.....................................................  $    41,719    $   108,970    $   127,370
Adjustments to reconcile net income to net cash (used) provided
  by operating activities:
     Provision for credit losses...............................       24,293          6,997          4,083
     Net gains on sales of assets..............................      (72,918)       (80,524)      (112,349)
     Net depreciation, amortization, and accretion.............      (49,335)        (7,921)        (8,781)
     Amortization of intangibles...............................       21,856         18,247         24,469
     FHLB stock dividend.......................................      (11,446)        (5,558)        (3,095)
     Purchases of trading account assets.......................         (203)           (46)      (222,593)
     Proceeds from sales of trading account assets.............          143            103         30,220
     Repayments of trading account assets......................           --             --         29,590
     Originations of loans held for sale.......................   (2,275,058)    (4,128,979)    (6,116,430)
     Purchases of loans held for sale..........................     (103,926)       (60,900)       (58,879)
     Proceeds from sales of loans held for sale................    2,164,407      4,838,051      6,258,670
     Change in loans held for sale.............................        5,661         53,117        207,477
     Change in interest receivable.............................      (37,778)       (10,284)           791
     Change in other assets....................................       (1,547)        (4,213)        41,616
     Change in other liabilities...............................       89,056        (44,432)       131,034
                                                                 -----------    -----------    -----------
          Net cash (used) provided by operating activities.....     (205,076)       682,628        333,193
                                                                 -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in securities purchased under agreements to
       resell and federal funds sold...........................     (117,342)       189,278       (341,988)
     Purchases of securities held to maturity..................       (2,920)       (32,812)        (2,500)
     Proceeds from maturities of securities held to maturity...        3,472         33,000          5,500
     Purchases of mortgage-backed securities held to
       maturity................................................      (38,515)       (83,854)      (480,915)
     Proceeds from sales of mortgage-backed securities held to
       maturity................................................           --         38,294             --
     Repayments of mortgage-backed securities held to
       maturity................................................      390,364        162,328         40,966
     Purchases of securities available for sale................           --       (135,930)            --
     Proceeds from sales of securities available for sale......           --         61,482             --
     Purchases of mortgage-backed securities available for
       sale....................................................         (230)      (735,757)      (731,677)
     Proceeds from sales of mortgage-backed securities
       available for sale......................................       77,626        187,189        403,129
     Repayments of mortgage-backed securities available for
       sale....................................................       16,346        760,111        289,304
     Change in mortgage-backed securities available for sale...           --        (12,148)            --
     Purchases of loans held to maturity.......................   (2,658,093)    (1,406,275)    (1,212,103)
     Proceeds from sales of loans held to maturity.............       31,543         27,093          2,878
     Change in loans held to maturity..........................     (379,229)      (734,276)      (404,530)
     Change in Covered Assets..................................           --        318,176        152,467
     Purchases of FHLB stock...................................     (100,190)          (793)       (55,030)
     Redemption of FHLB stock..................................       18,500             --             --
     Purchases of premises and equipment.......................       (6,132)       (10,379)       (14,401)
     Proceeds from sales of real estate owned acquired through
       foreclosure.............................................       34,137         31,212         29,117
     Proceeds from sales of servicing rights...................       34,080         67,198         64,260
                                                                 -----------    -----------    -----------
          Net cash used by investing activities................   (2,696,583)    (1,276,863)    (2,255,523)
                                                                 -----------    -----------    -----------
(Continued on following page)
 
                                       F-6
139
 
                               BANK UNITED CORP.
 
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
 
                                 (IN THOUSANDS)
FOR THE YEAR ENDED SEPTEMBER 30,
                                                               ----------------------------------------
                                                                  1995           1994           1993
                                                               ----------     ----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net change in deposits..................................  $  419,738     $  (73,290)    $  (72,284)
     Proceeds from FHLB advances.............................   3,821,754      2,161,384      8,454,000
     Repayment of FHLB advances..............................  (2,058,200)    (1,726,500)    (6,900,900)
     Net change in securities sold under agreements to
       repurchase and federal funds purchased................     619,533        243,000        310,000
     Change in advances from borrowers for taxes and
       insurance.............................................      38,585          1,191         11,693
     Repayment of long-term debt.............................          --             --       (102,000)
     Repayment of notes payable to related party.............          --             --         (4,090)
     Proceeds from issuance of Senior Notes..................          --             --        115,000
     Proceeds from issuance of the Bank's Preferred Stock....      96,242             --         81,576
                                                               ----------     ----------     ----------
          Net cash provided by financing activities..........   2,937,652        605,785      1,892,995
                                                               ----------     ----------     ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........      35,993         11,550        (29,335)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...............      76,938         65,388         94,723
                                                               ----------     ----------     ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.....................  $  112,931     $   76,938     $   65,388
                                                               ==========     ==========     ==========
Supplemental disclosures of cash flow information and noncash
  investing activities
     Cash paid for interest..................................  $  523,250     $  313,092     $  298,643
     Cash paid for income taxes..............................       9,863          5,102             --
     Cash paid in lieu of taxes..............................         157          4,000          2,800
     Real estate owned acquired through foreclosure..........      49,403         44,753         30,751
     Covered real estate owned acquired through
       foreclosure...........................................          --          3,744         26,320
     Sales of real estate owned financed by the Bank.........          30          2,732         16,752
     Securitization of loans.................................          --      1,182,172        572,582
     Transfer of loans from held to maturity to held for
       sale..................................................          --         88,100        575,306
     Transfer of loans from held for sale to held to
       maturity..............................................          --        486,745             --
     Transfer of mortgage-backed securities from available
       for sale to held to maturity..........................          --      1,318,877          8,907
     Transfer of mortgage-backed securities from held to
       maturity to loans held to maturity....................          --             --         23,125
     Transfer of mortgage-backed securities from held to
       maturity to available for sale........................          --         68,741        202,509
     Transfer of trading account assets to mortgage-backed
       securities available for sale.........................          --             --        214,926
     Transfer of trading account assets to securities
       available for sale....................................          --             --         41,526
     Change in unrealized gains (losses) on securities and
       mortgage-backed securities available for sale.........       6,780        (46,811)        33,384
See accompanying Notes to Consolidated Financial Statements.
 
                                       F-7
140
 
                               BANK UNITED CORP.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
FOR THE SIX MONTHS
                                                                                        ENDED
                                                                                      MARCH 31,
                                                                               -----------------------
                                                                                 1996          1995
                                                                               ---------     ---------
                                                                                     (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................................... $   26,759    $   23,659
Adjustments to reconcile net income to net cash provided by operating
  activities:
     Provision for credit losses.............................................      5,850         4,157
     Net gains on sales of assets............................................    (26,783)      (40,976)
     Net depreciation, amortization, and accretion...........................     (7,753)      (11,386)
     Amortization of intangibles.............................................      9,801        10,718
     FHLB stock dividend.....................................................     (7,086)       (4,687)
     Purchases of trading account assets.....................................    (10,722)          (30)
     Proceeds from sales of trading account assets...........................     10,620            --
     Originations of loans held for sale..................................... (1,492,463)     (826,541)
     Purchases of loans held for sale........................................    (52,957)      (63,074)
     Proceeds from sales of loans held for sale..............................  1,810,776       932,582
     Change in loans held for sale...........................................     11,368          (455)
     Change in interest receivable...........................................     19,443       (11,304)
     Change in other assets..................................................     27,365        (8,691)
     Change in other liabilities.............................................     18,350        16,164
                                                                              ----------    ----------
          Net cash provided by operating activities..........................    342,568        20,136
                                                                              ----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in securities purchased under agreements to resell and
      federal funds sold.....................................................   (188,227)     (277,564)
     Purchases of securities held to maturity................................     (1,460)       (1,451)
     Proceeds from maturities of securities held to maturity.................      1,500         1,972
     Purchases of mortgage-backed securities held to maturity................     (3,841)      (38,515)
     Repayments of mortgage-backed securities held to maturity...............    135,527       183,210
     Purchases of securities available for sale..............................     (9,142)           --
     Proceeds from sales of securities available for sale....................     67,375            --
     Proceeds from sales of mortgage-backed securities available for sale....    201,523        77,651
     Repayments of mortgage-backed securities available for sale.............    115,954        10,819
     Purchases of loans held to maturity.....................................   (100,247)     (765,118)
     Change in loans held to maturity........................................    203,214      (399,890)
     Purchases of FHLB stock.................................................         --       (47,875)
     Redemption of FHLB stock................................................         --        18,500
     Purchases of premises and equipment.....................................     (2,989)       (1,228)
     Proceeds from sales of real estate owned acquired through foreclosure...     20,099        14,134
     Proceeds from sales of servicing rights.................................      6,174        28,304
                                                                              ----------    ----------
          Net cash provided (used) by investing activities...................    445,460    (1,197,051)
                                                                              ----------    ----------
Continued on following page
 
                                                   F-8
141
 
                               BANK UNITED CORP.
 
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
 
                                 (IN THOUSANDS)
FOR THE SIX MONTHS
                                                                                        ENDED
                                                                                      MARCH 31,
                                                                               -----------------------
                                                                                 1996          1995
                                                                               ---------     ---------
                                                                                     (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES
     Net change in deposits..................................................  $(218,952)    $ 251,521
     Proceeds from FHLB advances.............................................    200,000     1,620,000
     Repayment of FHLB advances..............................................   (444,500)     (958,200)
     Net change in securities sold under agreements to repurchase and federal
      funds purchased........................................................   (222,597)      286,939
     Change in advances from borrowers for taxes and insurance...............    (79,219)       (9,371)
                                                                               ---------     ---------
          Net cash (used) provided by financing activities...................   (765,268)    1,190,889
                                                                               ---------     ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................................     22,760        13,974
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............................    112,931        76,938
                                                                               ---------     ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................  $ 135,691     $  90,912
                                                                               =========     =========
Supplemental disclosures of cash flow information and noncash investing
  activities
     Cash paid for interest..................................................  $ 318,849     $ 226,171
     Cash paid for income taxes..............................................      2,044         6,440
     Real estate owned acquired through foreclosure..........................     33,983        20,700
     Transfer of loans from held to maturity to held for sale................    188,748            --
     Transfer of mortgage-backed securities from held to maturity to
      available for sale.....................................................  1,244,945            --
     Change in unrealized gains (losses) on securities and mortgage-backed
      securities available for sale..........................................      3,579         1,672
See accompanying Notes to Consolidated Financial Statements
 
                                       F-9
142
 
                               BANK UNITED CORP.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
 
     Bank United Corp. (formerly USAT Holdings Inc.) (the "Parent Company") was
incorporated in the State of Delaware on December 19, 1988, and became the
holding company for Bank United (formerly Bank United of Texas), a federal
savings bank (the "Bank") upon the Bank's formation on December 30, 1988. The
Parent Company has no significant assets other than its equity interest in the
Bank. The Parent Company owns all of the outstanding common stock of the Bank,
subject to a potential minority interest represented by certain warrants. The
Parent Company and the Bank, are referred to on a consolidated basis as the
"Company". Substantially all of the Parent Company's revenues are derived from
the operations of the Bank.
 
     The accompanying consolidated financial statements include the accounts of
the Parent Company, the Bank, and the Bank's wholly-owned subsidiaries. To date,
the results of operations of these subsidiaries are not significant to the
Bank's consolidated results of operations. All intercompany accounts and
balances of these subsidiaries have been eliminated in consolidation.
 
     The accompanying consolidated financial statements and information as of
March 31, 1996 and for the six months ended March 31, 1996 and 1995 are
unaudited, and include all adjustments (consisting of only normal recurring
adjustments), that are necessary, in the opinion of management, for a fair
presentation.
 
     The accounting and reporting policies conform to generally accepted
accounting principles and general practices within the thrift and mortgage
banking industries. The following summarizes the more significant of these
policies.
 
SHORT-TERM INTEREST-EARNING ASSETS
 
     Short-term interest-earning assets are comprised of cash, cash equivalents,
securities purchased under agreements to resell ("repurchase agreements"), and
federal funds sold. Short-term instruments with original maturities of three
months or less (measured from their acquisition date) and highly liquid
instruments readily convertible to cash are generally considered to be cash
equivalents. Cash and cash equivalents consist primarily of interest-earning and
non-interest earning deposits in other banks.
 
     The Parent Company's cash is principally invested in repurchase agreements
that mature on a daily basis. Cash required for operating activities is
withdrawn prior to the daily purchase of the securities.
 
     Federal Reserve Board regulations require average cash reserve balances
based on deposit liabilities to be maintained by the Bank with the Federal
Reserve Bank. The required reserve balances were approximately $62.6 million,
$63.7 million, and $45.4 million for the periods including March 31, 1996 and
September 30, 1995, and 1994. The Bank was in compliance with these requirements
for each of these periods.
 
TRADING ACCOUNT ASSETS, SECURITIES, AND MORTGAGE-BACKED SECURITIES
 
     Debt and equity securities, including mortgage-backed securities, are
classified into one of three categories: held to maturity, available for sale,
or trading securities.
 
     Trading account assets are carried at fair value with any realized or
unrealized gains and losses recognized in current operations. Trading account
assets are generally comprised of assets that are actively and frequently bought
and sold with the objective of generating income on short-term changes in price.
 
     Securities and mortgage-backed securities that the Bank has the positive
intent and ability to hold to maturity are classified as held to maturity and
recorded at cost, adjusted for the amortization of premiums and the accretion of
discounts. Under certain circumstances (including the deterioration of the
issuer's
 
                                      F-10
143
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
creditworthiness or a change in tax law, statutory requirements, or regulatory
requirements), securities and mortgage-back securities held to maturity may be
sold or transferred to another portfolio.
 
     Securities and mortgage-back securities that the Bank intends to hold for
indefinite periods of time are classified as available for sale and are recorded
at fair value. Unrealized holding gains or losses are excluded from earnings and
reported net of tax as a separate component of stockholders' equity until
realized.
 
     In connection with the securitization of certain loans into mortgage-backed
securities, a portion of the original loan basis is allocated to an excess
servicing receivable. This receivable represents the present value of the
estimated future servicing revenue in excess of a "normal" service fee. The
securitized portion of the receivable is classified and accounted for as
mortgage-backed securities in the Consolidated Statements of Financial
Condition. That portion of the receivable not securitized is classified as other
assets in the Consolidated Statements of Financial Condition and is amortized to
operations over the lives of the underlying mortgages. The Bank reviews this
asset periodically for valuation impairment in a manner similar to its mortgage
servicing rights ("MSRs").
 
     The overall return or yield earned on mortgage-backed securities depends on
the amount of interest collected over the life of the security and the
amortization of any premium or discount. Premiums and discounts are recognized
in income using the level-yield method over the assets' remaining lives
(adjusted for anticipated prepayments). The actual yields and maturities of
mortgage-backed securities depend on the timing of the payment of the underlying
mortgage principal and interest. Accordingly, changes in interest rates and
prepayments can have a significant impact on the yields of mortgage-backed
securities.
 
     If the fair value of a security or mortgage-backed security classified as
held to maturity or available for sale was to decline for reasons other than
temporary market conditions, the carrying value of such a security would be
written down to current fair value by a charge to operations.
 
LOANS
 
     Loans that the Bank has the intent and ability to hold to maturity are
classified as held to maturity and are carried at unpaid principal balances,
adjusted for unamortized premiums, unearned discounts, the allowance for credit
losses, and net deferred loan origination fees (costs) ("Book Value"). Loans
held for sale, excluding single family mortgage warehouse loans, are carried at
the lower of allocated Book Value, as applicable, or fair value on an aggregate
basis, as determined by discounting contractual cash flows (adjusted for
anticipated prepayments) and using discount rates based on secondary market
sources. The Book Value is allocated to loans and the MSRs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 122. See " -- Loan
Servicing". Single family mortgage warehouse loans held for sale are carried at
the lower of aggregate allocated Book Value or market value, as determined by
commitments from investors or current investor yield requirements. Any net
unrealized losses on loans held for sale are recognized in a valuation allowance
by a charge to current operations.
 
     Interest income on loans, including impaired loans, is recognized
principally using the level-yield method. Based upon management's periodic
evaluation or at the time a loan is ninety days past due ("nonperforming"), the
related accrued interest is generally reversed by a charge to operations and the
subject loan is simultaneously placed on nonaccrual. Once a loan becomes current
and the borrower demonstrates a continuation of its ability to repay the loan,
the loan is returned to accrual status.
 
     Premiums, discounts and loan fees (net of certain direct loan origination
costs) on warehouse loans held for sale are recognized in income when the
related loans are sold. Premiums, discounts and loan fees (net of certain direct
loan origination costs) associated with other loans for which collection is
probable and estimable are recognized in income using the level-yield method,
over the loans' remaining lives (adjusted for anticipated prepayments) or when
such loans are sold. Net discounts associated with loans for which
 
                                      F-11
144
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
collection may not be probable and estimable are not accreted to income
("non-accretable discounts"). These non-accretable discounts relate to bulk
purchases of loans, a portion of which were nonperforming and acquired at
discounts from their principal balance. Management periodically evaluates
current loss estimates on loans with non-accretable discounts to determine if
the remaining non-accretable discounts should be accreted to income.
 
ALLOWANCE FOR CREDIT LOSSES
 
     The allowance for credit losses is maintained at levels management deems
adequate to cover estimated losses on loans. The adequacy of the allowance is
based on management's periodic evaluation of the loan portfolio and considers
such factors as historical loss experience, delinquency status, identification
of adverse situations that may affect the ability of obligors to repay, known
and inherent risks in the portfolio, assessment of economic conditions,
regulatory policies, and the estimated value of the underlying collateral, if
any. Provisions for credit losses are charged to current operations when they
are determined to be both probable and estimable. Losses are charged to the
allowance for credit losses when the loss actually occurs or when a
determination is made that a loss is likely to occur. Cash recoveries are
credited to the allowance for credit losses.
 
     The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, an amendment of SFAS No. 114,"
effective October 1, 1995. These statements address the accounting by creditors
for impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogenous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases,
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
 
     The adoption of SFAS No. 114 did not result in additional provisions for
credit losses. SFAS No. 114 requires that impaired loans that are within the
scope of this statement be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Any excess of the Bank's
recorded investment in the loans (unpaid principal balance, adjusted for
unamortized premium or discount and net deferred loan origination fees or costs)
over the measured value of the loans is provided for in the allowance for credit
losses.
 
LOAN SERVICING
 
     In September 1995, the Bank adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65," effective October 1,
1994. (See Note 6). This statement requires mortgage loan servicing rights to be
recognized as separate assets from the related loans, regardless of how those
servicing rights are acquired. Upon origination of a mortgage loan, the Book
Value of the mortgage loan is allocated to the MSR and to the loan (without the
MSR) based on its estimated relative fair value, provided there is a plan to
sell or securitize the related loan. The allocation of the Book Value of the
loan between the MSR and the loan basis results in increased gains on the sales
of the loan, reflecting the value of the servicing rights. Prior to the
implementation of SFAS No. 122, the value of the originated mortgage servicing
rights ("OMSRs") was not recognized until the servicing rights were sold.
 
     The statement further requires that MSRs, both OMSRs and purchased mortgage
servicing rights ("PMSRs"), periodically be evaluated for impairment based on
the fair value of those rights. The fair value of
 
                                      F-12
145
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
MSRs is determined by discounting the present value of estimated expected future
cash flows using a discount rate commensurate with the risks involved. This
method of valuation incorporates assumptions that market participants would use
in their estimates of future servicing income and expense, including assumptions
about prepayment, default, and interest rates. For purposes of measuring
impairment, the loans underlying the MSRs are stratified on the basis of
interest rate and type (conventional or government). The amount of impairment is
the amount by which the MSRs, net of accumulated amortization, exceed their fair
value. Impairment, if any, is recognized through a valuation allowance and a
charge to current operations.
 
     MSRs, net of valuation allowances, are amortized in proportion to, and over
the period of, the estimated net servicing revenue of the underlying mortgages,
which are collateralized by single family properties. The amortization expense
is reflected in amortization of intangibles in the Consolidated Statement of
Operations.
 
     An allowance for other losses associated with the mortgage servicing
portfolio and certain receivables, advances, and other assets associated with
that portfolio is established for expected costs that are incurred as a result
of the Bank's responsibility as servicer of the Federal Housing Administration
(the "FHA") insured and the Department of Veteran Affairs (the "VA") guaranteed
loans and is determined based on a number of variables. The allowance is netted
against the related assets in the Consolidated Statements of Financial Condition
and the related provision is included in non-interest expense in the
Consolidated Statements of Operations.
 
SALES OF SINGLE FAMILY LOANS
 
     Loans are sold periodically to institutional and private investors. Gains
or losses on loan sales are recognized at the time of sale, determined using the
specific identification method, and reflect the extent that net sales proceeds
differ from the allocated Book Value of the loans. Single family mortgage
warehouse loans are generally packaged into pools and sold as mortgage-backed
securities. Accordingly, gains or losses on loan sales include both gains from
sales of mortgage-backed securities created from single family mortgage
warehouse loans and whole loan sales. Certain of the loans and servicing rights
are sold with general representations and warranties under contracts for sales
of loans and servicing rights. Repurchases of the loans and servicing rights may
be required when a loan fails to meet certain conditions specified in the
contract pursuant to which the loans and servicing rights were sold and that
failure was caused by a matter covered by the general representations and
warranties. An accrual is determined for the estimated future costs of such
obligations and is maintained at a level management believes is adequate to
cover estimated losses. This accrual is included in other liabilities on the
Consolidated Statements of Financial Condition and the related expense is
reflected in non-interest expense in the Consolidated Statements of Operations.
 
FEDERAL HOME LOAN BANK STOCK
 
     As a member of the Federal Home Loan Bank (the "FHLB") System, the Bank is
required to purchase and maintain stock in the FHLB of Dallas in an amount equal
to the greater of 1% of the aggregate unpaid balance of loans and securities
secured by single family and multi-family properties, .3% of total assets, or 5%
of total FHLB advances. FHLB stock is redeemable by the Bank at par value at the
discretion of the FHLB of Dallas and is used to collateralize FHLB advances.
 
