BANKUNITED FINANCIAL CORP - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2003

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-13921

BankUnited Financial Corporation

(Exact name of registrant as specified in its charter)


Florida		65-0377773
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

255 Alhambra Circle, Coral Gables, Florida 33134

(Address of principal executive offices) (Zip Code)

(305) 569-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

The number of shares outstanding of the registrant’s common stock at the close of business on August 5, 2003 was 29,068,411 shares of Class A Common Stock, $.01 par value, and 536,562 shares of Class B Common Stock, $.01 par value.

This Form 10-Q contains 39 pages.

The Index to Exhibits appears on page 39.

TABLE OF CONTENTS


		CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II -- OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003 INDEX TO EXHIBITS
EX-10.1 Change in Control Agreement - Garcia
EX-10.2 Change in Control Agreement - Iglesias
EX-10.3 Amendment to Employment Agree. - Camner
EX-10.4 Amendment to Employment Agree. - Camner
EX-31.1 Certification of CEO - Section 302
EX-31.2 Certification of CFO - Section 302
EX-32 Certification of CEO & CFO - Section 906

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q REPORT FOR THE QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS


			Page No.

PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Financial Condition (unaudited) as of June 30, 2003 and September 30, 2002		2
		Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended June 30, 2003 and June 30, 2002		3
		Consolidated Statements of Stockholders’ Equity (unaudited) for the Nine Months Ended June 30, 2003 and June 30, 2002		4
		Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended June 30, 2003 and June 30, 2002		5
		Condensed Notes to Consolidated Financial Statements (unaudited)		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
	Item 4.	Controls and Procedures		36
PART II — OTHER INFORMATION
	Item 6.	Exhibits and Reports on Form 8-K		37

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


			June 30,			September 30,
			2003			2002


			(Dollars in thousands, except
			share data)
ASSETS:
	Cash		$	32,806		$	48,609
	Federal Home Loan Bank overnight deposits			25,215			419,946
	Federal funds sold and securities purchased under agreements to resell			11,998			3,735
	Investments available for sale, at fair value			289,132			171,585
	Mortgage-backed securities available for sale, at fair value			2,126,425			1,136,634
	Loans receivable, net (allowance for loan losses of $22,441 and $20,293 as of June 30, 2003 and September 30, 2002, respectively)			3,808,586			3,713,365
	Mortgage loans held for sale (fair value of approximately $312,719 and $284,239 at June 30, 2003 and September 30, 2002, respectively)			308,463			278,759
	Other earning assets			116,373			90,724
	Office properties and equipment, net			18,171			17,744
	Real estate owned			5,100			3,003
	Accrued interest receivable			29,920			28,861
	Mortgage servicing rights			10,825			6,746
	Goodwill			28,353			28,353
	Bank-owned life insurance			83,074			53,180
	Receivable for securities sold pending settlement			58,501			—
	Prepaid expenses and other assets			27,250			27,304

		Total assets	$	6,980,192		$	6,028,548

LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
	Deposits		$	3,158,419		$	2,976,171
	Securities sold under agreements to repurchase			363,537			355,042
	Advances from Federal Home Loan Bank			2,319,247			1,806,089
	Senior notes			200,000			200,000
	Trust preferred securities and junior subordinated deferrable interest debentures			161,684			253,761
	Interest payable			17,063			13,938
	Advance payments by borrowers for taxes and insurance			34,062			40,593
	Liability for securities purchased pending settlement			247,313			—
	Accrued expenses and other liabilities			33,372			37,805

		Total liabilities		6,534,697			5,683,399

Commitments and Contingencies (See note 10)
STOCKHOLDERS’ EQUITY:
	Preferred Stock, Authorized shares — 10,000,000. Issued shares — Noncumulative Convertible Preferred Stock, Series B — 724,007 and 574,007 at June 30, 2003 and September 30, 2002, respectively; Outstanding shares — Noncumulative Convertible Preferred Stock Series B — 697,287 and 547,287 at June 30, 2003 and September 30, 2002, respectively			7			6
	Class A Common Stock, $0.01 par value. Authorized shares — 60,000,000. Issued shares — 29,389,882 and 25,008,515 at June 30, 2003 and September 30, 2002, respectively. Outstanding shares — 29,056,882 and 24,675,515 at June 30, 2003 and September 30, 2002, respectively			294			250
	Class B Common Stock, $0.01 par value. Authorized shares — 3,000,000. Issued shares — 580,262 and 536,562, at June 30, 2003 and September 30, 2002, respectively. Outstanding shares — 536,562 at June 30, 2003 and September 30, 2002			6			5
	Additional paid-in capital			326,150			253,511
	Retained earnings			105,348			77,566
	Common Treasury Stock — 376,700 and 333,000 shares at June 30, 2003 and September 30, 2002, respectively			(3,279	)		(2,794	)
	Preferred Treasury Stock — 26,720 shares			(528	)		(528	)
	Deferred compensation and option shares			697			528
	Accumulated other comprehensive income			16,800			16,605

		Total stockholders’ equity		445,495			345,149

		Total liabilities and stockholders’ equity	$	6,980,192		$	6,028,548

See accompanying condensed notes to consolidated financial statements

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



				For the Three						For the Nine
				Months						Months
				Ended June 30,						Ended June 30,

				2003			2002			2003			2002


				(Dollars and shares
				in thousands, except per share data)
Interest income:
	Interest and fees on loans			$	56,699		$	61,959		$	176,333		$	192,207
	Interest on mortgage-backed securities				17,796			16,796			50,763			45,429
	Interest on short-term investments				113			169			340			483
	Interest and dividends on long-term investments and other interest-earning assets				3,922			2,762			10,644			8,605

			Total interest income		78,530			81,686			238,080			246,724

Interest expense:
	Interest on deposits				19,715			25,839			63,471			80,642
	Interest on borrowings				25,535			22,990			73,421			69,356
	Preferred dividends of subsidiary trusts				4,922			4,879			15,057			14,753

			Total interest expense		50,172			53,708			151,949			164,751

	Net interest income before provision for loan losses				28,358			27,978			86,131			81,973
Provision for loan losses					1,375			1,900			3,925			7,300

	Net interest income after provision for loan losses				26,983			26,078			82,206			74,673

Non-interest income:
	Loan servicing fees, net of amortization				(1,346	)		(632	)		(3,228	)		(1,616	)
	Loan fees				1,372			847			3,562			2,887
	Deposit fees				1,017			843			3,037			2,479
	Other fees				410			287			1,014			726
	Insurance and investment services income				771			844			2,091			3,024
	Net gain (loss) on sale of investments and mortgage-backed securities				4,085			(295	)		4,840			587
	Net gain on sale of loans and other assets				2,555			1,442			6,323			2,954
	Other				1,158			951			4,180			2,171

			Total non-interest income		10,022			4,287			21,819			13,212

Non-interest expenses:
	Employee compensation and benefits				9,569			7,891			27,938			22,304
	Occupancy and equipment				3,172			2,863			9,125			8,179
	Telecommunications and data processing				1,310			1,106			3,729			3,267
	Advertising and promotion expense				1,021			1,256			3,464			4,536
	Professional fees — legal and accounting				864			1,851			3,211			4,107
	Loan closing fees				827			705			2,362			1,927
	Loan servicing expense				277			652			1,124			2,384
	Postage and courier				394			306			1,059			875
	Insurance				304			261			873			778
	Other operating expenses				4,940			1,204			9,339			4,530

			Total non-interest expenses		22,678			18,095			62,224			52,887

	Income before income taxes				14,327			12,270			41,801			34,998
Provision for income taxes					4,700			4,429			13,782			12,755

		Net income		$	9,627		$	7,841		$	28,019		$	22,243

Earnings Per Share:
		Basic earnings per share		$	0.35		$	0.31		$	1.07		$	0.88
		Diluted earnings per share		$	0.33		$	0.29		$	0.99		$	0.83
Weighted average number of common shares outstanding:
	Basic				27,124			25,125			25,973			25,129
	Diluted				29,438			27,176			28,197			26,954

See accompanying condensed notes to consolidated financial statements

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY



	For the Nine Months Ended June 30, 2003 and 2002

															Accumulated
															Other
															Comprehensive		Total
	Preferred		Common		Paid-in		Retained			Treasury			Deferred		Income		Stockholders’
	Stock		Stock		Capital		Earnings			Stock			Compensation		Net of Tax		Equity


	(In thousands)
Balance at September 30, 2002	$	6	$	255	$	253,511		$77,566		$	(3,322	)	$	528	$	16,605	$	345,149
Comprehensive income:
Net income for the nine months ended June 30, 2003		—		—		—		28,019			—			—		—		28,019
Other comprehensive income, net of tax		—		—		—		—			—			—		195		195

Total comprehensive income		—		—		—		—			—			—		—		28,214
Payments of dividends on preferred stock		—		—		—		(237	)		—			—		—		(237	)
Deferred Compensation Obligation		—		—		—		—			—			169		—		169
Purchase of Stock		—		—		—		—			(485	)		—		—		(485	)
Issuance of stock, stock options and other awards		1		45		72,639		—			—			—		—		72,685

Balance at June 30, 2003	$	7	$	300	$	326,150	$	105,348		$	(3,807	)	$	697	$	16,800	$	445,495


															Accumulated
															Other
															Comprehensive		Total
	Preferred		Common		Paid-in		Retained			Treasury			Deferred		Income		Stockholders’
	Stock		Stock		Capital		Earnings			Stock			Compensation		Net of Tax		Equity