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.
 
                                      F-13
146
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
INTANGIBLE ASSETS
 
     Intangible assets consist of the excess cost over fair value of net assets
acquired, acquisition costs and debt issuance costs. The excess of cost over
fair value of net assets acquired is comprised of identifiable and
unidentifiable intangibles. The identifiable portion relates to core deposit
premiums paid and the value of mortgage origination networks acquired. The core
deposit premiums are amortized using an accelerated method over the estimated
lives of the deposit relationships acquired. The premiums paid for mortgage
origination networks are amortized using the straight-line method over five
years. The unidentifiable intangible, or goodwill, resulting from thrift related
acquisitions is amortized at a constant rate applied to the carrying amount of
the long-term interest-earning assets acquired that are expected to be
outstanding at the beginning of each subsequent period based on their terms. The
original estimated lives of these long-term interest-earning assets ranged from
one to 26 years. The amortization periods of the identifiable and unidentifiable
intangibles are evaluated on an ongoing basis to determine whether events and
circumstances have developed that warrant revision of the estimated lives of the
related assets. Acquisition costs are being amortized over 5 years using the
straight-line method. Debt issuance costs are being amortized over the life of
the notes using the straight-line method.
 
REAL ESTATE OWNED
 
     At the time of foreclosure, REO is recorded at the lower of the outstanding
loan amount (including accrued interest, if any) or fair value (less estimated
costs to sell). The resulting loss, if any, is charged to the allowance for
credit losses. Subsequent to foreclosure, REO is carried at the lower of its new
cost basis or fair value, with any further declines in fair value charged to
current operations. Revenues, expenses, gains or losses on sales and increases
or decreases in the allowance for losses are charged to operations as incurred.
Net gains on sales of certain REO properties, primarily single family
residences, are deferred (a) when such properties are acquired through the
foreclosure of loans that are part of discounted bulk purchases of loans and,
(b) uncertainty exists as to the total gains or losses that would be realized
from foreclosures associated with the bulk loan purchase. Upon obtaining
sufficient loss history or seasoning of the purchases, the deferred net gains
are recognized.
 
OTHER FINANCIAL INSTRUMENTS
 
     The Bank enters into traditional financial instruments such as interest
rate exchange agreements ("swaps"), interest rate caps and floors, financial
options and futures contracts, and forward delivery contracts in the normal
course of business in an effort to reduce its exposure to changes in interest
rates. Fees incurred to enter into these financial contracts are amortized over
the lives of the contracts as a component of the income or expense on the asset
or liability hedged. Gains or losses on early termination of such contracts, if
any, are amortized over the remaining terms of the hedged items. The Bank does
not utilize instruments such as leveraged derivatives or structured notes.
 
     Interest Rate Exchange Agreements, Caps, Floors, and Options. Amounts
receivable and payable are accrued and offset against interest income or expense
on the hedged items.
 
     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
 
                                      F-14
147
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
commitment will be exercised is remote or the fees are offset against the
related net gains as the commitment is filled.
 
     Other Off-Balance-Sheet Instruments. The Bank has entered into other
off-balance-sheet financial instruments consisting of commitments to extend
credit. Such financial instruments are recorded in the financial statements when
they are funded.
 
FEDERAL INCOME TAXES
 
     The Parent Company and the Bank are members of a consolidated group of
corporations as defined by the Internal Revenue Code of 1986, as amended (the
"Code") and accordingly participate in the filing of a consolidated tax return.
For financial reporting purposes, however, the Parent Company and the Bank each
compute their tax on a separate company basis and the results are combined for
purposes of preparing the consolidated financial statements. Deferred tax assets
and liabilities are recognized for the estimated tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. A deferred tax asset has
been recognized for certain net operating losses and credit carryforwards that
will be utilized against future taxable income.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
     In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement establishes accounting
standards for recognizing and measuring impairment of long-lived assets (and
related goodwill) to be held and used and for such assets held for disposal. The
statement is effective for financial statements with fiscal years beginning
after December 15, 1995, with earlier application encouraged. Implementation of
this pronouncement should have no material adverse effect on the Consolidated
Financial Statements.
 
EARNINGS PER COMMON SHARE
 
     Earnings per common share is calculated by dividing net income (adjusted
for earnings on the common stock equivalents attributable to the Bank's warrants
outstanding) by the weighted average number of Parent Company common shares
outstanding. Common stock equivalents on the Bank's warrants are computed using
the treasury stock method. Earnings per common share results have been
retroactively restated for all periods presented to reflect an 1,800 to one
stock conversion. See Notes 16 and 21.
 
RELATED PARTY TRANSACTIONS
 
     All transactions with the Parent Company's and the Bank's related parties
have been reflected herein. Management believes that the amounts, terms, and
conditions of such transactions are reasonably indicative of the marketplace at
the time the transaction occurred. During the six months ended March 31, 1996
and for fiscal 1995, 1994, and 1993, there were no material transactions with
related parties. At March 31, 1996 and September 30, 1995 and 1994, the Parent
Company and the Bank had no outstanding receivables from or payables to related
parties other than those related to participation in the filing of the
consolidated tax return and there were no loans outstanding to directors,
executive officers, or principal shareholders of the Bank's or the Parent
Company's voting securities.
 
                                      F-15
148
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
RECLASSIFICATIONS
 
     Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes as of March 31, 1995 and September 30, 1995, 1994, 1993,
1992, and 1991 have been reclassified to conform to the current presentation.
Such reclassifications had no effect on previously presented net income or
retained earnings.
 
2. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND FEDERAL FUNDS SOLD
FOR THE
                                                    SIX
                                                  MONTHS
                                                   ENDED       FOR THE YEAR ENDED SEPTEMBER 30,
                                                 MARCH 31,   ------------------------------------
                                                   1996         1995         1994         1993
                                                 ---------   ----------   ----------   ----------
                                                              (DOLLARS IN THOUSANDS)
Repurchase agreements
  Balance outstanding at period-end............  $ 631,279   $  428,052   $  248,710   $  547,988
  Fair value of collateral at period-end.......    668,538      449,152      255,210      557,013
  Maximum outstanding at any month-end.........    666,836      602,274      768,200      656,000
  Daily average balance........................    518,839      420,355      422,745      374,407
  Average interest rate........................      5.89%        6.28%        4.04%        3.45%
Federal funds sold
  Balance outstanding at period-end............  $  28,000   $   43,000   $  110,000   $       --
  Maximum outstanding at any month-end.........     69,000       75,000      110,000       65,000
  Daily average balance........................     47,060       37,493       16,948        3,559
  Average interest rate........................      5.39%        5.68%        4.01%        3.00%
F-16
149
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and mortgage-backed securities. The loans and mortgage-backed
securities underlying the repurchase agreements are held by the counterparty in
safekeeping for the account of the Bank or by a third party custodian for the
benefit of the Bank. All of the investments in repurchase agreements and federal
funds sold at March 31, 1996 matured on or before April 24, 1996 and those
outstanding at September 30, 1995 matured on or before October 5, 1995. The
repurchase agreements provide for the same loans and mortgage-backed securities
to be resold at maturity. At March 31, 1996 and September 30, 1995, the
following concentrations of repurchase agreements and federal funds sold
outstanding with individual counterparties exceeded ten percent of stockholders'
equity:
AT MARCH 31,      AT SEPTEMBER 30,
                                                               1996                1995
                                                           -------------     -----------------
                                                                     CARRYING VALUE
                                                           -----------------------------------
                                                                     (IN THOUSANDS)
Donaldson, Lufkin, and Jenrette Mortgage Capital.........    $ 204,936           $ 185,000
Salomon Brothers Holding Company Inc.....................      120,000              88,000
Paine Webber Inc.........................................      120,000              75,000
Merrill Lynch Mortgage Capital Inc.......................       80,000                  --
Bear Stearns and Company, Inc............................           --              58,500
                                                           -------------     -----------------
                                                             $ 524,936           $ 406,500
                                                           =============     ================
3. SECURITIES
AT MARCH 31, 1996
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
Held to maturity
     Federal agency..................  $  1,903      $ 1,107       $    --     $  3,010   $  1,903
                                                   ==========    ==========               =========
Available for sale
     Federal agency..................  $  4,278      $    --       $    --     $  4,278
     U.S. Treasury notes.............    52,466           --           296       52,170
                                       ---------   ----------    ----------    --------
     Available for sale..............    56,744      $    --       $   296       56,448   $ 56,448
                                       ---------   ==========    ==========    --------   =========
          Total securities...........  $ 58,647                                $ 59,458
                                       =========                               ========
AT SEPTEMBER 30, 1995
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
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
                                       =========                               ========
F-17
150
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AT SEPTEMBER 30, 1994
                                       ------------------------------------------------------------
                                                      GROSS         GROSS
                                       AMORTIZED   UNREALIZED    UNREALIZED      FAIR     CARRYING
                                         COST         GAINS        LOSSES       VALUE       VALUE
                                       ---------   -----------   -----------   --------   ---------
                                                        (IN THOUSANDS)
Held to maturity
     Federal agency..................  $  1,894      $   541       $    76     $  2,359
     U.S. Treasury notes.............       464           --            --          464
                                       --------     --------      --------     --------
          Held to maturity...........     2,358      $   541       $    76        2,823   $  2,358
                                       --------     ========      ========     --------   ========
Available for sale
     U.S. Treasury notes.............   114,833      $    --       $ 3,076      111,757   $111,757
                                       --------     ========      ========     --------   ========
          Total securities...........  $117,191                                $114,580
                                       ========                                ========
AT SEPTEMBER 30, 1993
                                       ------------------------------------------------------------
Held to maturity
     Federal agency..................  $  1,904      $   492       $    --     $  2,396   $  1,904
                                                   ==========    ==========               =========
Available for sale
     Mutual funds....................    41,526      $    --       $    --       41,526   $ 41,526
                                       ---------   ==========    ==========    --------   =========
          Total securities...........  $ 43,430                                $ 43,922
                                       =========                               ========
During the six months ended March 31, 1996, there were $67.4 million of
available for sale securities sold with proceeds of $67.4 million and a gross
gain of $1,000. During fiscal 1994, there were $62.7 million of available for
sale securities sold with proceeds of $61.5 million and a gross loss of $1.2
million. There were no sales of securities during fiscal 1995 or 1993. At
September 30, 1995, securities with carrying values totalling $13.5 million and
fair values totalling $13.3 million, were pledged towards margin requirements
for futures transactions and interest rate swap agreements.
 
     Securities outstanding at March 31, 1996 and September 30, 1995 mature as
follows:
AT MARCH 31, 1996
                                            ----------------------------------------------------
                                                HELD TO MATURITY           AVAILABLE FOR SALE
                                            ------------------------     -----------------------
                                            AMORTIZED        FAIR        AMORTIZED        FAIR
                                               COST          VALUE          COST         VALUE
                                            ----------     ---------     ----------     --------
                                                               (IN THOUSANDS)
Due in one year or less...................    $1,903        $ 3,010       $ 52,466      $ 52,170
Due from one to five years................        --             --          4,278         4,278
                                              ------        -------        -------      --------
                                              $1,903        $ 3,010       $ 56,744      $ 56,448
                                              ======        =======        =======      ========
AT SEPTEMBER 30, 1995
                                            ----------------------------------------------------
Due in one year or less...................    $1,902        $ 2,700       $ 64,972      $ 64,838
Due from one to five years................        --             --         49,952        49,273
                                            --------       --------       --------      --------
                                              $1,902        $ 2,700       $114,924      $114,111
                                            ========       ========       ========      ========
F-18
151
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4. MORTGAGE-BACKED SECURITIES
AT MARCH 31, 1996
                                   ---------------------------------------------------------------
                                                   GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
                                                     (IN THOUSANDS)
Held to maturity
  Agency CMOs -- fixed-rate....... $    3,061     $    61       $     --   $    3,122
  Non-agency
     Fixed-rate...................      7,529       1,837             93        9,273
     Adjustable-rate..............    559,365         635         12,526      547,474
     CMOs -- fixed-rate...........    104,286           7          6,893       97,400
  Other...........................        303          --             --          303
                                   ----------     -------       --------   ----------
                                      674,544     $ 2,540       $ 19,512      657,572
                                                  =======       ========
  Allowance for losses............        (56)                                     --
                                   ----------                              ----------
          Held to maturity........    674,488                                 657,572    $  674,488
                                   ----------                              ----------    ==========
Available for sale
  Agency
     Adjustable-rate..............    386,876     $ 3,335       $      5      390,206
     CMOs -- fixed-rate...........      4,032           6             --        4,038
     CMOs -- adjustable-rate......    245,565       1,219            121      246,663
  Non-agency
     Fixed-rate...................     72,760       2,390              1       75,149
     Adjustable-rate..............    440,638         687          2,723      438,602
     CMOs -- fixed-rate...........     79,944          --          1,460       78,484
     CMOs -- adjustable-rate......     37,851          12          1,017       36,846
  Other...........................      8,360       1,234             --        9,594
                                   ----------     -------       --------   ----------
          Available for sale......  1,276,026     $ 8,883       $  5,327    1,279,582    $1,279,582
                                   ----------     =======       ========   ----------    ==========
          Total mortgage-backed
            securities............ $1,950,514                              $1,937,154
                                   ==========                              ==========
F-19
152
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AT SEPTEMBER 30, 1995
                                   ---------------------------------------------------------------
                                                   GROSS         GROSS
                                   AMORTIZED    UNREALIZED    UNREALIZED      FAIR       CARRYING
                                      COST         GAINS        LOSSES        VALUE        VALUE
                                   ----------   -----------   -----------   ---------    ---------
(IN THOUSANDS)
Held to maturity
  Agency
     Fixed-rate................... $    4,259     $   167       $    77     $   4,349
     Adjustable-rate..............    489,412       5,212         2,711       491,913
     CMOs -- fixed-rate...........     57,935          96         1,623        56,408
  Non-agency
     Fixed-rate...................    126,562       4,489           318       130,733
     Adjustable-rate..............  1,130,102       4,343        21,256     1,113,189
     CMOs -- fixed-rate...........    239,487         173         8,643       231,017
  Other...........................      3,603          --            --         3,603
                                     --------    --------      --------      --------
                                    2,051,360     $14,480       $34,628     2,031,212
                                                 ========      ========
  Allowance for losses............        (56)                                     --
                                     --------                                --------
     Held to maturity.............  2,051,304                               2,031,212    $2,051,304
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     CMOs -- adjustable-rate......    250,208     $ 1,132       $   217       251,123
  Non-agency
     Fixed-rate...................     22,060         627            --        22,687
     CMOs -- fixed-rate...........     36,895          --           640        36,255
     CMOs -- adjustable-rate......     37,580           7           693        36,894
                                     --------    --------      --------      --------
          Available for sale......    346,743     $ 1,766       $ 1,550       346,959    $ 346,959
                                                 ========      ========                   ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $2,398,047                               $2,378,171
                                     ========                                ========
AT SEPTEMBER 30, 1994
                                   ---------------------------------------------------------------
Held to maturity
  Agency
     Fixed-rate................... $    5,313     $    20       $    15     $   5,318
     Adjustable-rate..............    563,629         830        15,290       549,169
     CMOs -- fixed-rate...........     81,395          --         3,967        77,428
  Non-agency
     Fixed-rate...................    184,929         603         2,057       183,475
     Adjustable-rate..............  1,288,271         226        23,048     1,265,449
     CMOs -- fixed-rate...........    267,658          --        11,601       256,057
  Other...........................      3,896          --            --         3,896
                                     --------    --------      --------      --------
                                    2,395,091     $ 1,679       $55,978     2,340,792
                                                 ========      ========
  Allowance for losses............       (113)                                     --
                                     --------                                --------
          Held to maturity........  2,394,978                               2,340,792    $2,394,978
                                                                                          ========
                                     --------                                --------
Available for sale
  Agency
     Fixed-rate...................     85,492     $ 1,688       $ 1,552        85,628
     CMOs -- adjustable-rate......    254,933          --         2,727       252,206
  Non-agency
     Fixed-rate...................     22,141          --         1,198        20,943
     CMOs -- fixed-rate...........     41,825          --         2,634        39,191
     CMOs -- adjustable-rate......     37,733          --         1,776        35,957
                                     --------    --------      --------      --------
          Available for sale......    442,124     $ 1,688       $ 9,887       433,925    $ 433,925
                                                 ========      ========                   ========
                                     --------                                --------
          Total mortgage-backed
            securities............ $2,837,102                               $2,774,717
                                     ========                                ========
F-20
153
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AT SEPTEMBER 30, 1993
                                      --------------------------------------------------------------
                                                      GROSS         GROSS
                                      AMORTIZED    UNREALIZED    UNREALIZED      FAIR      CARRYING
                                         COST         GAINS        LOSSES        VALUE       VALUE
                                      ----------   -----------   -----------   ---------   ---------
(IN THOUSANDS)
Held to maturity
  Agency CMOs -- fixed-rate.......... $    8,809     $   166        $  --      $   8,975
  Non-agency
     Fixed-rate......................     46,573       3,461           --         50,034
     Adjustable-rate.................    205,482       1,271          371        206,382
     CMOs -- fixed-rate..............     95,169       1,396          115         96,450
  Other..............................      3,436          --           --          3,436
                                        --------    --------     --------       --------
                                         359,469     $ 6,294        $ 486        365,277
                                                    ========     ========
  Allowance for losses...............       (573)                                     --
                                        --------                                --------
          Held to maturity...........    358,896                                 365,277   $ 358,896
                                                                                            ========
                                        --------                                --------
Available for sale
  Agency fixed-rate..................    149,519     $ 6,514        $ 189        155,844
     CMOs -- fixed-rate..............     50,827          --            7         50,820
     CMOs -- adjustable-rate.........    505,046       1,202           25        506,223
  Non-agency
     Fixed-rate......................    365,433      41,122           --        406,555
     Adjustable-rate.................    619,874       4,833           41        624,666
     CMOs -- fixed-rate..............     21,982          --           20         21,962
     CMOs -- adjustable-rate.........     35,563          28            3         35,588
  Other..............................     15,371          --           --         15,371
                                        --------    --------     --------       --------
          Available for sale.........  1,763,615     $53,699        $ 285      1,817,029   $1,817,029
                                                    ========     ========                   ========
                                        --------                                --------
          Total mortgage-backed
            securities............... $2,122,511                               $2,182,306
                                        ========                                ========
In November 1995, the FASB issued, "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities." This
implementation guide provided the Bank the opportunity to reassess the
appropriateness of the classifications of its securities. It further stated that
reclassifications of securities from the held to maturity category resulting
from this one-time reassessment would not call into question the intent to hold
other securities to maturity in the future. During the first quarter of fiscal
1996, the Bank reassessed its securities portfolios and reclassified $1.2
billion in mortgage-backed securities from the held to maturity portfolio to the
available for sale portfolio. An unrealized gain of $4.2 million before tax, or
$2.6 million after tax, was recorded in stockholders' equity as a result of this
transfer.
 
     During fiscal 1994, $68.7 million of fixed-rate collateralized mortgage
obligations ("CMOs") were transferred at fair value from the held to maturity
portfolio to the available for sale portfolio. The related unrealized gain
($66,000 at the time of transfer, before taxes) is included as a component of
stockholders' equity. This transfer was made in response to the classification
of securities as high-risk under the FASB's Emerging Issues Task Force
guidelines in effect at that time. Subsequent to the transfer, $45.5 million of
these securities were sold and the remaining $23.2 million was no longer
classified as high-risk.
 
                                      F-21
154
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1994, $38.3 million of non-agency mortgage-backed securities
that had been included in the held to maturity portfolio were sold. This sale
was made due to a deterioration of the issuer's creditworthiness and resulted in
a gross gain of $42,000.
 
     Mortgage-backed securities of approximately $1.3 billion were transferred
from the available for sale portfolio to the held to maturity portfolio at fair
value during fiscal 1994. The gross unrealized loss of $10.8 million on these
securities at the time of transfer is included as a component of stockholders'
equity and is being amortized over the remaining lives of the securities.
 
     At March 31, 1996 and September 30, 1995, mortgage-backed securities with
carrying values totalling $1,213.9 million and $1,691.1 million and fair values
totalling $1,199.4 million and $1,678.1 million were used to collateralize FHLB
advances and securities sold under agreements to repurchase ("reverse repurchase
agreements").
 