	(In thousands)
Balance at September 30, 2001	$	4	$	254	$	249,788	$	47,502		$	(2,794	)	$	—		$5,692	$	300,446
Comprehensive income:
Net income for the nine months ended June 30, 2002		—		—		—		22,243			—			—		—		22,243
Other comprehensive income, net of tax		—		—		—		—			—			—		4,131		4,131

Total comprehensive income		—		—		—		—			—			—		—		26,374
Payments of dividends on preferred stock		—		—		—		(178	)		—			—		—		(178	)
Deferred Compensation Obligation		—		—		—		—			—			528		—		528
Purchase of Stock		—		—		—		—			(528	)		—		—		(528	)
Issuance of stock, stock options and other awards		2		1		3,219		—			—			—		—		3,222

Balance at June 30, 2002	$	6	$	255	$	253,007	$	69,567		$	(3,322	)	$	528		$9,823	$	329,864

See accompanying condensed notes to consolidated financial statements

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



			For the Nine Months
			Ended June 30,

			2003			2002


			(In thousands)
Cash flows used in operating activities			$	(576,943	)	$	(163,407	)
Cash flows from investing activities:
	Net increases in loans			(33,141	)		(135,894	)
	Purchase of investment securities available for sale			(202,768	)		(39,516	)
	Purchase of mortgage-backed securities available for sale			(1,681,620	)		(655,359	)
	Purchase of other earning assets			(98,516	)		(57,849	)
	Purchase of bank-owned life insurance			(27,500	)		(30,000	)
	Purchase of office properties and equipment			(3,630	)		(3,558	)
	Proceeds from repayments of investment securities available for sale			50,303			10,067
	Proceeds from repayments of mortgage-backed securities held to maturity			—			70,199
	Proceeds from repayments of mortgage-backed securities available for sale			821,388			254,853
	Proceeds from repayments of other earning assets			72,867			47,500
	Proceeds from sale of investment securities available for sale			41,051			7,230
	Proceeds from sale of mortgage-backed securities available for sale			552,780			181,046
	Proceeds from sale of real estate owned			2,176			6,833

		Net cash used in investing activities		(506,610	)		(344,448	)

Cash flows from financing activities:
	Net increase in deposits			182,248			353,373
	Net increase in Federal Home Loan Bank advances			513,158			201,230
	Net increase (decrease) in other borrowings			8,495			(30,202	)
	Guarantee fees for senior notes			(113	)		(164	)
	Redemption of Trust Preferred Securities			(159,580	)		(15,325	)
	Net proceeds from issuance of Trust Preferred Securities			65,630			43,648
	Net proceeds from issuance of stock			71,681			2,895
	Purchase of Series B Preferred Stock			—			(528	)
	Dividends paid on preferred stock			(237	)		(178	)

		Net cash provided by financing activities		681,282			554,749

(Decrease) increase in cash and cash equivalents				(402,271	)		46,894
Cash and cash equivalents at beginning of period				472,290			294,753

Cash and cash equivalents at end of period			$	70,019		$	341,647

Supplemental disclosure of non-cash investing and financing activities:
	Securitization of loans receivable and mortgage loans held for sale		$	506,999		$	230,958
	Transfer of loans to real estate owned		$	4,361		$	7,030
	Securities purchased pending settlement		$	247,313		$	24,996
	Securities sold pending settlement		$	58,501			—

See accompanying condensed notes to consolidated financial statements

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of BankUnited Financial Corporation (“BankUnited”) and its subsidiaries, including BankUnited, FSB (the “Bank”). All significant intercompany transactions and balances have been eliminated.

The unaudited consolidated financial statements have been prepared in conformity with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission and therefore do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, all adjustments (consisting of normal recurring accruals), which, in the opinion of management, are necessary for a fair presentation of the financial statements, have been included. Operating results for the nine-month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending September 30, 2003. For further information, refer to the Consolidated Financial Statements and Notes thereto included in BankUnited’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002.

Certain prior period amounts have been reclassified to conform to the June 30, 2003 consolidated financial statements.

2. Significant Accounting Policies

During the second quarter of fiscal 2003, BankUnited adopted the disclosure requirement pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock Based Compensation — Transition and Disclosure.” See note 12. Impact of New Accounting Pronouncements for a discussion of the requirements of SFAS No. 148 and note 11. Stock Options for the new disclosure required by SFAS No. 148.

3. Securities Portfolio

Investments

Presented below is an analysis of investments designated as available for sale.



		June 30, 2003

				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value


		(In thousands)
U.S. government agency securities		$	52,990	$	1,651	$	—		$	54,641
Equity securities			839		—		—			839
Trust preferred securities of other issuers			85,437		3,583		(1,364	)		87,656
Other(1)			143,763		2,369		(136	)		145,996

	Total	$	283,029	$	7,603	$	(1,500	)	$	289,132

(1) Other includes mutual funds, preferred stock of FHLMC, and Bonds.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



		September 30, 2002

				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value


		(In thousands)
U.S. government agency securities		$	53,082	$	65	$	(387	)	$	52,760
Equity securities			4,242		132		(216	)		4,158
Trust preferred securities of other issuers			58,875		2,621		(1,386	)		60,110
Other(1)			53,829		801		(73	)		54,557

	Total	$	170,028	$	3,619	$	(2,062	)	$	171,585

(1) Other includes mutual funds, preferred stock of FHLMC, and bonds.

Investment securities available for sale as of June 30, 2003 and September 30, 2002, by contractual maturity, are shown below.



		June 30, 2003				September 30, 2002

		Amortized				Amortized
		Cost		Fair Value		Cost		Fair Value


		(In thousands)
Due in one year or less		$	3,044	$	3,101	$	—	$	—
Due after one year through five years			27,990		28,235		3,081		3,146
Due after five years through ten years			113,017		115,230		52,830		26,850
Due after ten years			138,139		141,727		109,875		137,431
Equity securities			839		839		4,242		4,158

	Total	$	283,029	$	289,132	$	170,028	$	171,585

Mortgage-Backed Securities

Presented below is an analysis of mortgage-backed securities designated as available for sale.



		June 30, 2003

				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value


		(In thousands)
GNMA mortgage-backed securities		$	13,058	$	590	$	—		$	13,648
FNMA mortgage-backed securities			339,342		4,674		—			344,016
FHLMC mortgage-backed securities			82,250		1,863		—			84,113
Collateralized mortgage obligations			21,820		68		(62	)		21,826
Mortgage pass-through certificates			1,647,921		15,262		(361	)		1,662,822

	Total	$	2,104,391	$	22,457	$	(423	)	$	2,126,425

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



		September 30, 2002

				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses		Fair Value


		(In thousands)
GNMA mortgage-backed securities		$	61,804	$	3,311	$	—	$	65,115
FNMA mortgage-backed securities			335,755		10,887		—		346,642
FHLMC mortgage-backed securities			176,426		4,951		—		181,377
Collateralized mortgage obligations			91,819		1,618		—		93,437
Mortgage pass-through certificates			444,022		6,041		—		450,063

	Total	$	1,109,826	$	26,808	$	—	$	1,136,634

Mortgage-backed securities available for sale as of June 30, 2003 and September 30, 2002, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. As of June 30, 2003, the duration of BankUnited’s mortgage-backed securities portfolio was significantly less than contractual maturities.



		June 30, 2003				September 30, 2002

		Amortized Cost		Fair Value		Amortized Cost		Fair Value


		(In thousands)
Due in one year or less		$	8	$	8	$	—	$	—
Due after one year through five years			971		1,007		21,037		21,411
Due after five years through ten years			66,955		67,354		36,455		37,596
Due after ten years			2,036,457		2,058,056		1,052,334		1,077,627

	Total	$	2,104,391	$	2,126,425	$	1,109,826	$	1,136,634

When BankUnited securitizes residential mortgage loans, the resulting securities are considered retained interest for accounting purposes until sold. At June 30, 2003, BankUnited’s retained interests from securitized loans, not including mortgage servicing rights, had a fair value of $35.2 million. Upon sale of the securities, BankUnited retains servicing rights and the resulting gain or loss on the sale of the securities depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of the transfer. Fair value is derived from current market information and assumptions for similar products. The investors in the securitized assets have no recourse to BankUnited for failure of debtors to pay when due.

During the nine months ended June 30, 2003, BankUnited securitized $507 million of residential mortgage loans. These loans were securitized with Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) and transferred into BankUnited’s mortgage-backed securities available for sale portfolio. During the same period BankUnited sold $494 million of securitized loans, recognizing net gains of $4.9 million. In connection with the sale of the securitized loans during the nine months ended June 30, 2003, BankUnited retained mortgage servicing rights with a fair value of $8.2 million. When BankUnited retains servicing responsibilities from these securitization transactions, it generally receives annual servicing fees approximating 0.25% of the outstanding receivable balance.

The value of the retained interest from securitized loans is subject to prepayment risk on the transferred financial assets, and the general level of interest rates. At June 30, 2003, key economic

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assumptions and the sensitivity of the current fair value of securities remaining from securitizations to immediate 10% and 20% adverse changes in those assumptions are as follows:


		Retained
		Securities

		(Dollars in
		thousands)
Carrying amount (fair value) of retained securities		$	35,158
Weighted average life in years			2.3
Annual prepayment assumption			37.83	%
	Impact on fair value of 10% adverse change	$	(101	)
	Impact on fair value of 20% adverse change	$	(277	)
Annual cash flow discount rate			3.96	%
	Impact on fair value of 10% adverse change	$	(236	)
	Impact on fair value of 20% adverse change	$	(546	)

Credit losses do not affect the valuation due to FNMA’s and FHLMC’s full guarantee to BankUnited for losses on loans collateralizing the securities.

The sensitivities presented above are hypothetical and are presented for informational purposes only. As the amounts indicate, the fair values due to a variation in any assumption generally cannot be extrapolated because the relationship of the change in any assumption to the change in fair value may not be linear. The effect of a change in a particular assumption on the fair value of the retained securities is calculated without considering the changes in other assumptions. However, changes in one assumption may result in changes in another.

The total principal amount of loans underlying the retained securities at June 30, 2003 was $33.7 million, none of which was 60 days or more past due. There were no credit losses during the nine months ended June 30, 2003 from the loans underlying the retained securities outstanding at June 30, 2003.

4. Earnings Per Share

The following tables reconcile basic and diluted earnings per share for the three and nine months ended June 30, 2003 and 2002.



		For the Three Months				For the Nine Months
		Ended June 30,				Ended June 30,

		2003		2002		2003		2002


		(Dollars and shares in thousands,
		except per share data)
Basic earnings per share:
Numerator:
	Net income	$	9,627	$	7,841	$	28,019	$	22,243
	Preferred stock dividends		79		77		237		178

Net income available to common stockholders		$	9,548	$	7,764	$	27,782	$	22,065

Denominator:
	Weighted average common shares outstanding		27,124		25,125		25,973		25,129

Basic earnings per share		$	0.35	$	0.31	$	1.07	$	0.88

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



			For the Three Months				For the Nine Months
			Ended June 30,				Ended June 30,

			2003		2002		2003		2002


			(Dollars and shares in thousands,
			except per share data)
Diluted earnings per share:
Numerator:
	Net income available to common stockholders		$	9,548	$	7,764	$	27,782	$	22,065
	Plus:
		Convertible preferred stock dividends		79		77		237		178

Diluted net income available to common stockholders			$	9,627	$	7,841	$	28,019	$	22,243

Denominator:
	Weighted average common shares outstanding			27,124		25,125		25,973		25,129
	Plus:
		Number of common shares from the conversion of options		1,231		1,193		1,157		1,164
		Number of common shares from the conversion of preferred stock		1,083		858		1,067		661

	Diluted weighted average shares outstanding			29,438		27,176		28,197		26,954

Diluted earnings per share			$	0.33	$	0.29	$	0.99	$	0.83

Basic earnings per share is calculated by dividing net income, adjusted for dividends declared on preferred stock, by the weighted number of shares of common stock outstanding.

Diluted earnings per share is calculated under the treasury stock method by dividing net income by the weighted average number of shares of common stock outstanding, assuming conversion of outstanding convertible preferred stock from the beginning of the period and the exercise of stock options. Such adjustments to net income and the weighted average number of shares of common stock are made only when such adjustments dilute earnings per share. There was no antidilutive effect from stock options and convertible securities during the three and nine month periods ending June 30, 2003 and 2002.


5.	Trust Preferred Securities and Junior Subordinated Deferrable Interest Debentures

BankUnited Statutory Trust IV, BankUnited Statutory Trust V, BankUnited Statutory Trust VI and BUFC Statutory Trust VII are wholly owned trust subsidiaries (“Trust Subsidiaries”) of BankUnited which were created during the nine months ended June 30, 2003 for the purpose of issuing Trust Preferred Securities and investing the proceeds from the sale thereof in Junior Subordinated Deferrable Interest Debentures issued by BankUnited (the “Junior Subordinated Debentures”). The Trust Preferred Securities were issued and sold in private placement offerings. All of the proceeds from the sale of the Trust Preferred Securities and the common securities issued by the Trust Subsidiaries are invested in Junior Subordinated Debentures, which are the sole assets of the Trust Subsidiaries. The Trust Subsidiaries pay preferential cumulative cash distributions on the Trust Preferred Securities at the same rate as the distributions paid by BankUnited on the Junior Subordinated Debentures held by the Trust Subsidiaries. Taken together, the undertakings made by BankUnited with respect to the Trust Preferred Securities constitute a full and unconditional guarantee by BankUnited of the obligations of the Trust Preferred Securities.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides information on the issuances of Trust Preferred Securities by BankUnited’s trust subsidiaries during the nine months ended June 30, 2003:



	Original

	Trust				Junior
	Preferred		Common		Subordinated		Annual Rate of
	Securities		Securities		Debentures		Preferential Cash
	Issued		Issued		Held		Distribution	Maturity Date


	(Dollars in thousands)
BankUnited Statutory Trust IV(5)	$	20,000	$	619	$	20,619	3-Month LIBOR + 3.40%(1)		11/15/2032
BankUnited Statutory Trust V(5)		15,000		464		15,464	3-Month LIBOR + 3.25%(2)		12/19/2032
BankUnited Statutory Trust VI(5)		17,640		546		18,186	3-Month LIBOR + 3.15%(3)		3/26/2033
BUFC Statutory Trust VII(6)		15,000		465		15,465	3-Month LIBOR + 3.25%(4)		4/24/2033

	$	67,640	$	2,094	$	69,734

(1) The annual rate adjusts quarterly not to exceed 11.90% prior to November 15, 2007.

(2) The annual rate adjusts quarterly not to exceed 11.75% prior to December 26, 2007.

(3) The annual rate adjusts quarterly not to exceed 11.75% prior to March 26, 2008.

(4) The annual rate adjusts quarterly.

(5) Created under Connecticut law.

(6) Created under Delaware law.

On February 26, 2003, BankUnited Financial Corporation announced that it would redeem all of the 9.60% Junior Subordinated Debentures held by its trust subsidiary, BankUnited Capital II, and BankUnited Capital II would redeem all of its outstanding 9.60% Cumulative Trust Preferred Securities (Nasdaq: BKUNZ). The Trust Preferred Securities, with an aggregate liquidation amount of $46 million, were redeemed on March 28, 2003 at a price of $25.00 per share plus accumulated and unpaid interest.

On May 20, 2003, BankUnited Financial Corporation announced that it would partially redeem the outstanding 9% Junior Subordinated Debentures held by its trust subsidiary BankUnited Capital III, and BankUnited Capital III would partially redeem its outstanding Cumulative Trust Preferred Securities (NYSE: BUFPrC). On May 30, 2003, BankUnited Financial Corporation announced that it would redeem and retire the remaining outstanding 9% Junior Subordinated Debentures held by its trust subsidiary BankUnited Capital III, and BankUnited Capital III would redeem and retire its remaining 9% Cumulative Trust Preferred Securities. The Trust Preferred Securities, with an aggregate liquidation amount of $103 million, were redeemed on June 30, 2003 at a price of $25.00 per share plus accumulated and unpaid interest. For a discussion on interest rate swaps used to hedge some of BankUnited’s Trust Preferred Securities, see Note 9 Accounting for Derivatives and Hedging Activities.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Treasury Stock

The following table provides information on Treasury Stock held by BankUnited as of June 30, 2003 and September 30, 2002:


			June 30, 2003			September 30, 2002


			(In thousands)
Common Treasury Stock:
	Class A Common — 333,000 shares		$	(2,794	)	$	(2,794	)
	Class B Common — 20,440 shares			(316	)		—
	Class B Common (held in Rabbi Trust) — 23,260 shares			(169	)		—

		Total Common Treasury Stock		(3,279	)		(2,794	)

Preferred Treasury Stock:
Noncumulative Convertible Preferred Stock, Series B (held in Rabbi Trust) — 26,720 shares				(528	)		(528	)

Total Treasury Stock			$	(3,807	)	$	(3,322	)

In the first quarter of fiscal 2003, the Chief Executive Officer (“CEO”) surrendered 20,440 shares of Class B Common Stock to BankUnited as consideration for the exercise of 43,700 shares of Class B Common Stock. The 20,440 shares surrendered had a value of $316 thousand and are reflected in treasury stock in the equity section of BankUnited’s Consolidated Statement of Financial Condition. The incremental shares due to the CEO upon the option exercise were 23,260 shares of Class B Common Stock with a value of $169 thousand, which have been deferred by the CEO and are being held in a trust established by BankUnited. These shares are reflected in treasury stock in the equity section of BankUnited’s Consolidated Statement of Financial Condition. The obligation to deliver the shares to the CEO is also reflected in the equity section of BankUnited’s Consolidated Statement of Financial Condition in deferred compensation.