                      CHANGES IN UNREALIZED GAINS (LOSSES)
MORTGAGE-BACKED
                                            SECURITIES
                                       ---------------------      SECURITIES
                                       AVAILABLE    HELD TO       AVAILABLE       TAX
                                       FOR SALE     MATURITY       FOR SALE      EFFECT      TOTAL
                                       ---------    --------      ----------    --------    --------
(IN THOUSANDS)
Balance at September 30, 1993........  $ 53,414     $     --       $     --     $(20,030)   $ 33,384
  Market value changes and the effect
     of prepayments..................   (60,960 )         --         (4,264)      24,457     (40,767)
  (Gains) losses realized due to
     sales...........................   (11,488 )         --          1,188        3,862      (6,438)
  Transfer to held to maturity.......    10,835      (10,835)            --           --          --
  Amortization of held to maturity...        --          633             --         (239)        394
                                       ---------    --------      ----------    --------    --------
Balance at September 30, 1994........    (8,199 )    (10,202)        (3,076)       8,050     (13,427)
                                       ---------    --------      ----------    --------    --------
  Market value changes and the effect
     of prepayments..................     8,431           --          2,263       (4,005)      6,689
  (Gains) losses realized due to
     sales...........................       (16 )         --             --            6         (10)
  Amortization of held to maturity...        --          162             --          (61)        101
                                       ---------    --------      ----------    --------    --------
Balance at September 30, 1995........       216      (10,040)          (813)       3,990      (6,647)
                                       ---------    --------      ----------    --------    --------
  Market value changes and the effect
     of prepayments..................     3,070           --            526       (1,348)      2,248
  (Gains) losses realized due to
     sales...........................    (2,770 )         --             (9)       1,042      (1,737)
  Transfer from held to maturity.....     3,040        1,114             --       (1,558)      2,596
  Amortization of held to maturity...        --          755             --         (283)        472
                                       ---------    --------      ----------    --------    --------
Balance at March 31, 1996............  $  3,556     $ (8,171)      $   (296)    $  1,843    $ (3,068)
                                       ========     ========      =========     ========    ========
F-22
155
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1994 and 1993, the Banking Segment securitized single family
loans from its own portfolio as follows:
 
                                SECURITIZATIONS
FOR THE YEAR ENDED
                                                                            SEPTEMBER 30,
                                                                       -----------------------
                                                                          1994          1993
                                                                       ----------     --------
(IN THOUSANDS)
Principal securitized, gross.........................................  $1,178,999     $674,132
  Principal securitized, net.........................................   1,182,172      572,582
Principal sold.......................................................     161,864      269,511
Gains recognized.....................................................      10,441       41,001
The activity in the excess servicing receivable generated as a result of
these securitizations was as follows:
 
                          EXCESS SERVICING RECEIVABLE
FOR THE SIX MONTHS
                                            ENDED MARCH 31,      FOR THE YEAR ENDED SEPTEMBER 30,
                                         ---------------------   ---------------------------------
                                           1996        1995        1995        1994        1993
                                         ---------   ---------   ---------   ---------   ---------
(IN THOUSANDS)
Balance at beginning of period.........  $  11,116   $  12,182   $  12,182   $  15,023   $   3,623
  Additions............................         --          --          --       2,044      13,534
  Amortization.........................       (512)       (506)     (1,066)     (4,885)     (2,134)
                                         ---------   ---------   ---------   ---------   ---------
Balance at end of period...............  $  10,604   $  11,676   $  11,116   $  12,182   $  15,023
                                         =========   =========   =========   =========   =========
Approximately $3.7 million, $4.0 million, $4.3 million, and $5.5 million of
the excess servicing receivable balance at March 31,1996 and at September 30,
1995, 1994, and 1993 represented the securitized portion of the receivable,
which was included in the mortgage-backed securities portfolio. The remaining
balance was included in other assets.
 
     The following table provides information related to the sales of
mortgage-backed securities available for sale, including those assets
securitized by the Bank.
FOR THE SIX MONTHS
                                          ENDED MARCH 31,        FOR THE YEAR ENDED SEPTEMBER 30,
                                        --------------------     ---------------------------------
                                          1996        1995        1995         1994         1993
                                        --------     -------     -------     --------     --------
(IN THOUSANDS)
Proceeds from sales...................  $201,523     $77,651     $77,626     $186,190     $403,129
Gross gains on sales..................     3,472         206         217       16,300       43,712
Gross losses on sales.................       702         201         201        4,812           --
F-23
156
 
                               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:
AT SEPTEMBER 30,
                                         AT MARCH 31,     -------------------------------------------------------------
                                             1996           1995         1994         1993         1992         1991
                                         -------------    ---------    ---------    ---------    ---------    ---------
(IN THOUSANDS)
Held to maturity
  Single family.........................   $6,651,723     $7,061,088   $4,203,614   $2,847,602   $2,302,073   $3,053,914
  Single family residential
    construction........................     179,505        115,436       57,786       35,904       31,920       24,215
  Consumer..............................     130,356        123,096      108,179       57,902       21,732       19,826
  Multi-family..........................     341,094        392,017      276,799      112,055       50,741       23,870
  Commercial real estate................      45,098         31,006       61,919       49,510       58,521       58,931
  Business credit.......................      15,008          6,495           --           --           --           --
  Mortgage banker finance line of
    credit..............................     141,781        109,339      147,754      385,548           --           --
                                          ----------      ----------   ----------   ----------   ----------   ----------
                                           7,504,565      7,838,477    4,856,051    3,488,521    2,464,987    3,180,756
  Allowance for credit losses...........     (36,445)       (36,763)     (23,378)     (27,970)     (25,529)      (9,919)
  Accretable unearned discounts.........     (17,168)       (34,784)     (50,384)     (25,486)     (53,174)    (193,900)
  Net deferred loan origination fees....      (3,452)        (3,254)      (1,961)        (625)        (402)        (485)
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Held to maturity..................   7,447,500      7,763,676    4,780,328    3,434,440    2,385,882    2,976,452
                                          ----------      ----------   ----------   ----------   ----------   ----------
Held for sale
  Single family mortgage warehouse......     379,720        411,287      252,153      899,602    1,016,854      457,137
  Single family.........................          --             --           --      528,579      783,002           --
  Multi-family..........................      52,510         87,781       12,535           --           --           --
  Business credit.......................       4,007            825           --           --           --           --
                                          ----------      ----------   ----------   ----------   ----------   ----------
                                             436,237        499,893      264,688    1,428,181    1,799,856      457,137
  Allowance for credit losses...........         (44)           (38)         (76)      (1,894)      (2,685)        (229)
  Unrealized losses.....................        (256)        (1,142)          --           --           --           --
  Accretable unearned discounts.........      (7,284)        (3,676)        (266)      (2,437)     (85,115)      (3,160)
  Net deferred loan origination costs...       1,927          1,527        1,500        4,089        3,778          954
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Held for sale.....................     430,580        496,564      265,846    1,427,939    1,715,834      454,702
                                          ----------      ----------   ----------   ----------   ----------   ----------
      Total loans.......................   $7,878,080     $8,260,240   $5,046,174   $4,862,379   $4,101,716   $3,431,154
                                          ==========      ==========   ==========   ==========   ==========   ==========
Supplemental information
  Non-accretable unearned discounts.....   $ (11,210)     $ (15,423)   $ (31,917)   $ (42,975)   $ (41,060)   $ (41,306)
  Undisbursed portion of loans in
    process.............................    (195,478)      (179,737)    (136,797)     (39,162)     (41,534)     (25,975)
F-24
157
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following tables set forth the geographic distribution of loans by
states with concentrations of 4% of loans or greater at March 31, 1996 and
September 30, 1995. The geographic data is based on gross loan principal and
includes REO.
AT MARCH 31, 1996
                                  ---------------------------------------------------------------------
                                                           COMMERCIAL
                                    SINGLE      % OF      REAL ESTATE      % OF                   % OF
                                    FAMILY      TOTAL     AND BUSINESS     TOTAL                  TOTAL
             STATE                AND OTHER     ASSETS       CREDIT        ASSETS     TOTAL       ASSETS
- -------------------------------   ----------    -----     ------------     ----     ----------    -----
(DOLLARS IN THOUSANDS)
California.....................   $3,793,197    33.67%      $     --         --%    $3,793,197    33.67%
Texas..........................    1,299,730    11.54         44,660       0.39      1,344,390    11.93
Florida........................      448,958     3.98          1,986       0.02        450,944     4.00
Other..........................    1,851,933    16.44         18,313       0.16      1,870,246    16.60
                                  ----------    -----        -------       ----     ----------    -----
                                   7,393,818    65.63%        64,959       0.57%     7,458,777    66.20%
                                                =====                      ====                   =====
                                  ----------                 -------                ----------
Mortgage banker finance line of
  credit.......................      141,781                      --                   141,781
Single family mortgage
  warehouse....................      379,720                      --                   379,720
                                  ----------                 -------                ----------
     Total.....................   $7,915,319                $ 64,959                $7,980,278
                                  ==========                 =======                ==========
AT SEPTEMBER 30, 1995
                                 -------------------------------------------------------------------------
                                                           COMMERCIAL
                                   SINGLE       % OF      REAL ESTATE       % OF                     % OF
                                   FAMILY      TOTAL      AND BUSINESS     TOTAL                    TOTAL
            STATE                AND OTHER     ASSETS        CREDIT        ASSETS       TOTAL       ASSETS
- ------------------------------   ----------    ------     ------------     ------     ----------    ------
                                                          (DOLLARS IN THOUSANDS)
California....................   $3,958,401     33.03%      $     --          --%     $3,958,401     33.03%
Texas.........................    1,340,063     11.18         15,065        0.13       1,355,128     11.31
Florida.......................      477,479      3.98          1,999        0.02         479,478      4.00
Other.........................    2,038,953     17.02         24,971        0.20       2,063,924     17.22
                                 ----------     -----        -------        ----      ----------     -----
                                  7,814,896     65.21%        42,035        0.35%      7,856,931     65.56%
                                                =====                       ====                     =====
                                 ----------                  -------                  ----------
Mortgage banker finance line
  of credit...................      109,339                       --                     109,339
Single family mortgage
  warehouse...................      411,287                       --                     411,287
                                 ----------                  -------                  ----------
     Total....................   $8,335,522                 $ 42,035                  $8,377,557
                                 ==========                  =======                  ==========
F-25
158
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Contractual maturities of the loans held to maturity portfolio as of March
31, 1996 and September 30, 1995, were as follows:
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED MARCH 31,
                                  --------------------------------------------------------------------------------
                                                                    2000-       2002-        2007-       2012 AND
                                    1997       1998       1999       2001        2006         2011      THEREAFTER     TOTAL
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
(IN THOUSANDS)
Type of loan
Single family...................  $105,763   $113,983   $122,841   $275,066   $  897,988   $1,265,826   $3,870,256   $6,651,723
Single family residential
  construction..................   179,505      --         --         --          --           --           --          179,505
Consumer........................    74,627      9,303     10,244     23,698       12,484       --           --          130,356
Multi-family....................    93,097    101,389     55,140      4,943       85,329        1,196       --          341,094
Commercial real estate..........     2,780      3,018      3,276      6,593       17,652        6,453        5,326       45,098
Business credit.................     8,619      6,389      --         --          --           --           --           15,008
Mortgage banker finance line of
  credit........................   136,606      --         --         2,685        2,490       --           --          141,781
                                  --------   --------   --------   --------     --------   ----------   ----------   ----------
    Total.......................  $600,997   $234,082   $191,501   $312,985   $1,015,943   $1,273,475   $3,875,582   $7,504,565
                                  ========   ========   ========   ========     ========   ==========   ==========   ==========
Type of interest
Fixed-rate loans................  $ 39,979   $ 43,349   $ 46,558   $104,417   $  333,122   $  298,805   $   --       $  866,230
Adjustable-rate loans...........   561,018    190,733    144,943    208,568      682,821      974,670    3,875,582    6,638,335
                                  --------   --------   --------   --------     --------   ----------   ----------   ----------
    Total.......................  $600,997   $234,082   $191,501   $312,985   $1,015,943   $1,273,475   $3,875,582   $7,504,565
                                  ========   ========   ========   ========     ========   ==========   ==========   ==========
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED SEPTEMBER 30,
                                  --------------------------------------------------------------------------------
                                                                    1999-       2001-        2006-       2011 AND
                                    1996       1997       1998       2000        2005         2010      THEREAFTER     TOTAL
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
(IN THOUSANDS)
Type of loan
Single family...................  $106,424   $114,883   $124,015   $278,393   $  914,393   $1,221,214   $4,301,766   $7,061,088
Single family residential
  construction..................   115,436      --         --         --          --           --           --          115,436
Consumer........................    80,277      7,624      8,398     19,437        7,360       --           --          123,096
Multi-family....................    82,207     89,932     57,012      3,740      158,086        1,040       --          392,017
Commercial real estate..........       607        655        706      1,584       14,385        6,507        6,562       31,006
Business credit.................     2,154      2,201      2,140      --          --           --           --            6,495
Mortgage banker finance line of
  credit........................   102,274      --         --         4,587        2,478       --           --          109,339
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
    Total.......................  $489,379   $215,295   $192,271   $307,741   $1,096,702   $1,228,761   $4,308,328   $7,838,477
                                  ========   ========   ========   ========   ==========   ==========   ==========   ==========
Type of interest
Fixed-rate loans................  $ 34,770   $ 37,643   $ 40,857   $ 92,814   $  397,784   $  229,547   $   --       $  833,415
Adjustable-rate loans...........   454,609    177,652    151,414    214,927      698,918      999,214    4,308,328    7,005,062
                                  --------   --------   --------   --------   ----------   ----------   ----------   ----------
    Total.......................  $489,379   $215,295   $192,271   $307,741   $1,096,702   $1,228,761   $4,308,328   $7,838,477
                                  ========   ========   ========   ========   ==========   ==========   ==========   ==========
The performing single family loans are pledged, under a blanket lien, as
collateral securing advances from the FHLB at March 31, 1996 and September 30,
1995.
 
                                      F-26
159
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                     PRINCIPAL BALANCE OF NONACCRUAL LOANS
AT MARCH             AT SEPTEMBER 30,
                                                     31,       ---------------------------------
                                                    1996         1995        1994        1993
                                                 -----------   ---------   ---------   ---------
(IN THOUSANDS)
Nonaccrual loans
     Single family.............................   $ 101,936    $  83,954   $  85,722   $  61,451
     Single family residential construction....          35          505          --          --
     Consumer..................................         745          563         506         427
     Multi-family..............................         510          213       3,802       3,233
     Commercial real estate....................         488           --       2,342          --
                                                     ------       ------      ------      ------
          Total................................   $ 103,714    $  85,235   $  92,372   $  65,111
                                                     ======       ======      ======      ======
At September 30, 1994 and 1993, nonaccrual loans above included $5.7
million and $9.0 million of single family loans that were ninety days
delinquent, subject to government guaranty, and upon which interest continued to
accrue. There were no such loans at March 31, 1996 and September 30, 1995.
 
     If the nonaccrual loans as of March 31, 1996 and September 30, 1995 had
been performing in accordance with their original terms throughout the six
months ended March 31, 1996 and fiscal 1995, interest income recognized would
have been $4.3 million and $6.4 million. The actual interest income recognized
on these loans for the six months ended March 31, 1996 was $695,000 and for
fiscal 1995 was $2.0 million. No commitments exist to lend additional funds to
borrowers whose loans were on nonaccrual status at March 31, 1996 and September
30, 1995.
 
     At March 31, 1996, the recorded investment in impaired loans pursuant to
SFAS No. 114, totalled $4.7 million and the average outstanding balance for the
six months ended March 31, 1996 was $4.5 million. No allowance for credit losses
was required on these loans because the measured values of the loans exceeded
the recorded investments in the loans. Interest income of $230,000 was
recognized on impaired loans during the six months ended March 31, 1996, of
which $192,000 was collected in cash.
 
                                      F-27
160
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                          ALLOWANCE FOR CREDIT LOSSES
LOANS HELD TO MATURITY
                               ------------------------------------------------------------------         LOANS
                                                                            COMMERCIAL                HELD FOR SALE
                                                                               REAL      MORTGAGE   ------------------
                                            SINGLE                            ESTATE      BANKER     SINGLE
                                            FAMILY                             AND       FINANCE     FAMILY
                               SINGLE    RESIDENTIAL               MULTI-    BUSINESS    LINE OF    MORTGAGE    SINGLE
                               FAMILY    CONSTRUCTION   CONSUMER   FAMILY     CREDIT      CREDIT    WAREHOUSE   FAMILY    TOTAL
                               -------   ------------   --------   ------   ----------   --------   ---------   ------   -------
(IN THOUSANDS)
Balance at
  September 30, 1990.......... $ 6,729       $ 38        $--       $  53     $ --         $--         $--       $--      $ 6,820
    Provision.................   3,133        148         --          60          552      --           229      --        4,122
    Net charge-offs...........    (775)     --              (19)    --         --          --         --         --         (794)
    Other.....................    (131)     --              100       31       --          --         --         --        --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1991..........   8,956        186            81      144          552      --           229      --       10,148
    Provision.................  14,156        135            39       75        6,261      --           467      --       21,133
    Net charge-offs...........  (2,827)     --              (76)    --         --          --          (118)     --       (3,021)
    Other.....................  (6,817)     --              100     --          4,564      --         --        2,107        (46)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1992..........  13,468        321           144      219       11,377      --           578     2,107     28,214
    Provision.................   1,824         56           264    1,285          (25)       944       (265)     --        4,083
    Net charge-offs...........  (2,161)       (71)          (53)    --         --          --          (148)     --       (2,433)
    Other.....................     378      --            --         (30 )         30      --         --         (378 )    --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1993..........  13,509        306           355    1,474       11,382        944        165     1,729     29,864
    Provision.................   2,369         93         2,794    1,215          875       (260)       (89)     --        6,997
    Net charge-offs...........  (1,702)     --           (1,327)    (233 )    (10,145)     --         --         --      (13,407)
    Other.....................   1,729      --            --        --         --          --         --        (1,729)    --
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1994..........  15,905        399         1,822    2,456        2,112        684         76      --       23,454
    Provision.................  18,493        (38)        4,178      596        1,374       (274)       (36)     --       24,293
    Net charge-offs...........  (4,804)     --           (2,753)       2       (3,389)     --            (2)     --      (10,946)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  September 30, 1995.......... $29,594       $361        $3,247    $3,054    $     97     $  410      $  38     $--      $36,801
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
Balance at
  September 30, 1994.......... $15,905       $399        $1,822    $2,456    $  2,112     $  684      $  76     $--      $23,454
    Provision.................   2,293         74         1,791      516       --           (448)       (69)     --        4,157
    Net charge-offs...........  (1,414)     --           (1,158)       2       --          --            (2)     --       (2,572)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  March 31, 1995.............. $16,784       $473        $2,455    $2,974    $  2,112     $  236      $   5     $--      $25,039
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
Balance at
  September 30, 1995.......... $29,594       $361        $3,247    $3,054    $     97     $  410      $  38     $--      $36,801
    Provision.................   2,429        122         3,030      175           86          2          6      --        5,850
    Net charge-offs...........  (3,224)     --           (2,938)    --         --          --         --         --       (6,162)
                               -------       ----        ------    ------    --------     ------      -----     ------   -------
Balance at
  March 31, 1996.............. $28,799       $483        $3,339    $3,229    $    183     $  412      $  44     $--      $36,489
                               =======       ====        ======    ======    ========     ======      =====     ======   =======
F-28
161
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6.  LOAN SERVICING
 
                       SINGLE FAMILY SERVICING PORTFOLIO
 
                               PRINCIPAL BALANCES
AT MARCH         AT SEPTEMBER 30,
                                                               31,         --------------------
                                                              1996          1995          1994
                                                           -----------     -------       ------
(IN MILLIONS)
Owned loans...............................................   $ 7,261       $ 7,603       $4,537
     Less:  Loans serviced by others......................     3,125         3,477        1,764
                                                              ------        ------       ------
          Total owned loans serviced by Bank..............     4,136         4,126        2,773
                                                              ------        ------       ------
Loans serviced for others
     Purchased servicing rights...........................     4,315         4,652        1,419
     Loans originated and sold with servicing retained....     1,720         1,187        1,886
     Servicing sales -- not yet transferred from Bank.....       351         1,047        1,109
     Other................................................        27           276          239
                                                              ------        ------       ------
          Total loans serviced for others.................     6,413         7,162        4,653
Mortgage-backed securities securitized by Banking
  Segment.................................................     1,225         1,360        1,554
                                                              ------        ------       ------
          Total servicing portfolio.......................   $11,774       $12,648       $8,980
                                                              ======        ======       ======
The table above includes single family, single family residential
construction, and single family mortgage warehouse loans. In addition to the
single family servicing portfolio, there were $296 million, $177 million, and
$252 million of multi-family loans serviced for others at March 31, 1996 and
September 30, 1995 and 1994.
 
                FAIR VALUE OF SINGLE FAMILY SERVICING PORTFOLIO
AT MARCH          AT SEPTEMBER 30,
                                                            31,         -----------------------
                                                           1996           1995           1994
                                                        -----------     --------       --------
(IN MILLIONS)
Principal
     Total loans serviced for others...................  $   6,413      $  7,162       $  4,653
     Mortgage-backed securities securitized by Banking
       Segment.........................................      1,225         1,360          1,554
     Servicing purchases -- not yet transferred to
       Bank............................................         --            --          3,357
     Servicing sales -- not yet transferred from
       Bank............................................       (351)       (1,047)        (1,109)
     Single family mortgage warehouse loans subject to
       SFAS No. 122....................................        380           411             --
                                                            ------        ------         ------
          Total principal..............................  $   7,667      $  7,886       $  8,455
                                                            ======        ======         ======
                                                                    (IN THOUSANDS)
Fair value.............................................  $ 132,235      $122,250       $137,433
Book value
     OMSR..............................................     38,267        23,062             --
     PMSR..............................................     45,116        52,035         56,677
                                                            ------        ------         ------
          Total book value.............................     83,383        75,097         56,677
                                                            ------        ------         ------
          Fair value in excess of book value (see Note
            12)........................................  $  48,852      $ 47,153       $ 80,756
                                                            ======        ======         ======
F-29
162
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                           MORTGAGE SERVICING RIGHTS
FOR THE SIX MONTHS ENDED
                                                 MARCH 31,                        FOR THE YEAR ENDED SEPTEMBER 30,
                                  ----------------------------------------    ----------------------------------------
                                         1996                  1995                  1995            1994       1993
                                  ------------------    ------------------    ------------------    -------    -------
OMSRS      PMSRS      OMSRS      PMSRS      OMSRS      PMSRS      PMSRS     PMSRS
                                                                     (IN THOUSANDS)
Balance at beginning of
  period........................  $23,062    $52,035    $    --    $56,677    $    --    $56,677    $10,650    $16,036
  Additions.....................   14,944      1,142     13,435     10,508     28,694     12,546     50,955      1,768
  Amortization..................   (1,125)    (4,823)      (234)    (4,930)    (1,010)    (9,821)    (4,928)    (3,518)
  Writedown.....................       --         --         --         --         --         --         --     (2,633)
  Deferred hedging (gains)
    losses......................       --     (1,730)        --         --         --     (7,173)        --         --
  Sales.........................       --       (122)    (8,543)        --     (4,622)      (376)        --     (1,003)
  Other.........................    1,386     (1,386)        --       (173)        --        182         --         --
                                  -------    -------    -------    -------    -------    -------    -------    -------
Balance at end of period........  $38,267    $45,116    $ 4,658    $62,082    $23,062    $52,035    $56,677    $10,650
                                  =======    =======    =======    =======    =======    =======    =======    =======
As discussed in Note 1, SFAS No. 122 was implemented effective October 1,
1994. As a result, originated MSRs of $28.7 million were recorded, net income
for fiscal 1995 and stockholders' equity increased $9.8 million, and earnings
per common share increased $0.33. Per share results have been restated to
reflect the 1,800 to one stock conversion effective June 1996. See Note 21 for a
discussion of subsequent events. The effect of the implementation on the
Consolidated Statement of Operations was as follows:
TOTAL
                                             FISCAL       FOURTH      THIRD     SECOND      FIRST
                                              1995        QUARTER    QUARTER    QUARTER    QUARTER
                                           -----------    -------    -------    -------    -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Before SFAS No. 122 Implementation
     Non-interest income..................  $  98,042     $13,096    $23,185    $29,120    $32,641
     Non-interest expense.................    193,567      51,905     40,251     51,381     50,030
     Income before income taxes and
       minority interest..................     74,181       9,256     21,106     17,593     26,226
     Income tax expense...................     31,323       3,754      9,164      7,546     10,859
     Net income...........................     31,881       1,391      9,708      7,884     12,898
     Earnings per common share............       1.02        0.04       0.31       0.25       0.42
After SFAS No. 122 Implementation
     Non-interest income..................    114,981      25,201     23,127     30,641     36,012
     Non-interest expense.................    194,576      52,466     40,465     51,553     50,092
     Income before income taxes and
       minority interest..................     90,111      20,800     20,834     18,942     29,535
     Income tax expense...................     37,415       8,169      9,060      8,062     12,124
     Net income...........................     41,719       8,520      9,540      8,717     14,942
     Earnings per common share............       1.35        0.28       0.31       0.28       0.48
7.  COVERED ASSETS AND FEDERAL FINANCIAL ASSISTANCE
 
     Concurrent with the Bank's incorporation on December 30, 1988, the Parent
Company, the Bank, and certain of their direct and indirect parent entities
entered into an Assistance Agreement (the "Assistance Agreement") with the
Federal Savings and Loan Insurance Corporation (the "FSLIC") whereby the Bank
acquired substantially all of the assets and assumed all of the deposits and
certain liabilities of United Savings Association of Texas ("Old USAT"), an
insolvent thrift institution (the "Acquisition"). The majority of assets
acquired were designated as Covered Assets ("Covered Assets") and were subject
to certain provisions contained in the Assistance Agreement. The Assistance
Agreement provided for, among other things, financial assistance to the Bank.
 