7. Regulatory Capital

The Office of Thrift Supervision (“OTS”) requires that the Bank meet minimum regulatory, core and risk-based capital requirements. Currently, the Bank exceeds all regulatory capital requirements. The Bank’s required, actual and excess regulatory capital levels as of June 30, 2003 and 2002 were as follows:



	Regulatory Capital


	Required						Actual						Excess

	2003			2002			2003			2002			2003			2002


	(Dollars in thousands)
Core capital	$	207,048		$	172,662		$	502,671		$	445,921		$	295,623		$	273,259
		3.0	%		3.0	%		7.3	%		7.8	%		4.3	%		4.8	%
Risk based capital	$	260,666		$	222,004		$	524,213		$	463,822		$	263,547		$	241,818
		8.0	%		8.0	%		16.1	%		16.7	%		8.1	%		8.7	%

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Comprehensive Income

BankUnited’s comprehensive income includes all items which comprise net income, plus other comprehensive income. For the three months and nine months ended June 30, 2003 and 2002, BankUnited’s other comprehensive income (loss) was as follows:



			For the Three Months						For the Nine Months
			Ended June 30,						Ended June 30,

			2003			2002			2003			2002


			(In thousands)
Net income			$	9,627		$	7,841		$	28,019		$	22,243
Other comprehensive (loss) income, net of tax:
	Unrealized (loss) income arising during the period on securities, net of tax (benefit) expense of $(40) and $7,905 for the three months ended June 30, 2003 and 2002, respectively and $2,211 and $3,026 for the nine months ended June 30, 2003 and 2002, respectively			(73	)		12,627			3,931			4,834
	Unrealized losses on cash flow hedges, net of tax benefit of $256 and $426 for the three and nine months ended June 30, 2003, respectively			(479	)		—			(757	)		—
	Less reclassification adjustment for:
		Amortization of unrealized losses on transferred securities, net of tax expense of $31 and $69 for the three and nine months ended June 30, 2002, respectively		—			(50	)		—			(110	)
		Realized gains on securities sold included in net income, net of tax expense of $1,106 for the three months ended June 30, 2003, and $1,676 and $509 for the nine months ended June 30, 2003 and 2002, respectively		2,070			—			2,979			813

Total other comprehensive (loss), income net of tax			$	(2,622	)	$	12,677		$	195		$	4,131

Comprehensive income			$	7,005		$	20,518		$	28,214		$	26,374

9. Accounting For Derivatives and Hedging Activities

Loan Commitments

BankUnited commits to make one-to-four family residential mortgage loans with potential borrowers at specified interest rates for short periods of time, usually thirty days. If potential borrowers meet underwriting standards, these loan commitments obligate BankUnited to fund the loans, but do not obligate the potential borrower to take the loans. If the borrowers do not allow the commitments to expire, the loans are funded, and either placed into BankUnited’s loan portfolio or held for sale. Based on historical experience, and the underlying loan characteristics, BankUnited estimates the amount of commitments that will ultimately become loans held for sale and treats those as derivatives during the commitment period. As derivatives, the changes in the fair value of the commitments are recorded in current earnings under other non-interest income with an offset to the consolidated statement of financial condition in other assets. Fair values are based on observable market prices from third parties. During the nine months ended June 30, 2003, BankUnited recorded $1.1 million in net losses from fair value adjustments on loan commitments. At June 30, 2003, the estimated notional amount of loan commitments BankUnited expected to be funded was $104.9 million.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Forward Sales Contracts

To economically hedge the fair value exposure on loan commitments to a change in interest rates during the commitment period, BankUnited enters into forward contracts with similar terms. Since both the loan commitments and the forward contracts are derivatives, this hedging relationship does not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133. Accordingly, the fair value adjustments on the forward contracts are also assets or recorded in current earnings under other non-interest income or expense with an offset to the balance sheet in other liabilities. These forward contracts may also extend beyond the commitment period and are also used to offset the fair value exposure of loans held for sale to a change in interest rates. This relationship exists until either the loan is sold or until the forward contract expires. During the nine months ended June 30, 2003, BankUnited recorded $1.3 million in net gains from fair value adjustments on these forward contracts.

Interest Rate Swaps

BankUnited enters into interest rate swap contracts as fair value and cash flow hedges (“hedge”) for the purpose of hedging long-term fixed and variable interest costs on Trust Preferred Securities (“hedged item”) issued by its trust subsidiaries. All terms of the interest rate swap contracts, with the exception of the right to defer interest payments, are the same as those of the Trust Preferred Securities. BankUnited expects these interest rate swap contracts to be highly effective in offsetting interest costs of its long-term debt, and therefore applies hedge accounting treatment.

Hedges used by BankUnited to offset interest costs from fixed long-term debt are treated as qualifying fair value hedges. The accounting treatment for fair value hedges is to record the change in fair value during the period of both the hedge and the hedged item into current earnings. During the nine months ended June 30, 2003, BankUnited recorded a total of $2.6 million as a charge to non-interest income from a change in fair value of its fair value interest rate swap hedges with an offsetting amount to non-interest income for a change in fair value of the hedged item. There was no ineffectiveness during the nine month period ended June 30, 2003.

Hedges used by BankUnited to offset interest costs from variable long-term debt, are treated as qualifying cash flow hedges. The accounting treatment for cash flow hedges is to record the effective portion of the gain or loss on the hedge as a component of other comprehensive income, net of tax, with an offsetting amount recorded in either other assets or other liabilities. The amounts recorded in other accumulated comprehensive income will be reclassified into current earnings in the same period in which the hedged item affects earnings. During the nine months ended June 30, 2003, BankUnited recorded a total of $757 thousand, net of taxes, in other comprehensive losses resulting from the effective portion of its cash flow hedges. There was no ineffectiveness during the nine month period ended June 30, 2003. BankUnited expects $232 thousand of the amounts currently reported in other comprehensive income related to cash flow hedges to be reclassified into earnings within the next twelve months.

During the second quarter of fiscal 2003, BankUnited settled an interest rate swap which was used to hedge the 9.60% Cumulative Trust Preferred Securities issued by BankUnited Capital II. This settlement was made in conjunction with the redemption of the 9.60% Trust Preferred Securities which took place simultaneously and resulted in a gain of $87 thousand. During the third quarter of fiscal 2003 BankUnited settled an interest rate swap which was used to hedge the 10.25% Cumulative Trust Preferred Securities issued by BankUnited Capital. This settlement resulted in a deferred gain of $2.6 million. See Note 5. Trust Preferred Securities and Junior Subordinated Deferrable Interest Debentures in the Financial Statements for a further discussion of the redemption of the BankUnited Capital II securities.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. Commitments and Contingencies

Standby letters of credit are off balance sheet instruments which represent conditional commitments issued by BankUnited to guarantee the performance of a customer to a third party. BankUnited had outstanding standby letters of credit in the amount of $9.4 million and $8.0 million as of June 30, 2003 and September 30, 2002, respectively. In accordance with the disclosure requirements of Financial Accounting Standards Board (“FASB”) Interpretation No. 45, approximately $3.1 million of the standby letters of credit outstanding at June 30, 2003 were issued subsequent to December 31, 2002. The fair value of these instruments, which is represented by the fees earned in connection with the standby letters of credit, are recognized in BankUnited’s financial statements. BankUnited’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for standby letters of credit is represented by the contractual amounts of those instruments. BankUnited uses the same credit policies in establishing conditional obligations as those for on-balance sheet instruments. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies but may include cash, accounts receivable, inventory, equipment, marketable securities and property. Since certain letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements.

BankUnited is a party to certain claims and litigation arising in the ordinary course of business. In the opinion of management, the resolution of such claims and litigation will not materially affect BankUnited’s consolidated financial position or results of operations.

11. Stock Options

The new disclosure requirements under SFAS No. 148 for interim financial statements are effective and were adopted by BankUnited on January 1, 2003. The following table provides the newly required disclosures for the three and nine-month periods ended June 30, 2003 compared to the same periods in the prior year:



		For the Three						For the Nine
		Months Ended						Months Ended
		June 30,						June 30,

		2003			2002			2003			2002


		(Dollars in thousands)
Net income, as reported		$	9,627		$	7,841		$	28,019		$	22,243
Add: Total stock-based employee and director compensation expense included in net income, net of related tax effects			16			—			16			—
Deduct: Total stock-based employee and director compensation expense determined under the fair value based method for all awards, net of related tax effects(1)			(611	)		(330	)		(1,372	)		(902	)

Pro forma net income		$	9,032		$	7,511		$	26,663		$	21,341

Earnings per share:
	Basic — as reported	$	0.35		$	0.31		$	1.07		$	0.88

	Basic — pro forma	$	0.33		$	0.30		$	1.02		$	0.84

	Diluted — as reported	$	0.33		$	0.29		$	0.99		$	0.83

	Diluted — pro forma	$	0.31		$	0.28		$	0.95		$	0.79

(1) The fair value of each option has been estimated on the date of the grant using the Black Scholes option pricing model.

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Impact of New Accounting Pronouncements

SFAS No. 145

In May of 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002”. Under SFAS No. 4, all gains and losses from extinguishment of debt were required to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. This was an exception to Accounting Principals Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB No. 30”), which defines extraordinary items as events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence.

SFAS No. 145 eliminates Statement No. 4 and, thus, the exception to applying APB No. 30 to all gains and losses related to extinguishments of debt (other than extinguishment of debt to satisfy sinking-fund requirements). As a result, gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria in APB No. 30. Applying APB No. 30 will distinguish transactions that are part of an entity’s recurring operations from those that are unusual or infrequent in nature or that meet the criteria for classification as an extraordinary item. The provisions of SFAS No. 145 related to the rescission of Statement No. 4 shall be applied in fiscal years beginning after May 15, 2002. BankUnited adopted the provisions of SFAS No. 145 related to the rescission of Statement No. 4 beginning October 1, 2002, which resulted in a reclassification of extraordinary item related to early extinguishment of debt, to non-interest income in the consolidated statement of operations for prior periods.

SFAS No. 148

In December of 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based Compensation — Transition and Disclosure.” Under SFAS No. 148, alternative methods of transition are provided for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS 123, “Accounting for Stock Based Compensation” to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

As permitted by SFAS No. 123, BankUnited continues to follow the intrinsic value method of accounting for stock-based compensation under the provisions of Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees.” Accordingly, the alternative methods of transition for the fair value based method of accounting for stock-based employee compensation provided by SFAS No. 148 do not apply to BankUnited. BankUnited is required under the provisions of SFAS No. 148 amending SFAS 123 and APB No. 28, “Interim Financial Reporting,” to provide additional disclosures in both annual and interim financial statements. See note 11. Stock Options for required interim disclosures.

In January of 2003, FASB issued FASB Interpretation No. 46 (“FIN 46”), an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 establishes the criteria used to identify variable interest entities and to determine whether or not to consolidate a variable interest entity. Under the criteria established by FIN 46, BankUnited believes it will be required to de-consolidate its trust subsidiaries, however management is still evaluating this interpretation. The result will be to recognize investments in its Trust Subsidiaries in other assets and to report the amount of subordinated debentures issued by BankUnited Financial Corporation to its Trust Subsidiaries in the liability section of BankUnited’s Consolidated Statement of Financial Condition. Prior to FIN 46, BankUnited eliminated the investments in all of its Trust Subsidiaries and reported Trust Preferred Securities in the liability section of BankUnited’s Consolidated Statement of Financial Condition. This interpretation is effective immediately

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for variable interest entities created after January 31, 2003 and in the first fiscal year or interim period beginning after June 15, 2003, for variable interest entities in which a variable interest was acquired prior to February 1, 2003.

SFAS No. 149

In April of 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 clarifies certain issues and amends definitions contained in SFAS 133 to ensure that contracts with comparable characteristics are accounted for similarly. Although applicable to BankUnited, management does not expect that SFAS No. 149 will have a significant impact on its consolidated financial condition or results of operations.

SFAS No. 150

In May of 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liability and equity. Although applicable to BankUnited, management does not expect that SFAS No. 150 will have a significant impact on its consolidated financial condition or results of operations.

13. Related Party Transactions

The Bank, as an insured depository institution as defined under Section 3 of the Federal Deposit Investment Act, extends loans to directors, officers and employees, as well as to members of their immediate families and their affiliates. The following discussion pertains to significant changes to related party transactions during the nine month period ending June 30, 2003. As of June 30, 2003, there were approximately $3.5 million in loans receivable from an entity in which a director has interests. As of September 30, 2002 there were approximately $1 million in loans receivables from entities in which two directors have interests. These loans and their terms have been reviewed and approved by the Bank’s board of directors.

As of June 30, 2003, BankUnited had loans receivable from BankUnited’s executive officers in the aggregate amount of $2.4 million. Loans receivable from executive officers as of September 30, 2002 were $986 thousand. These loans are secured by each executive’s primary residence.

During the quarter ended June 30, 2003 a related party interest was terminated by the sale of a property on which BankUnited has a branch office. The property was previously owned indirectly by a partnership in which the Chief Executive Officer has a 25% interest.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

As used in this Form 10-Q, “BankUnited,” “we,” “us” and “our” refers to BankUnited and its subsidiaries on a consolidated basis. The following discussion and analysis and the related financial data present a review of BankUnited’s consolidated operating results for the three and nine-month periods ended June 30, 2003 and 2002 and consolidated financial condition as of June 30, 2003. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in BankUnited’s Annual Report on Form 10-K for the year ended September 30, 2002.

This Quarterly Report on Form 10-Q contains forward-looking statements. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words and phrases such as: “will likely result,” “expect,” “will continue,” “anticipate,” “estimate,” “project,” “believe,” “intend,” “should,” “may,” “can,” “plan,” “target” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, discussions concerning:

• Projections of revenues, expenses, income, earnings per share, margin, asset growth, loan production, deposit growth, and other performance measures;

• Expansion of operations, including branch openings, entrance into new markets, development of products and services and plans for new marketing strategies; and

• Discussions on the outlook of the economy.

BankUnited cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and are not historical facts. Actual results may differ materially from the results discussed in these forward-looking statements due to the following factors, among other things: general economic conditions, either nationally or regionally; changes or fluctuations in the interest rate environment; a deterioration in credit quality and/or a reduced demand for credit; reduced deposit flows and loan demand; competition from other financial services companies in our markets; legislative or regulatory changes, including changes in accounting standards, guidelines and policies; changes in the regulation of financial services companies; the issuance or redemption of additional equity or debt securities; the concentration of operations in south Florida, if the Florida economy or real estate values decline; and the threat and impact of war and terrorism. BankUnited cautions that the foregoing factors are not exclusive. BankUnited does not undertake, and specifically disclaims, any obligations to publicly release the result of any updates which might be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Critical Accounting Policies

BankUnited’s financial position and results of operations are impacted by management’s application of accounting policies involving judgments made to arrive at the carrying value of certain assets. Management’s greatest challenge in implementing its policies is the need to make estimates about the effect of matters that are inherently less than certain. Critical accounting policies applied by BankUnited are those that relate to the loan portfolio, which includes the allowance for loan losses and the valuation of mortgage servicing rights pertaining to the sale or securitization of mortgage loans. A variety of estimates impact the carrying value of the loan portfolio, including the amount of the allowance for loan losses, the placement of loans on non-accrual status, and the valuation of loans held for sale and mortgage servicing rights. On a periodic basis, management obtains a valuation of mortgage servicing rights from an independent third party.

For a more detailed discussion on these critical accounting policies, see “Critical Accounting Policies” on page 21 of BankUnited’s Annual Report on Form 10-K/A for the year ended September 30, 2002.

Fiscal 2003 Developments

On February 3, 2003, BankUnited announced the addition of Sharon A. Brown as an independent member of its Board of Directors. Ms. Brown will serve on the Audit Committee and will qualify as an “audit committee financial expert” in compliance with rules adopted by the Securities and Exchange Commission. Through July 31, 2003 Ms. Brown was Director of Alumni and External Affairs for the University of Miami School of Business Administration and previously served as Assistant Dean for Administration and Development. Ms. Brown was a partner at Coopers & Lybrand, where she worked for 25 years, prior to joining the University of Miami in 1992. At Coopers & Lybrand, Ms. Brown’s clients included financial institutions, non-profit organizations and major organizations in government and education. She advised senior management on accounting, auditing, financial, and operations issues, and developed expertise in financial reporting, internal control reviews, major financing, acquisition reviews and other areas. She became a partner of that firm in 1979. Ms. Brown is a member of the Audit Committee of the School Board of Miami-Dade County, and served on the five-member citizen board appointed by Florida Governor Chiles in 1998 to oversee the financial recovery of the City of Miami. Ms. Brown is a long-standing member of the Florida Institute of Certified Public Accountants where she has chaired various committees, including County Agency Audits, State and Local Government, Relations with Financial Institutions, and Structure and Governance. She also served as the organization’s President in 1986. The Florida House of Representatives recognized Ms. Brown for her service as president of the FICPA and for having devoted most of her professional career to improving the quality and integrity of local governmental audits.

BankUnited was added to the S&P SmallCap 600 GICS (Global Industry Classification Standard) Banks sub-industry after the close of trading on February 4, 2003. The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market size, liquidity and industry group representation. BankUnited was selected for inclusion in the NASDAQ Financial-100 Index, effective June 23, 2003. The NASDAQ Financial-100 Index includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization. The index contains banks and savings institutions and related holding companies, insurance companies, broker-dealers, investment companies and financial services organizations.

BankUnited believes that the branch network will continue to play a vital role in building banking relationships and toward this objective has opened its 42nd branch location subsequent to the 3rd quarter of fiscal 2003 in the Palm Beach County community of Palm Beach Gardens and a wholesale lending office in the state of Maryland during the 3rd quarter of fiscal 2003. BankUnited intends to open four additional full-service branches by the end of the calendar year.

In April 2003, BankUnited launched its micro-market strategy for the retail banking operation. The initiative, which divided the company’s marketplace into micro markets, is designed to provide BankUnited customers with an even greater level of high-touch service and to enhance community ties. Emphasizing that it is a true market-driven strategy, BankUnited has empowered its micro-market managers with enhanced decision making abilities, greater latitude in community sponsorship and involvement, and customer-centric promotions and product bundles. By offering our customers the advantages of community-bank service, localized decision making, and market-savvy bankers backed by BankUnited’s asset strength and broad product array, we hope to increase our market penetration. BankUnited intends to continue to carve a niche by offering more products and services than our community bank competitors, and more personalized and flexible service than our larger regional competitors.

BankUnited issued 3,936,500 shares of its Class A Common Stock at a price of $18.50 per share in its public offering, which closed on May 28, 2003. This includes 436,500 shares purchased by the underwriters, pursuant to an exercise of a portion of their over-allotment option. Gross proceeds from this equity offering were $72.8 million.

Results of Operations


	*For the Three Months Ended June 30, 2003 Compared to the Same Period in 2002*


	General

Net income was $9.6 million for the three months ended June 30, 2003, a 23% increase compared to $7.8 million for the same period in 2002. Basic and diluted earnings per share for the quarter were $0.35 and $0.33, respectively, versus $0.31 and $0.29, respectively, for the same period in 2002.


	Analysis of Net Interest Income

The following discussion of net interest income should be reviewed in conjunction with the Yields Earned and Rates Paid and Rate/Volume Analysis tables.

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. The following table sets forth certain information relating to the categories of BankUnited’s interest-earning assets and interest-bearing liabilities for the periods indicated. All yield and rate information is calculated on an annualized basis by dividing the annualized interest income or expense for the period by the average balance of the appropriate balance sheet item during the period. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets. Non-accrual loans are included in asset balances for the appropriate period, whereas recognition of interest on such loans is discontinued and any remaining accrued interest receivable is reversed, in conformity with Generally Accepted Accounting Principles and regulatory requirements. The yields and net interest margins have been calculated on a pre-tax basis.