                                      F-30
163
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On December 23, 1993, the Parent Company, the Bank, and certain of their
direct and indirect parent entities, and the Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund ("FRF"), entered into a
Settlement and Termination Agreement (the "Settlement Agreement") providing,
among other things, for the termination of the Assistance Agreement and the
disposition of Covered Assets. Accordingly, effective December 28, 1993, the
Bank no longer owned or managed any Covered Assets, and stopped receiving
financial assistance from the FRF. In connection with this settlement, the Bank
received a payment totalling $195.3 million.
FOR THE YEAR ENDED
                                                                    SEPTEMBER 30,
                                                                ----------------------
                                                                  1994          1993
                                                                --------       -------
(IN THOUSANDS)
        Payments affecting the results of operations..........  $ 23,143       $ 9,289
        Other Payments
             Settlement payment...............................   195,300            --
             Other............................................       468        61,578
                                                                --------       -------
                  Total FRF payments..........................  $218,911       $70,867
                                                                ========       =======
8.  DEPOSITS
AT SEPTEMBER 30,
                                                           ----------------------------------------------------------------
                                         AT MARCH 31,
                                             1996                  1995                  1994                  1993
                                     --------------------  --------------------  --------------------  --------------------
                                                WEIGHTED              WEIGHTED              WEIGHTED              WEIGHTED
                                                 AVERAGE               AVERAGE               AVERAGE               AVERAGE
                                      AMOUNT      RATE      AMOUNT      RATE      AMOUNT      RATE      AMOUNT      RATE
                                     ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
(DOLLARS IN THOUSANDS)
Non-interest bearing deposits....... $ 242,560       --%   $ 181,196       --%   $  76,498       --%   $  44,149       --%
Interest-bearing deposits
  Transaction accounts..............   222,148     1.00      219,307     1.50      233,666     1.49      229,972     2.07
  Insured money fund accounts
    Consumer........................   493,000     4.11      397,473     3.73      407,029     3.12      397,511     2.69
    Commercial......................   717,308     5.32      857,669     5.82      416,571     4.84       51,938     2.60
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Subtotal...................... 1,210,308     4.83    1,255,142     5.16      823,600     3.99      449,449     2.68
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
  Savings accounts..................   139,343     2.50      144,301     2.73      222,769     2.60      312,778     2.68
  Certificates of deposit
    Consumer........................ 2,912,263     5.72    3,063,631     5.84    2,949,715     4.88    3,251,391     4.77
    Commercial......................     3,348     5.02        2,273     5.36           --       --           --       --
    Wholesale.......................   233,351     9.70      316,370     9.06      457,956     7.92      551,649     7.13
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Subtotal...................... 3,148,962     6.01    3,382,274     6.14    3,407,671     5.29    3,803,040     5.11
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Total interest-bearing
        deposits.................... 4,720,761     5.37    5,001,024     5.59    4,687,706     4.74    4,795,239     4.58
                                     ---------      ---    ---------      ---    ---------      ---    ---------      ---
      Total deposits................ $4,963,321    5.11%   $5,182,220    5.40%   $4,764,204    4.67%   $4,839,388    4.53%
                                     =========  =========  =========  =========  =========  =========  =========  =========
Consumer............................ $3,843,134            $3,868,498            $3,834,238            $4,207,739
Commercial..........................   886,836               997,352               472,009                80,000
Wholesale...........................   233,351               316,370               457,957               551,649
                                     ---------             ---------             ---------             ---------
      Total deposits................ $4,963,321            $5,182,220            $4,764,204            $4,839,388
                                     =========             =========             =========             =========
F-31
164
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At March 31, 1996 and September 30, 1995, certificates of deposit ("CDs")
summarized by scheduled maturity by year and weighted average interest rate were
as follows:
CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
                       --------------------------------------------------------------------------
    STATED RATE          1997          1998          1999         2000        2001     THEREAFTER      TOTAL
                       ---------     ---------     --------     --------     -------   ----------    ---------
(IN THOUSANDS)
2.99% and below......  $   1,824     $      --     $     --     $     --     $    --    $     --     $   1,824
3.00% to 3.99%.......     21,033         3,827          649            8          --           3        25,520
4.00% to 4.99%.......    291,351       237,112       16,495       32,615       1,051       3,099       581,723
5.00% to 5.99%.......    524,650       564,293      144,050       47,412       5,496      15,581     1,301,482
6.00% to 6.99%.......    131,259       436,705       82,683       57,147      60,189      19,592       787,575
7.00% to 7.99%.......    127,964        80,121        7,690        5,723      21,599      12,888       255,985
8.00% to 8.99%.......     11,580         1,273        2,581        3,010       1,700         379        20,523
9.00% to 9.99%.......        265           741        6,249        2,925          12         446        10,638
10.00% to 10.99%.....     31,200         7,444       23,974          728         591         325        64,262
Over 10.99%..........     69,648        29,517           --          265          --          --        99,430
                       ----------    ----------    --------     --------     -------     -------     ----------
                       $1,210,774    $1,361,033    $284,371     $149,833     $90,638    $ 52,313     $3,148,962
                       ==========    ==========    ========     ========     =======     =======     ==========
CERTIFICATES MATURING IN THE YEAR ENDING SEPTEMBER 30,
                       --------------------------------------------------------------------------
                         1996          1997          1998         1999        2000     THEREAFTER      TOTAL
                       ---------     ---------     --------     --------     -------   ----------    ---------
(IN THOUSANDS)
2.99% and below......  $   1,947     $      --     $     --     $     --     $    --    $     --     $   1,947
3.00% to 3.99%.......     49,923         4,209          649            8          --           3        54,792
4.00% to 4.99%.......    419,671        58,644        7,242       32,816          50         100       518,523
5.00% to 5.99%.......    637,453       338,794      142,232       46,123       5,308         476     1,170,386
6.00% to 6.99%.......    449,506       437,013       82,291       57,725      60,339      16,062     1,102,936
7.00% to 7.99%.......    147,563        82,049        7,726        5,728      21,722      12,944       277,732
8.00% to 8.99%.......     33,642         1,262          675        4,165       2,272         376        42,392
9.00% to 9.99%.......     42,640           564        6,504        2,909          11         442        53,070
10.00% to 10.99%.....      4,950        37,235       13,594       10,019         657         325        66,780
Over 10.99%..........         --        78,438       15,026          252          --          --        93,716
                       ----------    ----------    --------     --------     -------     -------     ----------
                       $1,787,295    $1,038,208    $275,939     $159,745     $90,359    $ 30,728     $3,382,274
                       ==========    ==========    ========     ========     =======     =======     ==========
Scheduled maturities of CDs of $100,000 or more were as follows:
AT SEPTEMBER 30,
                                                 AT MARCH 31, 1996               1995
                                                --------------------     --------------------
                                                NUMBER OF   DEPOSIT      NUMBER OF   DEPOSIT
                                                ACCOUNTS     AMOUNT      ACCOUNTS     AMOUNT
                                                ---------   --------     ---------   --------
(DOLLARS IN THOUSANDS)
    Three months or less.......................     648     $ 68,289         475     $ 51,307
    Over three through six months..............     895       94,458         664       70,615
    Over six through twelve months.............   1,455      151,881       1,188      124,752
    Over twelve months.........................   1,352      143,660       2,115      222,801
                                                  -----     --------       -----     --------
              Total............................   4,350     $458,288       4,442     $469,475
                                                  =====     ========       =====     ========
F-32
165
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                          INTEREST EXPENSE ON DEPOSITS
FOR THE SIX MONTHS
                                            ENDED MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                          --------------------    --------------------------------
                                            1996        1995        1995        1994        1993
                                          --------    --------    --------    --------    --------
(IN THOUSANDS)
Transaction and insured money fund
  accounts..............................  $ 34,453    $ 25,261    $ 61,232    $ 22,261    $ 18,314
Savings accounts........................     1,883       2,620       4,715       7,311       7,055
Certificates of deposit.................   102,174      94,623     198,419     179,462     200,614
                                          --------    --------    --------    --------    --------
     Total..............................  $138,510    $122,504    $264,366    $209,034    $225,983
                                          ========    ========    ========    ========    ========
9. FEDERAL HOME LOAN BANK ADVANCES
FOR THE
                                               SIX MONTHS
                                                 ENDED          FOR THE YEAR ENDED SEPTEMBER 30,
                                               MARCH 31,     --------------------------------------
                                                  1996          1995          1994          1993
                                               ----------    ----------    ----------    ----------
(DOLLARS IN THOUSANDS)
Maximum outstanding at any month-end.........  $4,384,798    $4,386,605    $2,697,829    $2,217,745
Daily average balance........................   4,346,960     3,560,844     2,285,630     1,344,129
Average interest rate........................        6.18%         6.31%         3.98%         3.62%
The aggregate amounts of principal maturities for FHLB advances for the
periods indicated were as follows:
AT SEPTEMBER 30,
                                                       ---------------------------------------------
                                   AT MARCH 31,
                                       1996                    1995                    1994
                               ---------------------   ---------------------   ---------------------
                                            WEIGHTED                WEIGHTED                WEIGHTED
                                            AVERAGE                 AVERAGE                 AVERAGE
                                 AMOUNT       RATE       AMOUNT       RATE       AMOUNT       RATE
                               ----------   --------   ----------   --------   ----------   --------
(DOLLARS IN THOUSANDS)
1995.........................  $   --         --  %    $   --         --  %    $1,838,200     4.98%
1996.........................      --         --        2,391,885     6.22        640,884     5.19
1997.........................   3,815,107     5.79      1,855,765     6.33        115,000     6.03
1998.........................     192,671     6.03        115,000     6.60          5,000     7.44
1999.........................     118,700     5.50          8,700     7.65          8,700     7.65
2000.........................       2,700     7.80          2,700     7.80          2,700     7.80
2001.........................       4,800     7.92          4,800     7.92          4,800     7.92
Thereafter...................       5,045     8.33          5,045     8.33          5,045     8.33
                               ----------   --------   ----------   --------   ----------   --------
     Total...................  $4,139,023     5.80%    $4,383,895     6.28%    $2,620,329     5.11%
                                =========   ========    =========   ========    =========   ========
F-33
166
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
    AND FEDERAL FUNDS PURCHASED
FOR THE
                                                     SIX
                                                   MONTHS
                                                    ENDED      FOR THE YEAR ENDED SEPTEMBER 30,
                                                  MARCH 31,    ---------------------------------
                                                    1996         1995         1994        1993
                                                  ---------    ---------    --------    --------
                                                                    (DOLLARS IN THOUSANDS)
Reverse repurchase agreements
     Balance outstanding at period-end..........  $ 949,936    $1,172,533   $553,000    $300,000
     Fair value of collateral at period-end.....    987,478    1,239,527     673,000     321,200
     Maximum outstanding at any month-end.......  1,096,508    1,355,540     553,000     659,000
     Daily average balance......................    982,115      887,932     273,899     345,269
     Average interest rate......................       5.82%        5.99%       3.85%       3.23%
Federal funds purchased
     Balance outstanding at period-end..........  $      --    $      --    $     --    $ 10,000
     Maximum outstanding at any month-end.......         --           --      15,000      10,000
     Daily average balance......................         54          521         767         740
     Average interest rate......................       5.94%        5.95%       3.73%       2.84%
Scheduled maturities of reverse repurchase agreements outstanding at March
31, 1996 and September 30, 1995 were as follows:
AT MARCH 31, 1996   AT SEPTEMBER 30, 1995
                                                  -----------------   ---------------------
                                                               (IN THOUSANDS)
October 1995................................      $      --             $ 627,533
    April 1996..................................        589,936               185,000
    July 1996...................................        360,000               360,000
                                                     ----------            ----------
                                                      $ 949,936             $1,172,533
                                                     ==========            ==========
The counterparties to all reverse repurchase agreements at March 31, 1996
and September 30, 1995 have agreed to resell the same securities upon maturity
of such agreements. The securities collateralizing the reverse repurchase
agreements have been delivered to the counterparty or its agent. At March 31,
1996 and September 30, 1995, the reverse repurchase agreements were outstanding
with the following counterparties:
AT MARCH 31, 1996   AT SEPTEMBER 30, 1995
                                                  -----------------   ---------------------
                                                               CARRYING VALUE
                                                  -----------------------------------------
(IN THOUSANDS)
Morgan Stanley and Co. Incorporated.........      $ 360,000             $ 496,614
    Donaldson, Lufkin, and Jenrette Securities
      Corporation...............................        239,936                94,000
    CS First Boston Corporation.................        185,000               239,309
    Goldman, Sachs and Co.......................        165,000               146,500
    Salomon Brothers Holding Company Inc........             --               196,110
                                                     ----------            ----------
                                                      $ 949,936             $1,172,533
                                                     ==========            ==========
F-34
167
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
11. SENIOR NOTES
 
     In May 1993, the Parent Company issued $115 million of 8.05% Senior Notes
("Senior Notes") and repaid the long-term debt and the note payable to a related
party. In connection with this transaction, the Parent Company paid a prepayment
penalty, a make-whole premium, and charged-off the remaining capitalized debt
issuance costs of $9.5 million, $1.6 million, and $3.4 million, respectively.
These penalties and costs are reflected as an extraordinary loss in fiscal 1993.
The extraordinary loss had no tax benefit in accordance with SFAS No. 109.
 
     The Senior Notes were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), but were offered and sold in a private offering
to qualified institutional investors in reliance on Rule 144A under the
Securities Act and to a limited number of institutional accredited investors
within the meaning of Rule 501 of Regulation D under the Securities Act.
 
     The Senior Notes had an initial interest rate of 8.05% per annum, payable
semi-annually, and are due on May 15, 1998. The interest rate on the Senior
Notes was subject to increase in certain circumstances if the Parent Company did
not consummate an exchange offer ("Exchange Offer") by certain dates. The
Exchange Offer would provide holders of the Senior Notes with the ability to
effect, for federal income tax purposes, a tax free exchange of the Senior
Notes, for Exchange Notes ("Exchange Notes"). The per annum interest rate on the
Senior Notes increased by 0.5%, to 8.55% in October 1993, and increased by 0.5%
to 9.05% in February 1994. When the Exchange Offer is consummated, the interest
rate will revert to the initial rate of 8.05%.
 
     The Senior Notes are not redeemable prior to maturity, except upon the
occurrence of a change of control (as defined) of the Parent Company or the Bank
(i) at the option of the Parent Company, in whole but not in part, and (ii) at
the option of holders, in whole or in part, in each case, at 101% of their
principal amount plus accrued interest to the date of redemption. The Senior
Notes do not have the benefit of any sinking fund obligation.
 
     The cost of issuing the Senior Notes totalled $4.9 million, and
amortization for the six months ended March 31, 1996 and 1995 and fiscal 1995,
1994, and 1993 was $488,000, $488,000, $976,000, $977,000, and $366,000,
respectively.
 
     The Parent Company's ability to meet its long-term obligations is
contingent on the Bank's ability to pay dividends on its common stock. As
discussed in Note 15, the ability of the Bank to pay dividends on its preferred
or common stock without prior Office of Thrift Supervision (the "OTS") approval
is subject to its continued profitability and the maintenance of certain capital
ratios. Further, the payment of dividends by the Bank to the Parent Company on
the Bank's common stock is subordinate to the payment of dividends on the Bank's
preferred stock. See Note 16 for a discussion of the preferred stock of the
Bank. Under the Senior Note indenture, aggregate dividends paid by the Company
on the Common Stock and by the Bank on the Preferred Stock, Series A and
Preferred Stock, Series B, and certain other payments or investments, is limited
to the sum of (i) 50% of cumulative consolidated net income (or, if negative
100% of such deficit) after March 31, 1993, subject to certain exclusions, (ii)
the proceeds from any issuance of capital stock by the Parent Company after
March 31, 1993, and (iii) $12 million. At March 31, 1996 and September 30, 1995,
$123.7 million and $117.5 million were available for payment of future dividends
under this restriction. See Note 21 for a discussion of subsequent events.
 
                                      F-35
168
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
12. FINANCIAL INSTRUMENTS
 
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires the disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Quoted market
prices, when available, are used as the measure of fair value. In cases where
quoted market prices are not available, fair values are based on present value
estimates or other valuation techniques. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair
values cannot always be substantiated by comparison to independent market quotes
and, in many cases, the estimated fair values could not necessarily be realized
in an immediate sale or settlement of the instrument.
 
     The fair value estimates presented herein are based on relevant information
available to management as of March 31, 1996, September 30, 1995, and 1994.
Management is not aware of any factors that would significantly affect these
estimated fair value amounts. As these reporting requirements exclude certain
financial instruments and all non-financial instruments, the aggregate fair
value amounts presented herein do not represent management's estimate of the
underlying value of the Parent Company and the Bank. Additionally, such amounts
exclude intangible asset values such as the value of core deposit intangibles.
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value.
 
     Short-Term Interest-Earning Assets.  The carrying amount approximates the
fair value.
 
     Trading Account Assets.  The carrying values are market values, which are
generally based on quoted market prices or dealer quotes, if available. If a
quoted market price is not available, market value is estimated using quoted
market prices for instruments with similar credit, maturity, and interest
characteristics.
 
     Securities and Mortgage-Backed Securities.  The carrying amounts for
certain securities and mortgage-backed securities approximate fair value as they
mature within 90 days and do not present significant credit concerns. The fair
value of securities and mortgage-backed securities with longer maturities are
estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers.
 
     Loans.  Fair values are estimated for portfolios of loans with similar
characteristics and include the value of related servicing rights, if
appropriate. Loans are segregated by type, by rate, and by performing and
nonperforming categories. As adjustable-rate loans (excluding single family)
reprice frequently, their carrying value approximates their fair value. For
fixed-rate loans and single family loans, excluding the single family mortgage
warehouse, fair value is estimated using contractual cash flows discounted at
secondary market rates, adjusted for prepayment estimates, or using current
rates offered for similar loans. Fair value of the single family mortgage
warehouse loans is estimated using outstanding commitment prices from investors
or current investor yield requirements. The fair value of nonperforming loans is
estimated using the carrying value less any related allowance for credit losses.
 
     FHLB Stock.  The carrying amount approximates the fair value as it is
redeemable at its par value.
 
     Deposits.  Under SFAS No. 107, the estimated fair value of deposits with no
stated maturity, which includes demand deposits, money market, and other savings
accounts, is equal to the amount payable on demand. Although market premiums
paid for depository institutions reflect an additional value for these deposits,
SFAS No. 107 prohibits adjusting fair value for any value expected to be derived
from retaining those deposits for a future period of time or from the benefit
that results from the ability to fund interest-earning assets with these deposit
liabilities. The SFAS No. 107 fair value of fixed-maturity deposits is
estimated, using a discounted cash flow model with rates currently offered by
the Bank for deposits of similar remaining maturities.
 
                                      F-36
169
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     FHLB Advances, Reverse Repurchase Agreements, and Federal Funds
Purchased.  The fair value is estimated based on the discounted value of
contractual cash flows using rates currently available to the Bank for
borrowings with similar terms and remaining maturities.
 
     Senior Notes.  The fair value of the Senior Notes is based on discounting
future cash flows using the current rates at which similar debt would be issued
by issuers with similar credit ratings and remaining maturities.
 