	Yields Earned and Rates Paid



			For the Three Months Ended June 30,


			2003								2002

			Average					Yield/(1)			Average					Yield/(1)
			Balance			Interest		Rate			Balance			Interest		Rate


			(Dollars in thousands)
Interest-earning assets:
	Loans receivable, net(2)		$	4,074,481		$	56,699		5.57	%	$	3,799,152		$	61,959		6.53	%
	Mortgage-backed securities			1,859,634			17,796		3.83	%		1,149,776			16,796		5.84	%
	Short-term investments(3)			21,183			113		2.11	%		20,597			169		3.25	%
	Long-term investments and FHLB stock(4)			350,010			3,922		4.48	%		220,948			2,762		5.00	%

		Total interest-earning assets		6,305,308			78,530		4.98	%		5,190,473			81,686		6.30	%

Interest-bearing liabilities:
	NOW/Money market			579,712			1,224		0.85	%		415,432			1,549		1.50	%
	Savings			778,996			3,228		1.66	%		739,814			4,963		2.69	%
	Certificates of deposit			1,719,289			15,263		3.56	%		1,783,597			19,327		4.35	%
	Trust preferred securities and junior subordinated deferrable interest debentures(5)			266,262			4,922		7.39	%		232,628			4,879		8.39	%
	Senior notes			200,000			2,796		5.59	%		200,000			2,834		5.67	%
	FHLB advances and other borrowings			2,533,910			22,739		3.55	%		1,630,584			20,156		4.89	%

		Total interest-bearing liabilities	$	6,078,169		$	50,172		3.29	%	$	5,002,055		$	53,708		4.28	%

Excess of interest-earning assets over interest-bearing liabilities			$	227,139							$	188,418

Net interest income						$	28,358							$	27,978

Interest rate spread									1.69	%							2.02	%

Net interest margin									1.81	%							2.17	%

Ratio of interest-earning assets to interest-bearing liabilities				103.74	%							103.77	%

(1) The yields and rates along with the corresponding interest rate spread and net interest margin represent the yields earned and rates paid on BankUnited’s interest-earning assets and interest-bearing liabilities, respectively, during the three-month periods ended June 30, 2003 and 2002, and do not include any estimates of the effect that accelerated amortization of premiums or discounts would have on the yields earned.

(2) Includes average non-accruing loans of $45 million and $26 million for the three months ended June 30, 2003 and 2002, respectively. The yields on loans receivable, net include amortization of loan fees.

(3) Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(4) Long-term investments include agency securities and Trust Preferred Securities of other issuers.

(5) Interest and rates include the effect of interest rate swaps.


	Rate/Volume Analysis

The following table presents, for the periods indicated, the changes in interest income and the changes in interest expense attributable to the changes in interest rates and the changes in the volume of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on the changes attributable to: (i) changes in volume (change in volume multiplied by prior year rate); (ii) changes in rate (change in rate multiplied by prior year volume); (iii) changes in rate/volume (change in rate multiplied by change in volume); and (iv) total changes in rate and volume.



			For the Three Month Period Ended June 30,
			2003 vs. 2002


			Increase (Decrease) Due to

			Changes						Changes			Total
			in			Changes			in Rate/			Increase
			Volume			in Rate			Volume			(Decrease)


			(Dollars in thousands)
Interest income attributable to:
	Loans receivable, net		$	4,495		$	(9,118	)	$	(637	)	$	(5,260	)
	Mortgage-backed securities			10,364			(5,778	)		(3,586	)		1,000
	Short-term investments(1)			5			(59	)		(2	)		(56	)
	Long-term investments and FHLB stock(2)			1,613			(282	)		(171	)		1,160

		Total interest-earning assets		16,477			(15,237	)		(4,396	)		(3,156	)

Interest expense attributable to:
	NOW/Money market			616			(675	)		(266	)		(325	)
	Savings			263			(1,905	)		(93	)		(1,735	)
	Certificates of deposit			(699	)		(3,523	)		158			(4,064	)
	Trust Preferred Securities and junior subordinated deferrable interest debentures(3)			705			(582	)		(80	)		43
	Senior notes			—			(40	)		2			(38	)
	FHLB advances and other borrowings			11,043			(5,462	)		(2,998	)		2,583

		Total interest-bearing liabilities		11,928			(12,187	)		(3,277	)		(3,536	)

Increase (decrease) in net interest income			$	4,549		$	(3,050	)	$	(1,119	)	$	380

(1) Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(2) Long-term investments include agency securities and Trust Preferred Securities of other issuers.

(3) Includes the effect of interest rate swaps.

While BankUnited anticipates future improvement, the sustained pressure of high industry-wide levels of residential loan pre-payments coupled with market pressure to competitively price deposits resulted in a net interest margin of 1.81% for the three months ended June 30, 2003, compared to 2.17% for the same period in 2002.

The average balances of loans, mortgage-backed securities, and FHLB stock increased significantly during the three months ended June 30, 2003 compared to the same period in 2002. These increases generated sufficient interest income due to changes in volume to help offset the margin compression experienced during the quarter. The result was an increase in net interest income of $380 thousand for the three months ended June 30, 2003 as compared to the same period in 2002.

While it is difficult to predict interest rate levels, we are cautiously optimistic that our net interest margin should begin to improve over the next several quarters as certain trends continue, and as

BankUnited takes proactive measures. Some of the measures that we have taken and possible favorable trends which should help to effect this improvement are:

• Effecting growth in core deposits.

• Increasing non-interest bearing deposits.

• Capitalizing on deposit re-pricing opportunities. Given the lagging nature of time deposit re-pricing, we have an opportunity to continue to lower our time deposit cost of funds over the next several quarters.

• Expanding the portfolio of loans originated by BankUnited. BankUnited’s portfolio of bank-originated loans grew by $171 million, or 5% from the quarter ended March 31, 2003. This growth should help to expand net interest margin. Management sees tremendous benefit to increasing its portfolio of self-originated loans. These loans are slower to pre-pay, and offer BankUnited significant cross-selling opportunities. Successful execution of this strategy should allow BankUnited to overcome the pressure of pre-payments on its margin in the long term.

• Eventual run-off of previously purchased residential loans serviced by others (LSBO); BankUnited’s LSBO portfolio has received the hardest impact from the trend in pre-payments. This portfolio, which stood at $692 million at September 30, 2002, continues to be pre-paid at a rate more than double that of the Bank’s self-originated residential portfolio, and at quarter end had a balance of $278 million. BankUnited has followed a policy of allowing the LSBO portfolio to run off, replacing them with loans originated by BankUnited. We expect the significant pressure on our net interest margin resulting from the pre-payments on the LSBO portfolio to subside during the next several quarters. Until full depletion of the portfolio, management expects that pre-payments will continue to have an adverse effect on net interest margin.

• Targeting consumer and commercial loan growth and diversification of the portfolio; management continues to implement proven consumer and commercial lending strategies to grow and diversify the Bank’s loan portfolio. The result of our lending strategies, as shown through record production in key areas, should serve to ease margin pressures, especially in light of our focus on gathering lower-cost deposits.

• Asset sensitive balance sheet; BankUnited maintains as asset sensitive position allowing us to re-price our assets faster than our liabilities in a rising interest rate environment.

• Strategically reducing high-interest debt.


	Analysis of Non-Interest Income and Expenses



			For the Three
			Months Ended
			June 30,

			2003			2002			Change



			(Dollars in thousands)
Non-interest income:
	Loan servicing fees, net of amortization		$	(1,346	)	$	(632	)	$	(714	)	(113.0	)%
	Loan fees			1,372			847			525		62.0	%
	Deposit fees			1,017			843			174		20.6	%
	Other fees			410			287			123		42.9	%
	Net gain (loss) on sale of investment and mortgage-backed securities			4,085			(295	)		4,380		1,484.7	%
	Net gain on sale of loans and other assets			2,555			1,442			1,113		77.2	%
	Insurance and investment services income			771			844			(73	)	(8.6	)%
	Other			1,158			951			207		21.8	%

		Total non-interest income	$	10,022		$	4,287		$	5,735		133.8	%

Non-interest income reached $10.0 million for the three months ended June 30, 2003, which is an increase of 133.8%, or $5.7 million over the same period in the prior year. The decrease of $714 thousand in loan servicing fees, net of amortization includes an increase in loan servicing fees of $231 thousand, offset by an increase in the amortization of mortgage servicing rights of $945 thousand. The increase in amortization of mortgage servicing rights is largely the result of a high level of pre-payments occurring during the quarter in the current low interest rate environment. The increase in loan servicing fees reflects a general growth in loans serviced for others by BankUnited.

Loan fees, which include late-payment fees and pre-payment penalties, increased by $525 thousand, or 62%, for the three months ended June 30, 2003 compared to the same period in the prior year; this increase reflects the high level of pre-payments discussed above. The increase in deposit fees of $174 thousand, or 20.6%, is the direct result of growth in core deposits, particularly non-interest bearing accounts. Other fees have increased by $123 thousand, or 42.9%, compared to the same period in the prior year. We expect continued improvement in generating fees as we focus on expanding our banking office locations, strengthen our commercial relationships, and as our micro-market strategy begins to build momentum.

BankUnited realized a total of $4.1 million in net gains on the sale of investments and mortgage-backed securities during the three months ended June 30, 2003. Included in that figure is a $4.3 million gain resulting from the sale of $203 million of mortgage-backed securities. These sales were outside of BankUnited’s securitization activities, which includes originating and securitizing loans with the intention to sell the resulting securities. Management concluded that the realizable value upon sale represented greater value than holding those securities. In addition to these sales, BankUnited realized $2.6 million in gains upon the sale of loans and other assets.

Other income of $1.1 million for the three months ended June 30, 2003 includes an increase in the cash surrender value of bank-owned life insurance policies of $983 thousand. The increase in cash surrender value during the three months ended June 30, 2003 was $218 thousand greater than it was for the same period in 2002, which is mostly an indication of the increase in coverage.



			For the Three Months
			Ended June 30,

			2003		2002		Change



			(Dollars in thousands)
Non-interest expenses:
	Employee compensation and benefits		$	9,569	$	7,891	$	1,678		21.3	%
	Occupancy and equipment			3,172		2,863		309		10.8	%
	Telecommunications and data processing			1,310		1,106		204		18.4	%
	Advertising and promotion expense			1,021		1,256		(235	)	(18.7	)%
	Professional fees — legal and accounting			864		1,851		(987	)	(53.3	)%
	Loan closing expense			827		705		122		17.3	%
	Postage and courier			394		306		88		28.8	%
	Loan servicing expense(1)			277		652		(375	)	(57.5	)%
	Insurance			304		261		43		16.5	%
	Other operating expenses			4,940		1,204		3,736		310.3	%

		Total non-interest expenses	$	22,678	$	18,095	$	4,583		25.3	%

(1) Loan servicing expense relates to LSBOs.

Non-interest expense increased by $4.6 million for the three months ended June 30, 2003 compared to the same period in 2002. The largest portion of the increase was $3.7 million charged to other operating expenses related to the elimination of long-term debt demonstrating BankUnited’s efforts to reduce overall debt and replace existing debt with lower cost funds. As BankUnited continues to expand its operations, it is expected that non-interest expenses may increase as is evidenced by the increase in employee compensation of $1.7 million.

The decrease in the provision for income taxes relative to income before income taxes for the three months ended June 30, 2003, compared to 2002, reflects a change in BankUnited’s effective tax rate due to new tax planning strategies.

For the Nine Months Ended June 30, 2003 Compared to the Same Period in 2002


	General

Net income for the first nine months of fiscal 2003 was $28.0 million compared to $22.2 million for the same period last year, a 26% increase. Basic and diluted earnings per share for the nine months ended June 30, 2003, were $1.07 and $0.99, respectively, versus $0.88 and $0.83, respectively, for the same period in the prior year. This represents increases of 22% and 19% for basic and diluted earnings per share, respectively.


	Analysis of Net Interest Income


	*Yields Earned and Rates Paid*



			For the Nine Months Ended June 30,


			2003								2002

			Average					Yield/(1)			Average					Yield/(1)
			Balance			Interest		Rate			Balance			Interest		Rate


			(Dollars in thousands)
Interest-earning assets:
	Loans receivable, net(2)		$	4,039,442		$	176,333		5.82	%	$	3,858,299		$	192,207		6.64	%
	Mortgage-backed securities			1,617,548			50,763		4.18	%		1,007,113			45,429		6.01	%
	Short-term investments(3)			15,919			340		2.81	%		19,237			483		3.31	%
	Long-term investments and FHLB stock(4)			301,428			10,644		4.71	%		211,951			8,605		5.42	%

		Total interest-earning assets		5,974,337			238,080		5.31	%		5,096,600			246,724		6.46	%

Interest-bearing liabilities:
	NOW/Money markets			552,514			4,311		1.04	%		372,202			4,043		1.45	%
	Savings			740,458			10,460		1.89	%		702,885			14,767		2.81	%
	Certificates of deposit			1,750,181			48,700		3.72	%		1,763,043			61,832		4.69	%
	Trust preferred securities and junior subordinated deferrable interest debentures(5)			273,423			15,057		7.34	%		217,569			14,753		9.04	%
	Senior notes			200,000			8,408		5.61	%		200,000			8,498		5.67	%
	FHLB advances and other borrowings			2,250,642			65,013		3.81	%		1,653,230			60,858		4.85	%

		Total interest-bearing liabilities	$	5,767,218		$	151,949		3.50	%	$	4,908,929		$	164,751		4.46	%

Excess of interest-earning assets over interest-bearing liabilities			$	207,119							$	187,671

Net interest income						$	86,131							$	81,973

Interest rate spread									1.81	%							2.00	%

Net interest margin									1.94	%							2.16	%

Ratio of interest-earning assets to interest-bearing liabilities				103.59	%							103.82	%

(1) The yields and rates along with the corresponding interest rate spread and net interest margin represent the yields earned and rates paid on BankUnited’s interest-earning assets and interest-bearing liabilities, respectively, during the nine-month periods ended June 30, 2003 and 2002 and do not include any estimates of the effect that accelerated amortization of purchased premiums or discounts would have on the yields earned.

(2) Includes average non-accruing loans of $36 million and $27 million for the nine months ended June 30, 2003 and 2002, respectively. The yield on loans receivable, net includes amortization of loan fees.

(3) Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(4) Long-term investments include agency securities and Trust Preferred Securities by other issuers.

(5) Interest and rates include the effect of interest rate swaps.


	Rate/Volume Analysis



			For the Nine Month Period Ended June 30,
			2003 vs. 2002


			Increase (Decrease) Due to

									Changes in			Total
			Changes in			Changes in			Rate/			Increase
			Volume			Rate			Volume			(Decrease)


			(Dollars in thousands)
Interest income attributable to:
	Loans receivable, net		$	9,021		$	(23,729	)	$	(1,166	)	$	(15,874	)
	Mortgage-backed securities			27,515			(13,823	)		(8,358	)		5,334
	Short-term investments(1)			(82	)		(72	)		11			(143	)
	Long-term investments and FHLB stock(2)			3,637			(1,129	)		(469	)		2,039

		Total interest-earning assets		40,091			(38,753	)		(9,982	)		(8,644	)

Interest expense attributable to:
	NOW/Money Market			1,961			(1,145	)		(548	)		268
	Savings			792			(4,850	)		(249	)		(4,307	)
	Certificates of deposit			(452	)		(12,826	)		146			(13,132	)
	Trust preferred securities and junior subordinated deferrable interest debentures(3)			3,787			(2,774	)		(709	)		304
	Senior notes			—			(90	)		—			(90	)
	FHLB advances and other borrowings			21,731			(12,895	)		(4,681	)		4,155

		Total interest-bearing liabilities		27,819			(34,580	)		(6,041	)		(12,802	)

Increase (decrease) in net interest income			$	12,272		$	(4,173	)	$	(3,941	)	$	4,158

(1) Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(2) Long-term investments include agency securities and Trust Preferred Securities by other issuers.

(3) Includes the effect of interest rate swaps.

As indicated in the discussion of results for the three months ended June 30, 2003, the high levels of residential loan pre-payments resulting from historically low mortgage rates, coupled with market-driven competitive deposit pricing, has resulted in compression of the net interest margin. The net interest margin for the nine months ended June 30, 2003 was 1.94% compared to 2.16% for the same period in the prior year. The effect of pre-payments was especially evident in the area of LSBOs, which were purchased several years ago. Despite the negative impacts of pre-payments, BankUnited was able to generate $9.0 million in additional interest income from loan volume.

The interest income generated from an increase in average mortgage-backed securities for the nine months ended June 30, 2003 compared to 2002 helped to reduce margin compression by generating an additional $27.5 million in interest income. While interest expense decreased significantly for the nine months ended June 30, 2003 compared to 2002 due to lower deposit and borrowing rates, competition prevented BankUnited from significantly lowering rates on deposits to offset the reduction of yield on its assets. There was also an increase in interest expense of $4.2 million from FHLB advances fueled mostly by an increase in average balances. BankUnited utilizes advances from the FHLB to fund growth mostly in the loan and securities portfolios.


	Analysis of Non-Interest Income and Expenses



			For the Nine Months
			Ended June 30,

			2003			2002			Change



			(Dollars in thousands)
Non-interest income:
	Loan servicing fees, net of amortization		$	(3,228	)	$	(1,616	)	$	(1,612	)	(99.8	)%
	Loan fees			3,562			2,887			675		23.4	%
	Deposit fees			3,037			2,479			558		22.5	%
	Other fees			1,014			726			288		39.7	%
	Net gain on sale of investment and mortgage-backed securities			4,840			587			4,253		724.5	%
	Net gain on sale of loans and other assets			6,323			2,954			3,369		114.0	%
	Insurance and investment service income			2,091			3,024			(933	)	(30.9	)%
	Other			4,180			2,171			2,009		92.5	%

		Total non-interest income	$	21,819		$	13,212		$	8,607		65.1	%

Non-interest income reached $21.8 million for the nine months ended June 30, 2003, which is an increase of 65.1%, or $8.6 million, over the same period in the prior year. The decrease of $1.6 million in loan servicing fees, net of amortization includes an increase in loan servicing fees of $548 thousand, offset by an increase in the amortization of mortgage servicing rights of $2.2 million. The increase in amortization of mortgage servicing rights is largely the result of a high level of pre-payments during the first three quarters of fiscal 2003 due to the current low interest rate environment. The increase in loan servicing fees reflects a general growth in loans serviced for others by BankUnited.

Loan fees, which include late payment fees and pre-payment penalties, increased by $675 thousand, or 23.4%, for the nine months ended June 30, 2003 compared to the same period in the prior year; this increase reflects the high level of pre-payments discussed above. The increase in deposit fees of $558 thousand, or 22.5%, is the direct result of growth in core deposits, particularly non-interest bearing accounts. Other fees have increased by $288 thousand, or 39.7% compared to the same period in the prior year. We expect continued improvement in generating fees as we focus on expanding our banking office locations, strengthen our commercial relationships, and as our micro-market strategy continues to build momentum.

BankUnited realized a total of $4.8 million in net gains on the sale of investments and mortgage-backed securities during the nine months ended June 30, 2003. Included in that figure is a $4.3 million gain resulting from the sale of $203 million of mortgage-backed securities during the three months ended June 30, 2003, and the sale of investment securities during the three months ended December 31, 2002 which resulted in a net gain of $1.5 million, offset by a loss on the sale of mortgage-backed securities related to securitizations. The sale of mortgage-backed securities resulting in the $4.3 million net gain were outside of BankUnited’s securitization activities, which includes originating and securitizing loans with the intention to sell the resulting securities. Management concluded that the realizable value upon sale represented greater value than holding these securities. In addition to those sales, BankUnited realized $6.3 million of gains from the sale of loans and other assets.