     Other Assets and Liabilities.  With the exception of that portion of the
excess servicing receivable classified as other assets, the carrying amounts of
financial instruments in these classifications are considered a reasonable
estimate of fair value due to their short-term nature. At March 31, 1996 and
September 30, 1995 and 1994, the fair value of the excess servicing receivable
exceeded its carrying value of $6.9 million, $7.1 million, and $7.9 million, by
$4.3 million, $5.1 million, and $4.7 million. The fair value of the excess
servicing receivable is equal to the present value of estimated net future cash
flows discounted at a current market rate.
 
     Financial Instruments With Off-Balance-Sheet Risk.  The fair value of
interest rate swaps, caps, and floors, and financial options are based on
pricing models. The fair value of financial futures contracts, forward delivery
contracts, and fixed-rate commitments to extend credit are based on current
market prices. The notional amount of adjustable-rate commitments to extend
credit approximates their fair value.
 
     Servicing Portfolio.  See Note 1 for a description of the method used to
value the single family servicing portfolio.
                            SFAS NO. 107 FAIR VALUES
AT SEPTEMBER 30,
                                                                        -----------------------------------------------------
                                                 AT MARCH 31,
                                                     1996                         1995                         1994
                                           -------------------------    -------------------------    ------------------------
                                            CARRYING       SFAS NO.      CARRYING       SFAS NO.      CARRYING      SFAS NO.
                                              VALUE       107 VALUE        VALUE       107 VALUE       VALUE       107 VALUE
                                           -----------    ----------    -----------    ----------    ----------    ----------
                                                                             (IN THOUSANDS)
Financial Assets
  Short-term interest-earning assets....   $   794,970    $  794,970    $   583,983    $  583,983    $  435,648    $  435,648
  Trading account assets................         1,267         1,267          1,081         1,081         1,011         1,011
  Securities............................        58,351        59,458        116,013       116,811       114,115       114,580
  Mortgage-backed securities............     1,954,070     1,935,188      2,398,263     2,378,171     2,828,903     2,774,717
  Loans.................................     7,878,080     8,014,145      8,260,240     8,418,464     5,046,174     5,095,133
  FHLB stock............................       233,038       233,038        225,952       225,952       132,816       132,816
  Other assets..........................       108,708       112,996        150,542       155,631        86,849        91,548
Non-financial assets....................       238,152           N/A        247,460           N/A       264,645           N/A
                                                           =========                    =========                   =========
                                           -----------                  -----------                  ----------
      Total assets......................   $11,266,636                  $11,983,534                  $8,910,161
                                           ===========                  ===========                  ==========
Financial Liabilities
  Deposits..............................   $ 4,963,321    $5,004,342    $ 5,182,220    $5,215,438    $4,764,204    $4,791,027
  FHLB advances.........................     4,139,023     4,145,304      4,383,895     4,395,965     2,620,329     2,615,204
  Reverse repurchase agreements and
    federal funds purchased.............       949,936       950,282      1,172,533     1,171,884       553,000       553,000
  Senior Notes..........................       115,000       119,701        115,000       115,383       115,000       111,324
  Other liabilities.....................       156,418       156,418        162,073       162,073       116,484       116,484
Non-financial liabilities, minority
  interest, and stockholders' equity....       942,938           N/A        967,813           N/A       741,144           N/A
                                                           =========                    =========                   =========
                                           -----------                  -----------                  ----------
      Total liabilities, minority
        interest, and stockholders'
        equity..........................   $11,266,636                  $11,983,534                  $8,910,161
                                           ===========                  ===========                  ==========
F-37
170
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
SFAS NO. 107 FAIR VALUES, CONTINUED
AT SEPTEMBER 30,
                                                                        -----------------------------------------------------
                                                 AT MARCH 31,
                                                     1996                         1995                         1994
                                           -------------------------    -------------------------    ------------------------
                                            CARRYING       SFAS NO.      CARRYING       SFAS NO.      CARRYING      SFAS NO.
                                              VALUE       107 VALUE        VALUE       107 VALUE       VALUE       107 VALUE
                                           -----------    ----------    -----------    ----------    ----------    ----------
                                                                             (IN THOUSANDS)
Other Financial -- Fair Value
  Interest rate swaps...................   $        --    $     (359)   $        --    $   (1,517)   $       --    $   (1,462)
  Interest rate caps....................            --         2,954             --         1,113            --            --
  Interest rate floors..................            --         3,305             --         4,895            --            --
  Financial options.....................            --           156             --           103            --            --
  Financial futures contracts...........            --           971             --        (1,869)           --           375
  Forward delivery contracts............            --         6,686             --        (2,877)           --         3,014
  Commitments to extend credit..........            --         1,257             --           897            --          (767)
Non-Financial -- Unrealized Gains
  Single family servicing portfolio, as
    adjusted (See Note 6)...............            --        48,852             --        47,153            --        80,756
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
 
     The Bank enters into certain financial instruments with off-balance-sheet
risk in the ordinary course of business to reduce its exposure to changes in
interest rates. The Bank utilizes only traditional financial instruments for
this purpose and does not enter into instruments such as leveraged derivatives
or structured notes. The financial instruments used for hedging interest rate
risk include interest rate swaps, caps, floors, and financial options, financial
futures contracts, and forward delivery contracts. A hedge is an attempt to
reduce risk by creating a relationship whereby any losses on the hedged asset or
liability are expected to be counterbalanced in whole or part by gains on the
hedging financial instrument. Thus, market risk resulting from a particular
off-balance-sheet instrument is normally offset by other on or off-balance-sheet
transactions. The Bank seeks to manage credit risk by limiting the total amount
of arrangements outstanding, both by counterparty and in the aggregate, by
monitoring the size and maturity structure of the financial instruments, by
assessing the creditworthiness of the counterparty, and by applying uniform
credit standards for all activities with credit risk.
 
     Notional principal amounts indicated in the following table represent the
extent of the Bank's involvement in particular classes of financial instruments
and generally exceed the expected future cash requirements relating to the
instruments.
AT SEPTEMBER 30,
                                                               AT MARCH 31,   -------------------
                                                                   1996         1995       1994
                                                               ------------   --------   --------
                                                                         (IN THOUSANDS)
Interest rate swaps..........................................   $  150,000    $615,000   $505,000
Interest rate caps...........................................    1,315,000     565,000         --
Interest rate floors.........................................      310,000     310,000    200,000
Financial options............................................       89,100      23,000         --
Financial futures contracts..................................       31,800     529,000     40,900
Forward delivery contracts...................................      514,767     509,463    354,439
Commitments to extend credit.................................    1,300,855     999,792    969,072
F-38
171
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Financial instruments with off-balance-sheet risk at March 31, 1996 and
September 30, 1995 were scheduled to mature as follows:
MATURING IN THE YEAR ENDING MARCH 31,
                                            ------------------------------------------
                                               1997        1998      1999     THEREAFTER   TOTAL
                                            ----------   --------   -------   --------   ----------
                                                                (IN THOUSANDS)
Interest rate swaps.......................  $  150,000   $     --   $    --   $     --   $  150,000
Interest rate caps........................     350,000    400,000        --    565,000    1,315,000
Interest rate floors......................          --    310,000        --         --      310,000
Financial options.........................      89,100         --        --         --       89,100
Financial futures contracts...............      31,800         --        --         --       31,800
Forward delivery contracts................     514,767         --        --         --      514,767
Commitments to extend credit..............   1,051,080    195,766    12,231     41,778    1,300,855
                                            ----------   --------   -------   --------   ----------
          Total...........................  $2,186,747   $905,766   $12,231   $606,778   $3,711,522
                                            ==========   ========   =======   ========   ==========
MATURING IN THE YEAR ENDING SEPTEMBER 30,
                                           -------------------------------------------
                                              1996        1997       1998     THEREAFTER   TOTAL
                                           ----------   --------   --------   --------   ----------
                                                                (IN THOUSANDS)
Interest rate swaps......................  $  565,000   $ 50,000   $     --   $     --   $  615,000
Interest rate caps.......................          --         --         --    565,000      565,000
Interest rate floors.....................          --     60,000    250,000         --      310,000
Financial options........................      23,000         --         --         --       23,000
Financial futures contracts..............     529,000         --         --         --      529,000
Forward delivery contracts...............     509,463         --         --         --      509,463
Commitments to extend credit.............     866,728     78,195     17,764     37,105      999,792
                                           ----------   --------   --------   --------   ----------
          Total..........................  $2,493,191   $188,195   $267,764   $602,105   $3,551,255
                                           ==========   ========   ========   ========   ==========
F-39
172
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Interest Rate Swaps.  Below is an itemization of swaps by type and items
hedged. These swaps were entered into in an effort to more closely match the
repricing of the Bank's liabilities with the related assets. During the six
months ended March 31, 1996, $465 million of interest rate swap contracts
expired.
NOTIONAL     FIXED    FLOATING                HEDGED
                                           AMOUNT      RATE       RATE                   ITEM
                                          --------     ----     --------         --------------------
                                                (DOLLARS IN THOUSANDS)
At March 31, 1996
Receive Floating/Pay Fixed............    $100,000     6.58%      5.63%   (2)    Commercial deposits
Receive Fixed/Pay Floating............      25,000     4.60       5.58    (2)    Consumer deposits
                                            25,000     6.00       5.40    (1)    Consumer deposits
                                          --------
          Total.......................    $150,000
                                          ========
At September 30, 1995
Receive Floating/Pay Fixed............    $ 75,000     6.10       5.81    (1)    FHLB advances
                                                                                 Reverse repurchase
                                           340,000     6.50       5.86    (1)      agreements
                                           100,000     6.58       6.00    (2)    Commercial deposits
Receive Fixed/Pay Floating............      75,000     4.32       5.88    (2)    Consumer deposits
                                            25,000     6.00       5.81    (1)    Consumer deposits
                                          --------
  Total...............................    $615,000
                                          ========
At September 30, 1994
Receive Floating/Pay Fixed............    $150,000     6.02       5.02    (1)    FHLB advances
                                                                                 Reverse repurchase
                                           280,000     5.76       4.90    (1)      agreements
Receive Fixed/Pay Floating............      75,000     4.32       4.82    (2)    Consumer deposits
                                          --------
  Total...............................    $505,000
                                          ========
(1) Based on the one month London InterBank Offered Rate ("LIBOR") as of the
    last reset prior to the date reported.
 
(2) Based on the three month LIBOR as of the last reset prior to the date
    reported.
 
     During fiscal 1993, the Bank sold interest rate swap agreements with
notional amounts totalling $215.0 million prior to the original maturities,
resulting in a $4.1 million gain on the sale. The gain was deferred and
amortized as a credit to interest expense over the remaining terms of the hedged
deposit liabilities. This deferred gain was $1.8 million at September 30, 1994
and was fully amortized during fiscal 1995.
 
     Interest Rate Caps.  The Bank simultaneously purchased and sold caps during
fiscal 1995 in an effort to hedge certain adjustable-rate loans. The Bank
purchased interest rate caps during fiscal 1996 in an effort to hedge certain
adjustable-rate mortgage-backed securities. The Bank will receive interest on
the caps it purchased if the index rates rise above the contracted rates. The
Bank will pay interest on the cap it sold if the index rate rises above the
contracted rate.
NOTIONAL       INDEX      CONTRACTED
                                                            AMOUNT        RATE          RATE
                                                           --------       ----       -----------
(DOLLARS IN THOUSANDS)
At March 31, 1996................................ buy      $565,000       5.48%(1)       7.86%
                                                  sell      565,000       5.48(1)        8.57
                                                            750,000       5.06(2)        5.81
At September 30, 1995............................ buy      $565,000       5.91(1)        7.86
                                                  sell      565,000       5.91(1)        8.57
(1) Based on the six month LIBOR as of the last reset prior to the date
    reported.
 
                                      F-40
173
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) Based on the one year Constant Maturity Treasury ("CMT") as of the last
    reset prior to the date reported.
 
     Interest Rate Floors.  Floor agreements outstanding at September 30, 1994
were entered into in an effort to shorten the duration of certain long-term
fixed-rate consumer deposits in a declining interest rate environment.
Additional floor contracts were entered into during fiscal 1995 in an effort to
hedge the MSRs against declines in value as a result of prepayments.
AVERAGE
                                            NOTIONAL     INDEX      FLOOR             HEDGED
                                             AMOUNT      RATE       RATE               ITEM
                                            --------     ----       -----       ------------------
(DOLLARS IN THOUSANDS)
At March 31, 1996.......................... $260,000     5.78%(1)   6.70 %             MSRs
                                              50,000     6.43(2)    7.20               MSRs
                                            --------
     Total................................. $310,000
                                            --------
                                            --------
At September 30, 1995...................... $260,000     6.01(1)    6.70               MSRs
                                              50,000     6.17(2)    7.20               MSRs
                                            --------
     Total................................. $310,000
                                            --------
                                            --------
At September 30, 1994...................... $200,000     5.13(3)    3.13        Consumer deposits
                                            --------
                                            --------
(1) Based on the five year CMT as of the last reset prior to the date reported.
 
(2) Based on the ten year CMT as of the last reset prior to the date reported.
 
(3) Based on the one month LIBOR as of the last reset prior to the date
    reported.
 
     An interest rate floor agreement with a notional principal amount of $530.0
million hedging single family MSRs was sold prior to its original maturity
during fiscal 1995, resulting in a gain of $6.4 million. The gain was deferred
and is being accreted to operations offsetting the related MSR intangible
amortization expense. At March 31, 1996, the deferred gain remaining from the
sale of the interest rate floor was approximately $5.5 million. Interest
received on interest rate floor agreements totalled $1.7 million and $817,000 at
March 31, 1996 and September 30, 1995.
 
     Financial Options.  At March 31, 1996 and September 30, 1995 there were
purchased Treasury call options outstanding with notional principal amounts
totalling $22.5 million and $23.0 million. These options were entered into in an
effort to hedge MSRs against declines in value as a result of an increase in
prepayments caused by declining interest rates. The purchased Treasury call
option outstanding at September 30, 1995 was sold during fiscal 1996, for a gain
of $319,000 as the MSRs being hedged were sold. This gain was included in the
gain on the sale of MSRs. During the six months ended fiscal 1996, an additional
option with notional principal amount of $22.5 million was purchased.
 
     During fiscal 1996, the Bank purchased a Eurodollar put option with
notional principal amount of $2 billion in an effort to hedge certain MBS. The
Eurodollar put option was then sold for a loss of $49,000 as the mortgage-backed
securities being hedged were sold. The loss was included in the gain on the sale
of the MBS.
 
     During fiscal 1996, Treasury put options with notional principal amounts
totalling $16.6 million were entered into in an effort to hedge loans the Bank
originated for its own portfolio from the date that the interest rate is locked
until the date the loans are sold or funded ("portfolio pipeline").
 
                                      F-41
174
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During fiscal 1996, the Bank purchased a Treasury call option with a
notional principal amount of $50.0 million. The option was entered into as a
trading activity and the related premium paid was included in trading account
assets at March 31, 1996.
 
     Financial Futures Contracts.  At March 31, 1996 and September 30, 1995 and
1994 there were Treasury futures contracts outstanding with notional principal
amounts totalling $31.8 million, $160.0 million and $40.9 million. These
Treasury futures contracts were entered into in an effort to hedge loans in the
portfolio pipeline. During fiscal 1996, Treasury futures contracts with notional
principal amounts totalling $141.0 million were closed as the loans being hedged
were sold. Losses of $327,000 and $6.0 million and gains of $37,000 on Treasury
futures contracts as of March 31, 1996 and September 30, 1995 and 1994 were
deferred and included as an adjustment to the carrying amount of the loans.
 
     The Eurodollar futures contracts outstanding at September 30, 1995 with
notional amounts totalling $369.0 million, were entered into in an effort to
hedge the interest costs for a fixed period on certain borrowings that reprice
based on short-term rates. As of March 31, 1996, all of the Eurodollar futures
contracts outstanding at September 30, 1995 were closed or had expired. Losses
of $360,000 on closed Eurodollar futures contracts were deferred and included as
an adjustment to the carrying amount of the borrowings at March 31, 1996.
 
     Forward Delivery Contracts.  Forward delivery contracts are entered into to
sell single family mortgage warehouse loans and to manage the risk that a change
in interest rates will decrease the value of the single family mortgage loan
warehouse or commitments to originate mortgage loans ("mortgage pipeline").
 
                           FORWARD DELIVERY CONTRACTS
AT MARCH       AT SEPTEMBER 30,
                                                           31,       ----------------------
                                                           1996         1995        1994
                                                        ----------   ----------  ----------
(IN MILLIONS)
    Counterparty
         FNMA..........................................    $173         $265        $133
         GNMA..........................................     258          205         205
         Other.........................................      84           39          16
                                                        ----------   ----------  ----------
              Total....................................    $515         $509        $354
                                                        ==========   ==========  ==========
    Type
         Fixed.........................................    $463         $428        $236
         Variable......................................      52           81         118
                                                        ----------   ----------  ----------
              Total....................................    $515         $509        $354
                                                        ==========   ==========  ==========
    Loans available to fill commitments
         Single family mortgage warehouse..............    $380         $411        $252
         Mortgage pipeline (estimated).................     191          185         136
                                                        ----------   ----------  ----------
              Total....................................    $571         $596        $388
                                                        ==========   ==========  ==========
Short Sales.  During fiscal 1994, the Bank entered into short sales of
$121.5 million of Treasury notes in an effort to hedge the fixed-rate portfolio
pipeline, and also in an effort to hedge loans. The short sale positions were
closed out prior to their maturity and the resulting gain of $103,000 was
reflected as a realized gain on
 
                                      F-42
175
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
trading account assets for the year ended September 30, 1994. The Bank does not
routinely enter into short sales.
 
     Commitments to Extend Credit.  The Bank's exposure to credit loss for
commitments to extend credit is represented by the contractual amount of those
agreements. The Bank uses the same credit policies in making funding commitments
as it does for on-balance-sheet instruments. These commitments generally have
fixed expiration dates or other termination clauses and require the payment of a
fee to the Bank. Because commitments may expire without being drawn upon, the
total contract amounts do not necessarily represent future cash requirements.
AT SEPTEMBER 30,
                                                  AT MARCH 31,    --------------------------
                                                      1996            1995          1994
                                                  -------------   ------------  ------------
(IN THOUSANDS)
    Single family................................   $ 773,137       $589,157      $468,604
    Other........................................     527,718        410,635       500,468
                                                  -------------   ------------  ------------
              Total..............................   $1,300,855      $999,792      $969,072
                                                  =============   ============  ============
    Fixed........................................   $ 398,698       $282,101      $338,462
    Variable.....................................     902,157        717,691       630,610
                                                  -------------   ------------  ------------
              Total..............................   $1,300,855      $999,792      $969,072
                                                  =============   ============  ============
Included in the commitments to extend credit amounts above are letters of
credit of $6.0 million, $5.4 million, and $320,000 at March 31, 1996 and
September 30, 1995 and 1994.
 
     Recourse Obligations.  The Bank had servicing of approximately $25.6
million, $26.6 million, and $25.4 million, at March 31, 1996 and September 30,
1995 and 1994 for which certain recourse obligations apply. Management believes
that it has adequately provided reserves for its recourse obligations related to
this servicing.
 
13.  INCOME TAXES
FOR THE SIX MONTHS
                                       ENDED MARCH 31,           FOR THE YEAR ENDED SEPTEMBER 30,
                                   ------------------------   ---------------------------------------
                                      1996         1995          1995          1994          1993
                                   -----------  -----------   -----------  ------------  ------------
(IN THOUSANDS)
Current tax provision (benefit)
     Federal......................   $ 1,677      $ 2,094       $ 3,459      $  1,145      $  7,448
     State........................     2,033        1,447         2,080         1,841         2,091
     Payments due in lieu of
       taxes......................     7,112        6,327        15,261        (3,449)        8,491
Deferred tax provision (benefit)
     Federal......................    14,456       10,318        16,575        17,681        44,441
     State........................        --           --            40        (1,279)           --
     Change in valuation
       allowance..................        --           --            --       (47,838)     (103,203)
Goodwill reduction for utilization
  of acquired net operating loss
  carryforwards...................        --           --            --            --        14,579
                                   -----------  -----------   -----------  ------------  ------------
          Total income tax expense
            (benefit).............   $25,278      $20,186       $37,415      $(31,899)     $(26,153)
                                   ===========  ===========   ===========  ============  ============
F-43
176
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
FEDERAL TAXATION
 
     The Parent Company and the Bank are subject to regular income tax and
alternative minimum tax ("AMT"). For the six months ended March 31, 1996 and
fiscal 1995, alternative minimum taxable income ("AMTI") was generated resulting
primarily from the limitation on the utilization of AMT net operating loss
carryforwards ("NOLs"). Corporations may only offset 90% of their AMTI with AMT
NOLs. For the six months ended March 31, 1995 and fiscal 1994, federal taxable
income was generated resulting primarily from residual interests in real estate
mortgage investment conduits ("REMICs"), which cannot be offset by NOLs. For
fiscal 1993, AMTI was generated resulting primarily from assistance received
from the FRF and the limitation on the utilization of AMT NOLs.
 
     Tax NOLs at March 31, 1996 and September 30, 1995 were as follows:
AT MARCH 31, 1996
                                            ------------------------------------------
                                             REGULAR         ALTERNATIVE       EXPIRATION
                  YEAR GENERATED               TAX           MINIMUM TAX        DATE
        ----------------------------------  ----------       -----------       -------
(IN MILLIONS)
        December 30, 1988.................    $   24            $  46            2003
        September 30, 1989................       329              154            2004
        September 30, 1990................       296              139            2005
        September 30, 1991................       119               52            2006
        September 30, 1992................        33               12            2007
        September 30, 1994................         7               --            2009
AT SEPTEMBER 30, 1995
                                            ------------------------------------------
December 30, 1988.................    $  103            $ 113            2003
        September 30, 1989................       329              154            2004
        September 30, 1990................       296              139            2005
        September 30, 1991................       119               52            2006
        September 30, 1992................        33               12            2007
Utilization of the NOLs generated for the year ended December 30, 1988 are
subject to federal income tax rules that limit the utilization to federal
taxable income of the Bank and its subsidiaries only. The remaining NOLs may be
utilized against the federal taxable income of the other companies within the
"affiliated group" of which the Parent Company and the Bank are members.
 
PAYMENTS DUE IN LIEU OF TAXES
     Pursuant to the terms of the Assistance Agreement, the amount of financial
assistance paid to the Bank by the FRF was reduced each year by an amount equal
to one-third of any Federal and State Net Tax Benefits (as defined by the
Assistance Agreement). The Assistance Agreement further provided that in no
event would the amount paid to the FRF related to Net Tax Benefits be less than
a guaranteed minimum totalling $10 million payable over five years. Additional
payments due in lieu of taxes above the guaranteed minimum payments are included
in the Consolidated Statements of Operations as incurred as a component of the
provision for taxes. The final guaranteed payment was made in July 1994 for
fiscal 1993. The Assistance Agreement was terminated in December 1993. As part
of the Settlement Agreement, the Parent Company, the Bank, and certain of their
direct and indirect parent entities entered into the Tax Benefits Agreement,
pursuant to which the Bank will pay one-third of certain tax benefits that are
utilized by the Bank through the taxable year ending nearest to September 30,
2003. The amounts reflected in the Consolidated Financial Statements are based
on estimated tax benefits utilized by the Bank and may vary from amounts paid
due to the actual utilization of tax benefits reported in the federal income tax
return.
 
                                      F-44
177
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ACCOUNTING FOR INCOME TAXES
     During the fourth quarter of fiscal 1993, the Bank recognized $59 million
as a tax benefit for the expected utilization of $252 million in NOLs against
future taxable income. Tax benefits arising from an acquisition should first
reduce to zero any goodwill related to that acquisition, then decrease other
non-current intangible assets resulting from that acquisition, and finally
reduce income tax expense. As a result of the recognition of $59 million in tax
benefits, income tax expense was reduced $44 million and goodwill associated
with the Acquisition was reduced by $15 million during the fourth quarter of
1993. During fiscal 1994, the Bank recognized an additional $58 million as a tax
benefit for the expected utilization of $249 million in NOLs against future
taxable income. For the six months ended March 31, 1996 and 1995 and fiscal
1995, no tax benefit was recognized. See Note 21 for a discussion of subsequent
events.
 
     For the six months ended March 31, 1996 and 1995 and fiscal 1995, 1994, and
1993, the Parent Company recognized no benefit for income taxes for its stand
alone net operating loss and net operating loss carryforwards, because the
criteria to recognize a tax benefit under SFAS No. 109 was not met.
 
     Income tax and related payments differ from the amount computed by applying
the federal income tax statutory rate on income as follows:
FOR THE SIX MONTHS
                                           ENDED MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                         -------------------     ---------------------------------
                                          1996        1995        1995         1994         1993
                                         -------     -------     -------     --------     --------
(IN THOUSANDS)
Taxes calculated.......................  $21,485     $16,967     $31,539     $ 34,356     $ 47,784
Increase (decrease) from
  Reduction in valuation allowance for
     deferred tax assets...............       --          --          --      (47,838)    (103,203)
  Change in estimate of net deferred
     tax assets........................       --          --          --      (11,340)          --
  Goodwill reduction for utilization of
     acquired net operating loss
     carryforwards.....................       --          --          --           --       14,579
  Nontaxable assistance................       --          --          --       (8,100)      (3,343)
  Alternative minimum tax..............       --          --          --           --        7,448
  Provision (benefit) for payments due
     in lieu of taxes..................       --          --          --       (3,449)       8,491
  State income tax.....................    2,033       1,448       2,080        1,841        2,091
  Other................................    1,760       1,771       3,796        2,631           --
                                         -------     -------     -------     --------     --------
     Total.............................  $25,278     $20,186     $37,415     $(31,899)    $(26,153)
                                         =======     =======     =======     ========     ========
The change in the valuation allowance for fiscal 1994 and 1993 arises from
the utilization of NOLs against both current and expected future taxable income
of the Bank.
 
                                      F-45
178
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                      DEFERRED TAX ASSETS AND LIABILITIES
AT SEPTEMBER 30,
                                                         AT MARCH 31,    ----------------------
                                                             1996          1995         1994
                                                         ------------    ---------    ---------
(IN THOUSANDS)
Deferred tax assets
  Net operating losses.................................   $  193,196     $ 211,637    $ 241,702
  Purchase accounting..................................        9,451        10,064       12,700
  Capital loss carryforwards...........................           --        --              169
  Unrealized losses on securities available for sale...        1,842         3,990        8,050
  State................................................        2,817         2,817        4,338
  AMT credit...........................................        4,458         2,985       --
  Other................................................       11,028         7,648        8,344
                                                         ------------    ---------    ---------
     Total deferred tax assets.........................      222,792       239,141      275,303
                                                         ------------    ---------    ---------
Deferred tax liabilities
  Bad debt reserve.....................................        8,955        11,577       34,928
  FHLB stock...........................................        8,673         8,673       --
  REO..................................................        7,096         7,096       --
  State................................................           16            16        3,059
  Other................................................        6,016         3,008        7,897
                                                         ------------    ---------    ---------
     Total deferred tax liabilities....................       30,756        30,370       45,884
                                                         ------------    ---------    ---------
  Net deferred tax asset before valuation allowance....      192,036       208,771      229,419
  Valuation allowance..................................     (131,200)     (131,200)    (131,200)
                                                         ------------    ---------    ---------
     Net deferred tax assets...........................   $   60,836     $  77,571    $  98,219
                                                         ============    =========    =========
The Bank is permitted under the Code to deduct an annual addition to a
reserve for bad debts in determining taxable income, subject to certain
limitations. This addition differs from the provision for credit losses for
financial reporting purposes. No deferred taxes have been provided on
approximately $52 million of tax bad debt reserves prior to 1988. This tax
reserve for bad debts is included in taxable income of later years only if the
bad debt reserves are subsequently used for purposes other than to absorb bad
debt losses. Circumstances that would require an accrual of a portion or all of
this unrecorded tax liability are a reduction in loan levels relative to the end
of 1987, failure to meet the tax definition of a savings institution, dividend
payments in excess of both current year and accumulated tax earnings and
profits, or other distributions in dissolution, liquidation, or redemption of
stock. Because the Bank does not intend to use the reserves for purposes other
than to absorb losses, deferred income taxes of approximately $18 million have
not been provided. The Bank has recognized the deferred tax consequences of
differences between the financial statement and income tax treatment of
allowances for credit losses arising after December 31, 1987. See Note 17.
 
14. EMPLOYEE BENEFITS
 
     The Bank has an employee tax deferred savings plan (plan 401(k) under the
Code) available to all eligible employees. Through June 30, 1995, the Bank
contributed dollar for dollar up to three percent of the participant's earnings
and employees could contribute up to twelve percent of their earnings on a tax
deferred basis. The Bank's 401(k) plan was amended effective July 1, 1995. The
Bank currently contributes fifty cents for every dollar contributed up to two
percent of the participant's earnings, and dollar for dollar for contributions
between two percent and four percent of the participant's earnings. The maximum
contribution percentage is now fifteen percent of an employee's earnings on a
tax deferred basis, subject to Internal Revenue Service maximum contributions
limitations. This is a participant directed plan. Plan assets are held in trust
and managed by Fidelity Institutional Retirement Services Company. Contributions
to the
 
                                      F-46
179
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
plan are in such amounts and within certain limitations as the Bank may
authorize. The Bank's contributions to the plan were approximately $739,000,
$774,000, $1.5 million, $1.7 million, and $1.5 million for the six months ended
March 31, 1996 and 1995 and for fiscal 1995, 1994, and 1993.
 
15. REGULATORY MATTERS
 
     The regulatory capital requirements, as defined in the OTS capital
regulations, are 1.50% for Tangible Capital, 3.00% for Core Capital, and 8.00%
for Total Capital. Tangible and Core Capital are stated as a percentage of
adjusted total assets and Total Capital is stated as a percentage of
risk-weighted assets. The following table shows the Bank's compliance with
regulatory capital requirements:
AT MARCH 31, 1996                AT SEPTEMBER 30, 1995              AT SEPTEMBER 30, 1994
                        --------------------------------   --------------------------------   --------------------------------
                         ACTUAL     REQUIRED    ACTUAL %    ACTUAL     REQUIRED    ACTUAL %    ACTUAL     REQUIRED    ACTUAL %
                        ---------   ---------   --------   ---------   ---------   --------   ---------   ---------   --------
                                                                (DOLLARS IN THOUSANDS)
Stockholders'
  equity..............  $826,455                           $794,678                           $646,334
  Add: Net unrealized
    losses............     3,068                              6,647                                 --
  Less:
    Intangible
      assets..........   (21,030)                           (23,956)                           (32,907)
    Non-qualifying
      deferred tax
      assets..........   (37,617)                           (37,617)                           (81,864)
    Non-qualifying
      MSRs............      (112)                               (25)                            (3,244)
                        ---------                          ---------                          ---------
Tangible Capital......   770,764    $168,104       6.88%    739,727    $178,844       6.20%    528,319    $131,887       6.01%
  Add: Core deposit
    intangibles.......     9,463                             10,838                             15,259
                        ---------                          ---------                          ---------
Core Capital..........   780,227     336,492       6.96%    750,565     358,013       6.29%    543,578     264,232       6.17%
  General allowance
    for credit
    losses............    36,545                             36,855                             23,567
                        ---------                          ---------                          ---------
Total capital.........  $816,772     460,220      14.20%   $787,420     468,245      13.45%   $567,145     323,525      14.02%
                        =========                          =========                          =========
Notwithstanding the above capital requirements, the Bank's capital
requirements were established pursuant to the Forbearance Agreement issued
simultaneously with the Assistance Agreement. The OTS has taken the position,
with which the Bank disagrees, that the capital forbearances are no longer
available because of the enactment of the FIRREA. Despite the OTS position,
management believes that all significant waivers, approvals, and forbearances
related to the Bank's acquisition, including the capital forbearances, remain in
full force and effect following the enactment of FIRREA. Pursuant to the
Settlement Agreement, the Bank has retained all claims relating to the
forbearances against the United States of America, and on July 25, 1995, the
Bank, the Parent Company, and certain of their direct and indirect parent
entities filed suit against the United States of America in the Court of Federal
Claims for alleged failures of the United States to honor certain contractual
obligations, including obligations related to the Forbearance Agreement. The
lawsuit is in a preliminary stage.
 
     The Bank meets its fully phased-in capital requirements. OTS regulations
generally allow dividends to be paid without prior OTS approval under certain
conditions provided that the level of regulatory capital, following the payment
of such dividends, meets the fully phased-in capital requirements. At March 31,
1996 and September 30, 1995, there was an aggregate of approximately $186.5
million and $148.9 million available for the payment of dividends under these
requirements. See Note 21 for a discussion of subsequent events.
 
     The Bank's net income and stockholders' equity figures as presented in the
Consolidated Statements of Financial Condition and Operations in the Bank's
quarterly report on Form 10-Q for the quarter ended March 31, 1996 and the
Bank's annual report on Form 10-K for the year ended September 30, 1995 agree
 
                                      F-47
180
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
with the information included in the Bank's Thrift Financial Report filed with
the OTS as of March 31, 1996 and as of September 30, 1995. The Bank's capital
level at March 31, 1996 and September 30, 1995, qualified it as
"well-capitalized", the highest of five tiers under applicable regulatory
definition.
 
16.  MINORITY INTEREST AND STOCKHOLDERS' EQUITY
 
MINORITY INTEREST
 
     The Bank is authorized by its charter to issue a total of 10,000,000 shares
of preferred stock. In fiscal 1995, the Bank publicly issued 4,000,000 shares,
$25 liquidation preference per share, of 9.60% noncumulative preferred stock
(par value $0.01) (the "Preferred Stock, Series B"). In fiscal 1993, the Bank
publicly issued 3,420,000 shares, $25 liquidation preference per share, of
10.12% noncumulative preferred stock (par value $0.01) (the "Preferred Stock,
Series A"). Costs incurred in connection with the stock issuances were recorded
as reductions of paid-in capital. These shares are not owned by the Parent
Company.
 
     Shares of the Series A and Series B Preferred Stock are not subject to
redemption prior to December 31, 1997 and September 30, 2000, except in the
event of certain mergers and other transactions. The shares of Series A and
Series B Preferred Stock are redeemable at the option of the Bank, in whole or
in part, at any time on or after December 31, 1997 or September 30, 2000, at the
redemption prices set forth in the table below:
SERIES B
            SERIES A                 BEGINNING SEPTEMBER                          DOLLAR EQUIVALENT
     BEGINNING DECEMBER 31,                  30,             REDEMPTION PRICE         PER SHARE
- --------------------------------    ---------------------    ----------------     -----------------
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
WARRANTS
 
     Warrants outstanding represent the right to purchase 158,823 shares of the
Bank's common stock for an exercise price of $0.01 per share. The warrants are
exercisable through December 29, 2004. The Bank agreed to make payments in lieu
of dividends to the holder of the warrants upon payment of dividends on the
Bank's common stock from December 28, 1993 through December 30, 1998. The
warrants will be redeemed upon the occurrence of the merger or liquidation of
the Bank or certain events constituting a change in control of the Bank's direct
or indirect parent entities, at a price equivalent to the value of the number of
shares of the Bank's common stock into which the warrants are exercisable, such
value to be derived from the consideration paid in connection with the merger,
liquidation, or change in control.
 
CAPITAL STOCK
 
     The authorized capital stock of the Parent Company, par value of $0.01,
consists of Preferred Stock and Common Stock, Class A, B, and C. Of the 2,500
shares of preferred stock and the 2,797 shares of Class B Common Stock
authorized, no shares were issued at March 31, 1996 and September 30, 1995 and
1994. At March 31, 1996 and September 30, 1995, authorized shares of Class A
Common Stock and Class C Common Stock were 22,500 and 2,797. The Class C Common
Stock shares have been privately sold to investors and are non-voting stock.
Holders of Class C Common Stock may, under certain circumstances, convert their
shares into the same number of shares of Class B Common Stock.
 
                                      F-48
181
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
EARNINGS PER COMMON SHARE
     The table below presents information necessary for the computation of
earnings per common share, on both a primary and fully diluted basis (in
thousands, except earnings per share). The dilutive effect of the outstanding
Bank warrants has been considered in computing earnings per common share.
Average shares and per share results have been restated to reflect the 1,800 to
one stock conversion effective June 1996. See Note 21 for a discussion of
subsequent events.
FOR THE SIX MONTHS
                                        ENDED MARCH 31,         FOR THE YEAR ENDED SEPTEMBER 30,
                                    -----------------------   ------------------------------------
                                       1996         1995         1995         1994         1993
                                    ----------   ----------   ----------   ----------   ----------
Income before extraordinary
  loss............................  $   26,759   $   23,659   $   41,719   $  108,970   $  141,919
Less: Bank's net income
  attributable to common stock
  equivalents on warrants.........      (1,791)      (1,622)      (2,895)      (6,451)      (8,730)
                                    ----------      -------      -------      -------     --------
Income before extraordinary loss
  applicable to common shares.....      24,968       22,037       38,824      102,519      133,189
Extraordinary loss................          --           --           --           --      (14,549)
                                    ----------      -------      -------      -------     --------
Net income applicable to common
  shares..........................  $   24,968   $   22,037   $   38,824   $  102,519   $  118,640
                                    ==========      =======      =======      =======     ========
Average number of common shares
  outstanding.....................      28,863       28,863       28,863       28,863       28,863
                                    ==========      =======      =======      =======     ========
Earnings per common share before
  extraordinary loss..............  $     0.87   $     0.76   $     1.35   $     3.55   $     4.61
Extraordinary loss per common
  share...........................          --           --           --           --         0.50
                                    ----------      -------      -------      -------     --------
Earnings per common share.........  $     0.87   $     0.76   $     1.35   $     3.55   $     4.11
                                    ==========      =======      =======      =======     ========
17.  COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
     A petition for review has been filed in the United States Court of Appeals
for the Fifth Circuit seeking to modify, terminate, and set aside the order
approving the Acquisition, which involved substantially all of the Bank's
initial assets and liabilities. The same petitioner filed a Motion to Intervene
and a Complaint in Intervention in an action pending in the U.S. District Court
of Texas, also seeking to set aside the order approving the Acquisition. The
petitioner contends, in both cases, that it submitted the most favorable bid to
acquire the assets and liabilities of Old USAT and that it should have been
selected as the winning bidder.
 
     The Parent Company is not a party to either of these proceedings. The Bank
has intervened in the Fifth Circuit case and may file a Motion to Intervene in
the District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of the petitioner are barred by applicable
time limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Parent Company's financial
condition, results of operations, or liquidity.
 
     The Bank is involved in legal proceedings occurring in the ordinary course
of business that management believes, after consultation with legal counsel, are
not, in the aggregate, material to the financial condition, results of
operations, or liquidity of the Bank or the Parent Company.
 
     A substantial part of the Bank's business has involved the origination,
purchase, and sale of mortgage loans. During the past several years, numerous
individual claims and purported consumer class actions were commenced against a
number of financial institutions, their subsidiaries, and other mortgage lending
companies seeking civil statutory and actual damages and rescission under the
federal Truth In Lending Act (the "TILA"), as well as remedies for alleged
violations of various state unfair trade practices laws and restitution or
unjust enrichment in connection with certain mortgage loan transactions.
 
                                      F-49
182
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Bank has a substantial mortgage loan servicing portfolio and maintains
escrow accounts in connection with this servicing. During the past several
years, numerous individual claims and purported consumer class action claims
were commenced against a number of financial institutions, their subsidiaries,
and other mortgage lending institutions generally seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the Real
Estate Settlement Practices Act and breach the lenders' contracts with
borrowers. Such claims also generally seek actual damages and attorney's fees.
 
     In addition to the foregoing, mortgage lending institutions have been
subjected to an increasing number of other types of individual claims and
purported consumer class action claims that relate to various aspects of the
origination, pricing, closing, servicing, and collection of mortgage loans and
that allege inadequate disclosure, breach of contract, or violation of state
laws. Claims have involved, among other things, interest rates and fees charged
in connection with loans, interest rate adjustments on adjustable-rate mortgage
loans, timely release of liens upon loan payoffs, the disclosure and imposition
of various fees and charges, and the placing of collateral protection insurance.
 
     While the Bank has had various claims similar to those discussed above
asserted against it, management does not expect these claims to have a material
adverse effect on the Bank's or the Parent Company's financial condition,
results of operations, or liquidity.
 
INSURANCE ASSESSMENT
     Congress has passed legislation, which is currently in joint conference
committee that, if it became law, would result in an assessment on all Savings
Association Insurance Fund ("SAIF")-insured deposits in such amounts that will
increase the SAIF Fund reserve ratio to 1.25% of SAIF-insured deposits. This
one-time assessment has been estimated in the range of 0.75% to 0.90% of
deposits. If this legislation became law, it could result in an assessment, net
of tax, payable by the Bank amounting to as much as $23.7 million to $28.5
million. Thereafter, SAIF premiums are expected to decline to levels
approximating BIF premiums. Management believes that the Bank will be able to
maintain its status as a "well-capitalized" institution after payment of any
assessment described above.
 
BAD DEBT RESERVE RECAPTURE
     The United States Congress has passed legislation that, if it became law,
would require recapture of a thrift's post-1987 tax bad debt reserve over a six
year period, with the opportunity to defer recapture by up to two years if
certain residential loan requirements are met. There would be no financial
statement impact from this recapture because a deferred tax liability has
already been provided for on the Bank's post-1987 tax bad debt reserves. At
September 30, 1995, the Bank has approximately $101 million of post-1987 tax bad
debt reserves. The current tax liability resulting from recapture of these
reserves would be reduced by NOLs available to offset this income.
 
FACILITIES OPERATIONS
     Future minimum payments on data processing agreements and significant
operating leases in effect at September 30, 1995 were as follows (in thousands):
YEARS ENDING
                                       SEPTEMBER 30,                                  AMOUNT
        ---------------------------------------------------------------------------  ---------
1996....................................................................   $19,884
           1997....................................................................    11,671
           1998....................................................................     8,937
           1999....................................................................     5,072
           2000....................................................................     1,495
           Thereafter..............................................................     8,678
                                                                                      -------
                                                                                      $55,737
                                                                                      =======
Total data processing and rental expense for the six months ended March 31,
1996 and 1995 and fiscal 1995, 1994, and 1993, under the same or similar
agreements as in the preceding table, after consideration of
 
                                      F-50
183
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
certain credits and rental income, were $11.5 million, $11.5 million, $22.9
million, $22.4 million, and $21.5 million.
 
18.  FINANCIAL HIGHLIGHTS BY PRINCIPAL BUSINESS OPERATION
     The Bank operates as a fully integrated financial services company. This
business is conducted through the Community Banking, Financial Markets, and
Commercial Banking Groups, which comprise the Banking Segment, and the Mortgage
Banking Segment of the Bank. Summarized financial information by business
segment and for the Parent Company for the periods indicated, was as follows:
FOR THE SIX MONTHS ENDED MARCH 31, 1996
                                                 ----------------------------------------------------------
                                                              MORTGAGE
                                                  BANKING      BANKING     PARENT
                                                  SEGMENT      SEGMENT     COMPANY    ELIMINATIONS COMBINED
                                                 ---------    ---------    -------    --------    ---------
(IN THOUSANDS)
Revenues........................................ $ 123,856    $  49,842    $(1,366)   $ (5,791)   $ 166,541
Earnings before income taxes and minority
  interest......................................    64,121        3,006     (1,930)     (3,810)      61,387
Depreciation and amortization of intangibles....     4,594       11,132        488      (1,981)      14,233
Capital expenditures............................     2,750          239         --          --        2,989
Average identifiable assets..................... 11,295,739     634,013      4,707    (394,930)   11,539,529
Loan transfers to (from)........................   493,180     (493,180)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    11,895      (11,895)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (6,917)       6,917         --          --           --
- ---------------
 
The elimination amounts reflect the following: (i) dividends received by the
Parent Company from the Bank, (ii) interest income and MSR amortization expense
relating to loans held by the Banking Segment serviced by the Mortgage Banking
Segment, and (iii) the single family mortgage warehouse funded by the Banking
Segment.
 
                                      F-51
184
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 1995
                                                 ----------------------------------------------------------
                                                              MORTGAGE
                                                  BANKING      BANKING     PARENT
                                                  SEGMENT      SEGMENT     COMPANY    ELIMINATIONS COMBINED
                                                 ---------    ---------    -------    --------    ---------
(IN THOUSANDS)
Revenues........................................ $  93,919    $  67,149    $    38    $ (6,827)   $ 154,279
Earnings before income taxes and minority
  interest......................................    37,223       17,029       (566)     (5,209)      48,477
Depreciation and amortization of intangibles....     6,194       10,149        488      (1,618)      15,213
Capital expenditures............................     1,123          105         --          --        1,228
Average identifiable assets..................... 9,359,478      452,593      9,587    (289,060)   9,532,598
Loan transfers to (from)........................   659,186     (659,186)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...     9,393       (9,393)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (5,604)       5,604         --          --           --
FOR THE YEAR ENDED SEPTEMBER 30, 1995
                                                 ----------------------------------------------------------
Revenues........................................   203,115      119,601     (3,910)     (9,826)     308,980
Earnings before income taxes and minority
  interest......................................    82,163       19,357     (5,000)     (6,409)      90,111
Depreciation and amortization of intangibles....    12,305       20,965        976      (3,417)      30,829
Capital expenditures............................     5,859          273         --          --        6,132
Average identifiable assets..................... 10,258,857     482,965      8,061    (312,820)   10,437,063
Loan transfers to (from)........................ 1,012,771    (1,012,771)       --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    19,903      (19,903)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................   (12,672)      12,672         --          --           --
FOR THE YEAR ENDED SEPTEMBER 30, 1994
                                                 ----------------------------------------------------------
Revenues........................................   189,378      115,544      1,279     (13,530)     292,671
Earnings before income taxes and minority
  interest......................................    73,757       24,404       (645)    (11,435)      86,081
Depreciation and amortization of intangibles....    16,560       10,696        977      (2,095)      26,138
Capital expenditures............................     5,456        4,962         --          --       10,418
Average identifiable assets..................... 8,174,275      717,551      4,401    (612,600)   8,283,627
Loan transfers to (from)........................ 1,319,020    (1,319,020)       --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    33,173      (33,173)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................   (10,223)      10,223         --          --           --
FOR THE YEAR ENDED SEPTEMBER 30, 1993
                                                 ----------------------------------------------------------
Revenues........................................   221,476      121,028      1,070     (15,224)     328,350
Earnings before income taxes, minority interest,
  and extraordinary loss........................   106,015       31,492         20     (15,224)     122,303
Depreciation and amortization of intangibles....    20,757        8,445        694          --       29,896
Capital expenditures............................     6,145        8,256         --          --       14,401
Average identifiable assets..................... 7,193,808      981,711      7,790    (864,532)   7,318,777
Loan transfers to (from)........................   528,666     (528,666)        --          --           --
Interest income (expense) on single family
  mortgage warehouse outstanding loan balance...    43,103      (43,103)        --          --           --
Servicing (expense) income on Banking Segment's
  loans.........................................    (8,256)       8,256         --          --           --
Revenues are comprised of net interest income (before the provision for
credit losses) and non-interest income, and, in the case of Parent Company only
revenue, dividends received from the Bank. Interest costs incurred by the Parent
Company are included in its results above since they relate to long-term debt
and are not directly attributable to a specific segment. Earnings before income
taxes, minority interest, and extraordinary loss equal revenue, less the
provision for credit losses and non-interest expenses. Non-interest expenses of
the Bank are fully allocated to each segment of the Bank. Non-interest expenses
incurred by support departments that are directly attributable to a segment are
charged to the appropriate segment.
 
                                      F-52
185
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
General corporate overhead expenses not specifically identified to an individual
segment, but necessary for the maintenance of the Bank as a going concern, are
also allocated to the two segments. Parent Company expenses are not allocated to
the Bank's business segments.
 
     For segment reporting purposes, the value of servicing related to loans
purchased from third parties by the Banking Segment is segregated from the
original loan basis and is allocated to the Mortgage Banking Segment. The
amortization of this capitalized amount approximated $1.2 million and $1.2
million or the six months ended March 31, 1996 and 1995, respectively, $2.4
million for fiscal 1995, and $1.8 million for fiscal 1994, and is reflected in
the Mortgage Banking Segment figures above.
 
     For loans transferred from the Mortgage Banking Segment to the Banking
Segment, the difference, if any, between the Banking Segment's "purchase price"
and the loan's actual Book Value is retained by the Mortgage Banking Segment at
the time of transfer. The amount retained is amortized to operations of the
Mortgage Banking Segment and approximated $736,000 and $443,000 for the six
months ended March 31, 1996 and 1995, respectively, $1.0 million for fiscal
1995, and $283,000 for fiscal 1994.
 
                                      F-53
186
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
19.  QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     The following table represents summarized data for the first two quarters
in fiscal 1996 and each of the quarters in fiscal 1995 and 1994 (dollars in
thousands, except earnings per share).
1996                             1995                                        1994
                     -------------------   -----------------------------------------   -----------------------------------------
                      SECOND     FIRST      FOURTH     THIRD      SECOND     FIRST      FOURTH     THIRD      SECOND     FIRST
                     QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Interest income..... $203,436   $217,785   $224,308   $194,865   $172,992   $154,594   $133,563   $119,136   $118,333   $123,674
Interest expense....  148,548    160,741    166,580    146,220    129,915    110,045     93,118     76,998     73,617     77,191
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
    Net interest
      income........   54,888     57,044     57,728     48,645     43,077     44,549     40,445     42,138     44,716     46,483
Provision for credit
  losses............    3,181      2,669      9,663     10,473      3,223        934      3,421        798      1,298      1,480
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net interest income
  after provision
  for credit
  losses............   51,707     54,375     48,065     38,172     39,854     43,615     37,024     41,340     43,418     45,003
Non-interest
  income............   27,687     26,922     25,201     23,127     30,641     36,012     28,479     26,453     27,909     36,048
Non-interest
  expense...........   50,012     49,292     52,466     40,465     51,553     50,092     50,607     53,723     45,133     50,130
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Income before income
  taxes and minority
  interest..........   29,382     32,005     20,800     20,834     18,942     29,535     14,896     14,070     26,194     30,921
Income tax expense
  (benefit).........   12,144     13,134      8,169      9,060      8,062     12,124        681    (38,551)     5,751        220
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net income before
  minority
  interest..........   17,238     18,871     12,631     11,774     10,880     17,411     14,215     52,621     20,443     30,701
Less minority
  interest:
    Subsidiary
      preferred
      stock
      dividends.....    4,563      4,563      4,111      2,163      2,163      2,163      2,164      2,163      2,163      2,163
    Payments in lieu
      of
      dividends.....       --        224         --         71         --        306         --        298         59         --
                     --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
    Net Income...... $ 12,675   $ 14,084   $  8,520   $  9,540   $  8,717   $ 14,942   $ 12,051   $ 50,160   $ 18,221   $ 28,538
                     ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Net income
  applicable to
  common stock...... $ 11,824   $ 13,144   $  7,936   $  8,851   $  8,086   $ 13,951   $ 11,531   $ 47,199   $ 17,038   $ 26,751
Earnings per common
  share............. $   0.41   $   0.46   $   0.28   $   0.31   $   0.28   $   0.48   $   0.40   $   1.63   $   0.59   $   0.93
Average common
  shares and common
  stock equivalents
  outstanding.......   28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863     28,863
The 1995 figures have been restated to reflect the implementation of SFAS
No. 122 effective October 1, 1994. See Notes 1 and 6. Average shares and per
share results have been restated to reflect the 1,800 to one stock conversion
effective June 1996. See Note 21 for a discussion of subsequent events.
 
                                      F-54
187
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
20.  CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
 
     The condensed financial statements of the Parent Company do not include all
of the information and notes normally included with financial statements
prepared in accordance with generally accepted accounting principles. See Note
21 for a discussion of subsequent events.
 
                                 PARENT COMPANY
 
                  CONDENSED STATEMENTS OF FINANCIAL CONDITION
                                 (IN THOUSANDS)
AT
                                                                MARCH        AT SEPTEMBER 30,
                                                                 31,       --------------------
                                                                 1996        1995        1994
                                                               --------    --------    --------
ASSETS
Cash and cash equivalents...................................   $      1    $      1    $      1
Securities purchased under agreements to resell.............        682       2,121         710
Investment in Bank United...................................    640,955     609,178     560,834
Intangible assets...........................................      2,075       2,563       3,539
Other assets................................................      1,775       1,287       5,398
                                                               --------    --------    --------
TOTAL ASSETS................................................   $645,488    $615,150    $570,482
                                                               ========    ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Senior Notes................................................   $115,000    $115,000    $115,000
Other liabilities...........................................      4,047       4,047       4,120
                                                               --------    --------    --------
          Total liabilities.................................    119,047     119,047     119,120
                                                               --------    --------    --------
STOCKHOLDERS' EQUITY
Common stock
     Class A................................................          1           1           1
     Class C................................................          1           1           1
Paid-in capital.............................................    118,009     118,009     121,767
Retained earnings...........................................    411,498     384,739     343,020
Unrealized gains (losses) on subsidiary's securities and
  mortgage-backed securities available for sale, net of
  tax.......................................................     (3,068)     (6,647)    (13,427)
                                                               --------    --------    --------
          Total stockholders' equity........................    526,441     496,103     451,362
                                                               --------    --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................   $645,488    $615,150    $570,482
                                                               ========    ========    ========
These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-55
188
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                                 PARENT COMPANY
                       CONDENSED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
FOR THE SIX
                                                MONTHS ENDED
                                                  MARCH 31,       FOR THE YEAR ENDED SEPTEMBER 30,
                                              -----------------   ---------------------------------
                                               1996      1995      1995         1994         1993
                                              -------   -------   -------     --------     --------
INCOME
Dividends from the Bank...................... $ 3,810   $ 5,209   $ 6,409     $ 11,435     $ 15,224
Short-term interest-earning assets...........      29        31        88           21          107
                                              --------  --------  --------    --------     --------
          Total income.......................   3,839     5,240     6,497       11,456       15,331
                                              --------  --------  --------    --------     --------
EXPENSE
Interest expense -- note payable to related
  party......................................      --        --        --           --          601
Interest expense -- long-term debt...........      --        --        --           --       10,214
Interest expense -- Senior Notes.............   5,205     5,202    10,407       10,177        3,446
Amortization of intangibles..................     488       488       976          977          694
Other........................................      76       116       114          947          356
                                              --------  --------  --------    --------     --------
          Total expense......................   5,769     5,806    11,497       12,101       15,311
                                              --------  --------  --------    --------     --------
INCOME (LOSS) BEFORE UNDISTRIBUTED INCOME OF
  BANK, INCOME TAXES, AND EXTRAORDINARY
  LOSS.......................................  (1,930)     (566)   (5,000)        (645)          20
  Equity in undistributed income of the
     Bank....................................  28,198    23,675    45,322      104,316      141,910
                                              --------  --------  --------    --------     --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
  LOSS.......................................  26,268    23,109    40,322      103,671      141,930
  Income tax (benefit) expense...............    (491)     (550)   (1,397)      (5,299)          11
                                              --------  --------  --------    --------     --------
INCOME BEFORE EXTRAORDINARY LOSS.............  26,759    23,659    41,719      108,970      141,919
Extraordinary loss -- early extinguishment of
  debt.......................................      --        --        --           --      (14,549)
                                              --------  --------  --------    --------     --------
NET INCOME................................... $26,759   $23,659   $41,719     $108,970     $127,370
                                              ========  ========  ========    ========     ========
These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-56
189
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                                 PARENT COMPANY
 
                       CONDENSED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
FOR THE SIX MONTHS      FOR THE YEAR ENDED SEPTEMBER
                                               ENDED MARCH 31,                   30,
                                             -------------------    ------------------------------
                                               1996       1995        1995       1994       1993
                                             --------   --------    --------   --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................  $ 26,759   $ 23,659    $ 41,719   $108,970   $127,370
Adjustments to reconcile net income to net
  cash (used) provided by operating
  activities:
     Equity in undistributed income of the
       Bank................................   (28,198)   (23,675)    (45,322)  (104,316)  (141,910)
     Amortization of intangibles...........       488        488         976        977        694
     Change in other assets................      (488)     3,566       4,111     (5,393)    (1,594)
     Change in other liabilities...........        --         26         (73)       159      2,670
                                             --------   --------    --------   --------   --------
          Net cash (used) provided by
            operating activities...........    (1,439)     4,064       1,411        397    (12,770)
                                             --------   --------    --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under
  agreements to resell.....................     1,439     (4,064)     (1,411)      (397)      (313)
                                             --------   --------    --------   --------   --------
          Net cash provided (used) by
            investing activities...........     1,439     (4,064)     (1,411)      (397)      (313)
                                             --------   --------    --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
     Repayment of long-term debt and note
       payable to related party............        --         --          --         --   (106,090)
     Proceeds from issuance of Senior
       Notes...............................        --         --          --         --    115,000
                                             --------   --------    --------   --------   --------
          Net cash provided by financing
            activities.....................        --         --          --         --      8,910
                                             --------   --------    --------   --------   --------
NET DECREASE IN CASH AND CASH
  EQUIVALENTS..............................        --         --          --         --     (4,173)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
  PERIOD...................................         1          1           1          1      4,174
                                             --------   --------    --------   --------   --------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD...................................  $      1   $      1    $      1   $      1   $      1
                                             ========   ========    ========   ========   ========
These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
 
                                      F-57
190
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
21.  SUBSEQUENT EVENTS
 
     Name Change.  In June 1996, the Company changed its name from USAT Holdings
Inc. to Bank United Corp. and the Bank changed its name from Bank United of
Texas to Bank United.
 
     Dividend Payment.  On May 6, 1996, the Bank paid a $100 million dividend to
the Company on the Bank Common Stock and a related contractually required
payment to the FDIC in lieu of dividends in the amount of $5.9 million. On the
same day, the Company paid a dividend on its common stock in the amount of $100
million.
 
     Restructuring.  Prior to June 1996, the Company was a subsidiary of
Hyperion Holdings Inc., a Delaware corporation ("Hyperion Holdings"), which was
a subsidiary of Hyperion Partners L.P., a Delaware limited partnership
("Hyperion Partners"). In June 1996, the following actions were taken
(collectively, the "Restructuring"): (i) Hyperion Holdings exchanged shares of a
newly created class of its nonvoting common stock for certain shares of its
voting common stock held by Hyperion Partners; (ii) Hyperion Partners then
distributed the Hyperion Holdings common stock owned by it to its limited and
general partners in accordance with the terms of the limited partnership
agreement of Hyperion Partners (the "Distribution") and; (iii) following the
Distribution, Hyperion Holdings was merged with and into the Company (the
"Merger"). As a result of the Merger, the common stockholders of Hyperion
Holdings (i.e. the limited and general partners of Hyperion Partners) received
shares of Class A voting and Class B nonvoting Common Stock of the Company. As
of the date of the Merger, Hyperion Holdings had no significant assets,
liabilities or business other than its investment in the Company. The Merger was
accounted for in a manner similar to a pooling of interests. Due to the
immaterial nature of the assets, liabilities and operations of Hyperion Holdings
prior to the Merger, prior period results were not restated.
 
     Stock Conversion.  Prior to the Merger, the Company had outstanding 13,238
shares of Class A voting and 2,797 shares of Class C nonvoting Common Stock.
Subsequent to the Restructuring and an 1,800 to one stock conversion, the
Company had a total of 28,863,000 shares of Common Stock outstanding as follows:
Class A Common Stock (voting) -- 23,828,400 shares, Class B
(nonvoting) -- 5,034,600 shares, and no shares of Class C Common Stock (which
were cancelled upon their conversion to Class B Common Stock in the Merger). The
Company also filed a registration statement in June 1996 with the Securities and
Exchange Commission to offer           shares of the Class A Common Stock to the
public.
 
     Recognition of Tax Benefits.  The Parent Company's Certificate of
Incorporation and By-Laws were restated with the intent to preserve certain
beneficial tax attributes limiting disposition of Class A Common Stock and other
interests in the Parent Company by certain stockholders. These limitations
allowed the recognition of tax benefits in June 1996 for the expected
utilization of NOLs. These tax benefits were not recognized in prior periods due
to limitations on the utilization of NOLs if an ownership change had occurred.
In June 1996 the Parent Company and the Bank entered into a federal tax sharing
agreement. This agreement results in the recognition of a tax benefit for the
expected utilization of the Parent Company's NOLs by the Bank. A total tax
benefit of $101.7 million was recognized as a reduction of income tax expense
and an increase in the net deferred tax asset.
 
     Executive Management Compensation Plan.  In June 1996, the Company Board
approved an Executive Management Compensation Plan (the "Compensation Plan")
containing the following provisions: (i) a cash bonus of $  million payable by
     1996; (ii) the award of         shares of Company Class A Common Stock with
restrictions on its transferability for a period of three years from its
issuance; and (iii) issuance of           options for purchase of an equivalent
number of shares of Company Class A Common Stock; such options vest ratably over
three years from the date of grant. The options' exercise price approximates the
fair market value at the date of the grant and will expire if not exercised in
June 2003.
 
                                      F-58
191
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Compensation expense totaling $10 million, $6.2 million net of tax, will be
recognized in the third quarter of 1996 for the cash bonus and the restricted
stock award. Since the stock options have an exercise price approximating the
fair value of the Parent Company's stock, compensation expense is not recognized
for their issuance.
 
     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.
 
                                      F-59
192
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     These transactions are illustrated in the March 31, 1996 Pro Forma
Condensed Consolidated Statement of Financial Condition and the March 31, 1996
Pro Forma Condensed Consolidated Statement of Operations.
 
       PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS
                                           HISTORICAL     ------------------------------------------------     PRO FORMA
                                           MARCH 31,      DIVIDEND        TAX        ISSUANCE   COMPENSATION   MARCH 31,
                                              1996         PAYMENT      BENEFIT       COSTS        PLAN           1996
                                           ----------     ---------     --------     -------    ----------     ----------
(UNAUDITED)
ASSETS
  Cash and cash equivalents..............  $  135,691     $      --     $     --     $    --     $     --      $  135,691
  Securities purchased under agreements
    to resell and federal funds sold.....     659,279      (105,900)          --      (2,000)      (4,000)        547,379
  Trading account assets.................       1,267            --           --          --           --           1,267
  Securities.............................      58,351            --           --          --           --          58,351
  Mortgage-backed securities.............   1,954,070            --           --          --           --       1,954,070
  Loans..................................   7,878,080            --           --          --           --       7,878,080
  Other assets...........................     579,898            --      101,700          --           --         681,598
                                           ----------     ---------     --------     -------    ----------     ----------
      Total Assets.......................  $11,266,636    $(105,900)    $101,700     $(2,000)    $ (4,000)     $11,256,436
                                           ==========     =========     ========     =======    ==========     ==========
LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY
LIABILITIES
  Deposits...............................  $4,963,321     $      --     $     --     $    --     $     --      $4,963,321
  Borrowings.............................   5,088,959            --           --          --           --       5,088,959
  Other liabilities......................     502,415            --           --          --       (3,800)        498,615
                                           ----------     ---------     --------     -------    ----------     ----------
      Total liabilities..................  10,554,695            --           --          --       (3,800)     10,550,895
MINORITY INTEREST
  Preferred stock issued by consolidated
    subsidiary...........................     185,500            --           --          --           --         185,500
STOCKHOLDERS' EQUITY.....................     526,441      (105,900)     101,700      (2,000)        (200)        520,041
                                           ----------     ---------     --------     -------    ----------     ----------
TOTAL LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY...................  $11,266,636    $(105,900)    $101,700     $(2,000)    $ (4,000)     $11,256,436
                                           ==========     =========     ========     =======    ==========     ==========
F-60
193
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
HISTORICAL                                                            PRO FORMA
                                      FOR THE SIX                    PRO FORMA ADJUSTMENTS                  FOR THE SIX
                                      MONTHS ENDED     -------------------------------------------------    MONTHS ENDED
                                       MARCH 31,       DIVIDEND        TAX        ISSUANCE   COMPENSATION    MARCH 31,
                                          1996          PAYMENT      BENEFIT       COSTS        PLAN            1996
                                     --------------    ---------     --------     -------    -----------   --------------
(UNAUDITED)
INTEREST INCOME
  Interest income...................   $  421,221      $      --     $     --     $    --      $    --       $  421,221
  Interest expense..................      309,289             --           --          --           --          309,289
                                     --------------    ---------     --------     -------    -----------   --------------
      Net interest income...........      111,932             --           --          --           --          111,932
  Provision for credit losses.......        5,850             --           --          --           --            5,850
                                     --------------    ---------     --------     -------    -----------   --------------
      Net interest income after
        provision for credit
        losses......................      106,082             --           --          --           --          106,082
NON-INTEREST INCOME
  Net gains (losses)
    Sales of single family servicing
      rights and single family
      warehouse loans...............       19,157             --           --          --           --           19,157
    Securities and mortgage-backed
      securities....................        2,863             --           --          --           --            2,863
    Other loans.....................        3,485             --           --          --           --            3,485
    Loan servicing fees and
      charges.......................       22,107             --           --          --           --           22,107
    Other income....................        6,997             --           --          --           --            6,997
                                     --------------    ---------     --------     -------    -----------   --------------
      Total non-interest income.....       54,609             --           --          --           --           54,609
NON-INTEREST EXPENSE
  Compensation and benefits.........       39,898             --           --          --       10,000           49,898
  Occupancy.........................        9,439             --           --          --           --            9,439
  Data processing...................        8,120             --           --          --           --            8,120
  Amortization of intangibles.......        9,801             --           --          --           --            9,801
  Other.............................       32,046             --           --          --           --           32,046
                                     --------------    ---------     --------     -------    -----------   --------------
      Total non-interest expense....       99,304             --           --          --       10,000          109,304
                                     --------------    ---------     --------     -------    -----------   --------------
INCOME BEFORE TAXES AND MINORITY
  INTEREST..........................       61,387             --           --          --      (10,000)          51,387
Income tax expense (benefit)........       25,278             --     (101,700)         --       (3,800)         (80,222)
                                     --------------    ---------     --------     -------    -----------   --------------
Net Income Before Minority
  Interest..........................       36,109             --      101,700          --       (6,200)         131,609
  Less minority interest:
    Preferred Stock Dividends.......        9,126             --           --          --           --            9,126
    Payments in lieu of dividends...          224          5,900           --          --           --            6,124
                                     --------------    ---------     --------     -------    -----------   --------------
Net Income..........................   $   26,759      $  (5,900)    $101,700     $    --      $(6,200)      $  116,359
                                     ==============    =========     ========     =======    ===========   ==============
EARNINGS PER COMMON SHARE...........   $     0.87
                                     --------------
                                     --------------
F-61
194
 
                               BANK UNITED CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The historical average number of common shares outstanding used in
computing earnings per common share for the six months ended March 31, 1996 were
28,863,000 and reflects the 1,800 to one stock conversion in June 1996. The pro
forma average number of common shares outstanding have been adjusted to give
effect to the shares of restricted stock issued in accordance with the
Compensation Plan, as though these shares were issued on October 1, 1995.
 
     The following table shows the Bank's regulatory capital ratios on a
historical and a pro forma basis:
MARCH 31,
                                                                   ----------------------
                                                                      1996        1996
                                                                   HISTORICAL   PRO FORMA
                                                                   ----------   ---------
Tangible Capital..........................................     6.88%        5.89%
        Core Capital..............................................     6.96         5.97%
        Total Capital.............................................    14.20        12.12%
The Parent Company's and the Bank's dividend restrictions on a historical
and a pro forma basis follows:
MARCH 31,
                                                                   ----------------------
                                                                      1996        1996
                                                                   HISTORICAL   PRO FORMA
                                                                   ----------   ---------
Parent Company
             Dividend Limitation-Senior Note Indenture............  $ 123,746   $  62,672
        Bank
             Dividend Limitation-OTS Regulations..................  $ 186,460   $ 159,577
F-62
195
 
- ------------------------------------------------------
- ------------------------------------------------------
 
     NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
                            ------------------------
 
                               TABLE OF CONTENTS
PAGE
                                        ----
Prospectus Summary....................     3
Risk Factors..........................    11
The Company...........................    18
Use of Proceeds.......................    20
Dividend Policy.......................    20
Capitalization........................    21
Selected Consolidated Financial and
  Other Data..........................    23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................    26
Business..............................    52
Regulation............................    74
Description of Properties.............    96
Legal Proceedings.....................    96
Management............................    98
Selling Stockholders..................   117
Description of Capital Stock..........   120
Underwriting..........................   126
Legal Matters.........................   127
Experts...............................   127
Available Information.................   127
Index to Consolidated Financial
  Statements..........................   F-1
UNTIL                , 1996 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
 
                                             SHARES
 
                               BANK UNITED CORP.
 
                              CLASS A COMMON STOCK
                            ------------------------
 
                                   PROSPECTUS
                            ------------------------
 
                              MERRILL LYNCH & CO.
 
                                LEHMAN BROTHERS
 
                               SMITH BARNEY INC.
                                            , 1996
 
- ------------------------------------------------------
- ------------------------------------------------------
196
 
                PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission (the "Commission") registration fee, the
National Association of Securities Dealers, Inc. ("NASD") filing fee and the
NASDAQ listing fee.
PAYABLE BY
                                                                          THE REGISTRANT
                                                                          --------------
SEC registration fee............................................     $
        NASD filing fee.................................................
        NASDAQ listing fee..............................................
        Blue Sky fees and expenses......................................
        Accounting fees and expenses....................................
        Legal fees and expenses.........................................
        Printing and engraving expenses.................................
        Miscellaneous fees and expenses.................................
                                                                          --------------
                  Total.................................................     $
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by them in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation, a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions, and the
statute requires court approval before there can be any indemnification where
the person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.
 
     The Restated Certificate of Incorporation of the Company (the
"Certificate") provides that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, will be indemnified and held harmless by
the Company to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss reasonably incurred or
suffered by such person in connection therewith. Such right to indemnification
includes the right to have the Company pay the expenses incurred in defending
any such proceeding in advance of its final disposition, subject to the
provisions of the DGCL. Such rights are not exclusive of any other right which
any person may have or thereafter acquire under any statute, provision of the
Certificate, By-Laws, agreement, vote of stockholders or disinterested directors
or otherwise. No repeal or modification of such provision will in any way
diminish or
 
                                      II-1
197
 
adversely affect the rights of any director, officer, employee or agent of the
Company thereunder in respect of any occurrence or matter arising prior to any
such repeal or modification. The Certificate also specifically authorizes the
Company to maintain insurance and to grant similar indemnification rights to
employees or agents of the Company.
 
     The DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
 
     The Certificate provides that a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except, if required by the DGCL as
amended from time to time, for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the amendment
nor repeal of such provision will eliminate or reduce the effect of such
provision in respect of any matter occurring, or any cause of action, suit or
claim that, but for such provision, would accrue or arise prior to such
amendment or repeal.
 
     The Purchase Agreement provides for indemnification by the Underwriters of
the registrant, its Directors and officers, and by the registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act, and affords certain rights of contribution with respect thereto.
 
     In addition, Lewis S. Ranieri, Salvatore A. Ranieri, and Scott A. Shay, who
are directors of the Company, may be entitled to indemnification from Hyperion
Partners L.P. and Hyperion Ventures L.P., the former upstream affiliates of the
Company. Such former upstream affiliates, at their sole discretion, may elect to
indemnify other persons who serve as directors or officers of the Company.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     Not applicable.
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     (a) Exhibits. The following exhibits are filed as part of this Registration
Statement.
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
1.1*          -- Underwriting Agreement.
   2.1           -- Form of Letter Agreement, by and among the general and limited partners of
                    Hyperion Partners, L.P., dated as of June 17, 1996, relating to certain
                    transactions consummated prior to the Offering.
   2.2*          -- Merger Agreement, dated as of June 17, 1996, by and between the Company and
                    Hyperion Holdings relating to the Merger.
   3.1           -- Form of Restated Certificate of Incorporation of the Registrant, as amended.
   3.2           -- Form of By-Laws of the Registrant.
   4.1           -- Indenture, dated as of May 15, 1993, between the Registrant and Bank of New
                    York, as Trustee, relating to the Registrant's 8.05% Senior Notes due May
                    15, 1998.
   4.2           -- Form of 8.05% Senior Note due May 15, 1998 (included in the Indenture filed
                    as Exhibit 4.1 hereto).
   4.3           -- Exchange and Registration Rights relating to Registrant's 8.05% Senior Notes
                    due May 15, 1998.
II-2
198
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
4.4           -- First Supplemental Indenture, dated as of January 23, 1995, between the
                    Registrant and the Bank of New York, as Trustee, relating to Registrant's
                    8.05% Senior Notes due May 15, 1998.
   5.1*          -- Opinion and consent of  ______________ .
   8*            -- Opinion and consent of  ______________ (Federal Tax Matters).
  10.1           -- Assistance Agreement, dated December 30, 1988, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC.
  10.1a          -- Settlement and Termination Agreement, dated as of December 23, 1993, among
                    the Bank, the Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.
  10.1b          -- Tax Benefits Agreement, dated December 28, 1993, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.
  10.2           -- Acquisition Agreement, dated December 30, 1988, between the Bank and the
                    FSLIC.
  10.3           -- Warrant Agreement, dated December 30, 1988, between the Bank and the FSLIC.
  10.3a          -- Amended and Restated Warrant Agreement dated December 28, 1993, between the
                    Bank and the FDIC.
  10.4           -- Regulatory Capital Maintenance Agreement, dated December 30, 1988 among the
                    Bank, the Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC
                    (terminated).
  10.5           -- Federal Stock Charter of the Bank and First Amendment to charter approved on
                    August 26, 1992.
  10.6           -- Amended and Restated Federal Stock Charter of the Bank and Second Amendment
                    approved on October 30, 1992.
  10.6a          -- Third Amendment to the Federal Stock Charter of the Bank approved on April
                    23, 1996.
  10.6b          -- Amended and Restated Bylaws of the Bank.
  10.7           -- Specimen Preferred Stock, Series A, certificate, $25.00 per share stated
                    value of the Bank.
  10.7a          -- Certificate of Designation of Noncumulative Preferred Stock, Series A, of
                    the Bank.
  10.7b          -- Specimen Preferred Stock, Series B, certificate, $25.00 per share stated
                    value, of the Bank.
  10.7c          -- Certificate of Designation of Noncumulative Preferred Stock, Series B, of
                    the Bank.
  10.8           -- Data Processing Agreement, dated January 1, 1992, between the Bank and
                    Systematics Financial Services, Inc., and First Amendment (dated October 28,
                    1992) and Second Amendment (dated September 1, 1992).
  10.8a          -- Third Amendment, dated December 17, 1993, to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.8b          -- Fourth Amendment, dated March 28, 1994, to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.8c          -- Fifth Amendment, dated April 1, 1994 to the Data Processing Agreement, dated
                    January 1, 1992, between the Bank and Systematics Financial Services, Inc.
  10.8d          -- Sixth Amendment, dated February 26, 1996 to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial Services,
                    Inc.
  10.9           -- Management and Consulting Services Agreement, dated January 1, 1992, between
                    the Bank and Systematics Financial Services, Inc., and First Amendment
                    (dated March 18, 1992) and Second Amendment (dated September 1, 1992).
  10.10          -- Lease Agreement, dated April 1, 1989, between the Bank and Homart
                    Development Co. (Leased premises at 3200 Southwest Freeway) and First
                    Amendment thereto dated January 31, 1990.
  10.10a         -- Second Amendment, dated November 14, 1994 to Lease Agreement dated April 1,
                    1989, between the Bank and Homart Development Co. (assigned to HD Delaware
                    Properties, Inc.).
  10.10b         -- Third Amendment, dated January 8, 1996 to Lease Agreement dated April 1,
                    1989 between the Bank and Homart Development Co. (predecessor in interest of
                    HMS Office, L.P.).
II-3
199
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                         DESCRIPTION
- --------------   -------------------------------------------------------------------------------
10.11          -- Lease Agreement, dated November 20, 1990, between the Bank and Greenway
                    Plaza, LTD. (Leased premises at 3800 Buffalo Speedway).
  10.12          -- Employment Agreement, dated March 18, 1991, between the Bank and Barry C.
                    Burkholder.
  10.12a         -- Amendment, dated April 10, 1996, to the Employment Agreement between the
                    Bank and Barry C. Burkholder.
  10.13          -- Letter Agreement Related to Employment, dated April 4, 1990, between the
                    Bank and Anthony J. Nocella.
  10.14          -- Letter Agreement Related to Employment, dated June 18, 1990 between the Bank
                    and George R. Bender.
  10.15          -- Letter Agreement Related to Employment, dated April 6, 1990, between the
                    Bank and Jonathon K. Heffron.
  10.16          -- Letter Agreement Related to Employment, dated May 10, 1991, between the Bank
                    and Leslie H. Green.
  10.17          -- Management Incentive Plan, dated April 20, 1992.
  10.18          -- Letter Agreement, dated January 5, 1990, between Hyperion Partners and
                    certain shareholders of the Registrant with respect to the provision of
                    managerial assistance to the Registrant.
  10.22          -- Supplemental Executive Savings Plan of the Bank.
  10.23          -- Directors Supplemental Savings Plan of the Bank.
  12*            -- Statement re: Calculation of Ratios of Earnings to Fixed Charges.
  21*            -- Subsidiaries of the Registrant.
  23.1*          -- Consent of Bryan Cave LLP (included in Exhibit 5.1).
  23.2*          -- Consent of Deloitte & Touche LLP, independent auditors.
  24             -- Powers of Attorney (see the signature pages to the Form S-4 Registration
                    Statement).
  26*            -- Statement of Eligibility and Qualification of Trustee on Form T-1 of the
                    Bank of New York under the Trust Indenture Act of 1939.
  99.2*          -- Exchange Agent Agreement between Registrant and Bank of New York, as
                    Exchange Agent.
  99.3           -- Complaint filed by the Registrant and certain of its affiliates against the
                    FDIC and certain other governmental agencies in the Southern District of
                    Texas, Galveston Division, C.A. No. G-93-461.
- ---------------
 
  * To be filed by amendment.
 
     (b) Financial Statement Schedules.
 
     The Consolidated Financial Statements listed in the Index to Consolidated
Financial Statements contained in the Offering Circular are hereby incorporated
herein by reference.
 
     Schedules to the Consolidated Financial Statements are not required under
the related instructions or are inapplicable, and therefore have been omitted.
 
ITEM 17.  UNDERTAKINGS.
 
     The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing of the Offering specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy
 
                                      II-4
200
 
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
 
     The undersigned registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new Registration Statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-5
201
 
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 18TH DAY OF
JUNE, 1996.
                                          BANK UNITED CORP.
 
                                          By    /s/  BARRY C. BURKHOLDER
 
                                            ------------------------------------
                                            CHAIRMAN OF THE BOARD, PRESIDENT AND
                                                  CHIEF EXECUTIVE OFFICER
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT HAS BEEN
SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE DATES
INDICATED BELOW.
SIGNATURES                                  TITLE                     DATE
- ---------------------------------------------   -------------------------------   ---------------
(1)  Principal Executive Officer:
                     /s/  LEWIS S.                  Chairman of the Board,          June 18, 1996
                    RANIERI                              President and
- ---------------------------------------------       Chief Executive Officer
              Lewis S. Ranieri
(2)  Principal Financial and Accounting
  Officer:
            /s/  ROBERT A. PERRO                      Vice President and            June 18, 1996
- ---------------------------------------------       Chief Financial Officer
               Robert A. Perro
(3)  Directors:
            /s/  LEWIS S. RANIERI                          Director                 June 18, 1996
- ---------------------------------------------
              Lewis S. Ranieri
          /s/  SALVATORE A. RANIERI                        Director                 June 18, 1996
- ---------------------------------------------
            Salvatore A. Ranieri
             /s/  SCOTT A. SHAY                            Director                 June 18, 1996
- ---------------------------------------------
                Scott A. Shay
II-6
202
 
                                 EXHIBIT INDEX
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
1.1*          -- Underwriting Agreement................................................
   2.1           -- Form of Letter Agreement, by and among the general and limited
                    partners of Hyperion Partners, L.P., dated as of June 17, 1996,
                    relating to certain transactions consummated prior to the Offering....
   2.2*          -- Merger Agreement, dated as of June 17, 1996, by and between the
                    Company and Hyperion Holdings relating to the Merger..................
   3.1           -- Form of Restated Certificate of Incorporation of the Registrant, as
                    amended...............................................................
   3.2           -- Form of By-Laws of the Registrant.....................................
   4.1           -- Indenture, dated as of May 15, 1993, between the Registrant and Bank
                    of New York, as Trustee, relating to the Registrant's 8.05% Senior
                    Notes due May 15, 1998................................................
   4.2           -- Form of 8.05% Senior Note due May 15, 1998 (included in the Indenture
                    filed as Exhibit 4.1 hereto)..........................................
   4.3           -- Exchange and Registration Rights relating to Registrant's 8.05% Senior
                    Notes due May 15, 1998................................................
   4.4           -- First Supplemental Indenture, dated as of January 23, 1995, between
                    the Registrant and the Bank of New York, as Trustee, relating to
                    Registrant's 8.05% Senior Notes due May 15, 1998......................
   5.1*          -- Opinion and consent of  ______________ ...............................
   8*            -- Opinion and consent of  ______________ (Federal Tax Matters)..........
  10.1           -- Assistance Agreement, dated December 30, 1988, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC.......
  10.1a          -- Settlement and Termination Agreement, dated as of December 23, 1993,
                    among the Bank, the Registrant, Hyperion Holdings, Hyperion Partners
                    and the FDIC..........................................................
  10.1b          -- Tax Benefits Agreement, dated December 28, 1993, among the Bank, the
                    Registrant, Hyperion Holdings, Hyperion Partners and the FDIC.........
  10.2           -- Acquisition Agreement, dated December 30, 1988, between the Bank and
                    the FSLIC.............................................................
  10.3           -- Warrant Agreement, dated December 30, 1988, between the Bank and the
                    FSLIC.................................................................
  10.3a          -- Amended and Restated Warrant Agreement dated December 28, 1993,
                    between the Bank and the FDIC.........................................
  10.4           -- Regulatory Capital Maintenance Agreement, dated December 30, 1988
                    among the Bank, the Registrant, Hyperion Holdings, Hyperion Partners,
                    and the FSLIC (terminated)............................................
  10.5           -- Federal Stock Charter of the Bank and First Amendment to charter
                    approved on August 26, 1992...........................................
  10.6           -- Amended and Restated Federal Stock Charter of the Bank and Second
                    Amendment approved on October 30, 1992................................
  10.6a          -- Third Amendment to the Federal Stock Charter of the Bank approved on
                    April 23, 1996........................................................
  10.6b          -- Amended and Restated Bylaws of the Bank...............................
  10.7           -- Specimen Preferred Stock, Series A, certificate, $25.00 per share
                    stated value of the Bank..............................................
  10.7a          -- Certificate of Designation of Noncumulative Preferred Stock, Series A,
                    of the Bank...........................................................
  10.7b          -- Specimen Preferred Stock, Series B, certificate, $25.00 per share
                    stated value, of the Bank.............................................
  10.7c          -- Certificate of Designation of Noncumulative Preferred Stock, Series B,
                    of the Bank...........................................................
203
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
10.8           -- Data Processing Agreement, dated January 1, 1992, between the Bank and
                    Systematics Financial Services, Inc., and First Amendment (dated
                    October 28, 1992) and Second Amendment (dated September 1, 1992)......
  10.8a          -- Third Amendment, dated December 17, 1993, to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.8b          -- Fourth Amendment, dated March 28, 1994, to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.8c          -- Fifth Amendment, dated April 1, 1994 to the Data Processing Agreement,
                    dated January 1, 1992, between the Bank and Systematics Financial
                    Services, Inc.........................................................
  10.8d          -- Sixth Amendment, dated February 26, 1996 to the Data Processing
                    Agreement, dated January 1, 1992, between the Bank and Systematics
                    Financial Services, Inc...............................................
  10.9           -- Management and Consulting Services Agreement, dated January 1, 1992,
                    between the Bank and Systematics Financial Services, Inc., and First
                    Amendment (dated March 18, 1992) and Second Amendment (dated September
                    1, 1992)..............................................................
  10.10          -- Lease Agreement, dated April 1, 1989, between the Bank and Homart
                    Development Co. (Leased premises at 3200 Southwest Freeway) and First
                    Amendment thereto dated January 31, 1990..............................
  10.10a         -- Second Amendment, dated November 14, 1994 to Lease Agreement dated
                    April 1, 1989, between the Bank and Homart Development Co. (assigned
                    to HD Delaware Properties, Inc.)......................................
  10.10b         -- Third Amendment, dated January 8, 1996 to Lease Agreement dated April
                    1, 1989 between the Bank and Homart Development Co. (predecessor in
                    interest of HMS Office, L.P.).........................................
  10.11          -- Lease Agreement, dated November 20, 1990, between the Bank and
                    Greenway Plaza, LTD. (Leased premises at 3800 Buffalo Speedway).......
  10.12          -- Employment Agreement, dated March 18, 1991, between the Bank and Barry
                    C. Burkholder.........................................................
  10.12a         -- Amendment, dated April 10, 1996, to the Employment Agreement between
                    the Bank and Barry C. Burkholder......................................
  10.13          -- Letter Agreement Related to Employment, dated April 4, 1990, between
                    the Bank and Anthony J. Nocella.......................................
  10.14          -- Letter Agreement Related to Employment, dated June 18, 1990 between
                    the Bank and George R. Bender.........................................
  10.15          -- Letter Agreement Related to Employment, dated April 6, 1990, between
                    the Bank and Jonathon K. Heffron......................................
  10.16          -- Letter Agreement Related to Employment, dated May 10, 1991, between
                    the Bank and Leslie H. Green..........................................
  10.17          -- Management Incentive Plan, dated April 20, 1992.......................
  10.18          -- Letter Agreement, dated January 5, 1990, between Hyperion Partners and
                    certain shareholders of the Registrant with respect to the provision
                    of managerial assistance to the Registrant............................
  10.22          -- Supplemental Executive Savings Plan of the Bank.......................
  10.23          -- Directors Supplemental Savings Plan of the Bank.......................
  12*            -- Statement re: Calculation of Ratios of Earnings to Fixed Charges......
  21*            -- Subsidiaries of the Registrant........................................
  23.1*          -- Consent of Bryan Cave LLP (included in Exhibit 5.1)...................
  23.2*          -- Consent of Deloitte & Touche LLP, independent auditors................
  24             -- Powers of Attorney (see the signature pages to the Form S-4
                    Registration Statement)...............................................
204
ITEM 601
REGULATION S-K
   EXHIBIT
  REFERENCE
    NUMBER                                      DESCRIPTION                                 PAGE
- --------------   -------------------------------------------------------------------------  ----
26*            -- Statement of Eligibility and Qualification of Trustee on Form T-1 of
                    the Bank of New York under the Trust Indenture Act of 1939............
  99.2*          -- Exchange Agent Agreement between Registrant and Bank of New York, as
                    Exchange Agent........................................................
  99.3           -- Complaint filed by the Registrant and certain of its affiliates
                    against the FDIC and certain other governmental agencies in the
                    Southern District of Texas, Galveston Division, C.A. No. G-93-461.....
- ---------------
* To be filed by amendment.