Other non-interest income of $4.1 million for the nine months ended June 30, 2003 includes a life insurance payment of $1.1 million related to bank-owned life insurance policies and an increase in the cash surrender value of those policies of $2.4 million. The increase in cash surrender value during the nine months ended June 30, 2003 was $500 thousand greater than it was for the same period in 2002, which is mostly an indication of the increase in coverage.



			For the Nine Months
			Ended June 30

			2003		2002		Change



			(Dollars in thousands)
Non-interest expenses:
	Employee compensation and benefits		$	27,938	$	22,304	$	5,634		25.3	%
	Occupancy and equipment			9,125		8,179		946		11.6	%
	Telecommunications and data processing			3,729		3,267		462		14.1	%
	Advertising and promotion expense			3,464		4,536		(1,072	)	(23.6	)%
	Professional fees — legal and accounting			3,211		4,107		(896	)	(21.8	)%
	Loan closing fees			2,362		1,927		435		22.5	%
	Loan servicing expense(1)			1,124		2,384		(1,260	)	(52.9	)%
	Postage and courier			1,059		875		184		21.0	%
	Insurance			873		778		95		12.2	%
	Other operating expenses			9,339		4,530		4,809		106.2	%

		Total non-interest expenses	$	62,224	$	52,887	$	9,337		17.7	%

(1) Loan servicing expenses relate to LSBOs.

The largest portion of the increase was $5.6 million in employee compensation and benefits, which is expected as BankUnited expands its operations. There was a $5.5 million charge to other operating expenses during the nine months ended June 30, 2003 related to the elimination of long-term debt reflecting efforts to replace existing debt with lower cost funds. Loan servicing fees decreased by $1.3 million and will ultimately be eliminated as BankUnited allows its LSBO portfolio run off. Advertising and promotion expenses decreased by $1.1 million reflecting a realignment of BankUnited’s overall marketing strategy in preparation for the full roll-out of BankUnited’s micro-market advertising campaign in the first quarter of fiscal 2004.

The increase in the provision for income taxes of $1.0 million for the nine months ended June 30, 2003, compared to 2002, reflects an increase in taxable income but also reflects a decrease in BankUnited’s effective tax rate due to new tax planning strategies.

Liquidity

BankUnited’s objective in managing liquidity is to meet all cash flow requirements, including those from operating activities, customer demands on deposits and debt obligations, in a cost-effective manner. This objective is achieved through the implementation of BankUnited’s Asset/Liability Management Policy, which also strives to maintain earnings performance consistent with long-term goals and within acceptable levels of risk, while satisfying regulatory capital requirements. For information on the capital requirements that must be maintained by BankUnited, see note 7. Regulatory Capital to the Accompanying Condensed Notes to Consolidated Financial Statements.

In managing liquidity, BankUnited analyzes various sources of short-term funding used to meet short-term demands. In addition to funds provided by operating activities, BankUnited also relies on funds provided by both investing and financing activities. Funds provided by investing activities include: proceeds from the sale and/or maturities of investments, mortgage-backed securities, and securitized loans. Funds provided by financing activities include: deposits from customers, advances from the FHLB, proceeds from

securities sold under agreements to repurchase and other borrowings, issuances of Trust Preferred Securities, and issuance of stock.

Cash and cash equivalents decreased by $402 million for the nine months ended June 30, 2003, to $70 million versus $472 million at September 30, 2002. The relatively large cash and cash equivalent balance at the end of fiscal 2002 was in anticipation of funding investments in mortgage-backed securities during fiscal 2003. The net increase in mortgage-backed securities portfolio of $990 million was funded in part with this decrease in cash and cash equivalents. Other means of funding the increase in mortgage-backed securities came from an increase in deposits and additional borrowings in the form of FHLB advances.

Cash used in operating activities for the nine months ended June 30, 2003 was $577 million. The most significant items in that figure include net income of $28 million, the funding of loans originated for sale of $671 million, and proceeds received from the sale of loans of $60 million.

Significant sources of funds from investing activities for the nine months ended June 30, 2003 included payments on loans, investment, and mortgage-backed securities of $1.7 billion, $50 million, and $821 million, respectively and proceeds from the sale of investment and mortgage-backed securities of $41 million, and $553 million, respectively.

Significant sources of funds from financing activities for the nine months ended June 30, 2003 included a net increase in deposits, FHLB advances, and Trust Preferred Securities of $182 million, $513 million, and $66 million, respectively. In addition, BankUnited raised $72 million from an additional public offering of its Class A Common Stock in the third quarter of fiscal 2003.

Significant uses of funds in investing activities for the nine months ended June 30, 2003 included funding $2.4 billion in loans, purchasing $1.9 billion of mortgage-backed and investment securities, and purchasing $28 million of bank-owned life insurance.

Significant uses of funds in financing activities for the nine months ended June 30, 2003 included redeeming and repurchasing Trust Preferred Securities of $160 million.

As of June 30, 2003, BankUnited had $385 million in investments and mortgage-backed securities pledged against securities sold under agreements to repurchase with an outstanding balance of $364 million.

As of June 30, 2003 BankUnited had approximately $642 million in additional borrowing capacity not including funds that may be raised through additional debt or equity offerings. The borrowing capacity is primarily comprised of unused credit lines with the FHLB of Atlanta and repurchase agreements.

BankUnited is not aware of any events, or uncertainties, which may impede liquidity in the short or long-term.

Financial Condition

The following is a discussion of significant changes from September 30, 2002 to June 30, 2003 in the Statement of Financial Condition. For a discussion of changes in cash and cash equivalents, see Liquidity.

Assets continue to grow, and now total $7.0 billion versus $6.0 billion at September 30, 2002. The Bank is maintaining its strong capital position well in excess of regulatory requirements, with core and risk-based capital ratios of 7.3% and 16.1%, respectively.


	*Assets*

Investments available for sale — Investments available for sale increased by $118 million or 68.6%, to $289 million at June 30, 2003. This increase is the net result of $203 million in purchases, $50 million in maturities, and $41 million in sales, which resulted in a gain of $1.5 million. In addition, there was an increase of $4.5 million due to an adjustment for the changes in fair value as of June 30, 2003.

Mortgage-backed securities available for sale — Mortgage-backed securities available for sale increased by $990 million or 87%, to $2.1 billion at June 30, 2003. This net increase is primarily the result of purchases of $1.7 billion, including $247 million pending settlement, and securitizations of $507 million. This was offset with repayments of $821 million, and sales of $553 million, including $59 million pending settlement. The sales of $553 million resulted in gains of $3.4 million which is reflected in net gain on sale of investments and mortgage-backed securities in the consolidated statement of operations. In addition, there was a reduction due to the amortization of premiums and discounts of $12 million, and a reduction of $4.8 million due to changes in fair value as of June 30, 2003. The relatively high level of amortization of premiums and discounts during the nine-month period is the result of increased levels of pre-payments occurring in the current low interest rate environment.

Loans — Loans receivable, net (including loans held for sale) increased by $125 million to $4.1 billion at June 30, 2003. This net increase stems primarily from funding loans in the amount of $2.4 billion, offset by repayments of $1.7 billion, securitizations of $507 million, and sales of $54 million. The sales resulted in gains of $6.4 million, which also includes activity in connection with the securitization of loans.

Mortgage servicing rights — Mortgage servicing rights increased by $4.1 million to $10.8 million at June 30, 2003. This net increase is the result of recognizing $8.9 million in servicing rights upon the sale of loans which will continue to be serviced by BankUnited. This increase was offset by the amortization of $4.8 million resulting mostly from acceleration in prepayments as a result of the low interest rate environment.

Other earning assets — Other earning assets increased by $25.6 million to $116.4 million at June 30, 2003. This category consists primarily of FHLB stock, which must be purchased in proportion to advances received from the FHLB.

Bank-owned life insurance — Bank-owned life insurance increased by $29.9 million due to additional purchases of coverage under the policies of $27.5 million and a net increase in the cash surrender value of $2.4 million.


	*Liabilities*

Deposits — Deposits grew by $182 million to $3.2 billion as of June 30, 2003. As a result of BankUnited’s increased efforts to attract transaction accounts through business relationships, the deposit mix continues to shift towards core deposits. Core deposits, which include checking, savings, and money market accounts provide BankUnited with funds at a lower cost than time deposits. This is most evident from the sharp increase in non-interest bearing deposits of $57 million or 49% compared to September 30, 2002. The total increase in core deposits for the nine months ended June 30, 2003 was $182 million, whereas time deposits remained relatively flat. BankUnited believes that the expansion of the branch network will continue to play a vital role in building banking relationships. Coupled with BankUnited’s micro-market strategy, management expects the branch network to facilitate a further shift in deposit mix towards core deposits.

Advances from Federal Home Loan Bank — FHLB advances increased by $513 million to reach $2.3 billion as of June 30, 2003. BankUnited utilized these advances primarily, to fund the purchase of mortgage-backed securities.

Trust Preferred Securities and Junior Subordinated Deferrable Interest Debentures – Trust preferred securities and junior subordinated deferrable interest debentures decreased by $92 million, to $163 million at June 30, 2003. The net decrease of $92 million is primarily the result of redemptions and repurchases, reducing Trust Preferred Securities by $160 million, offset by $67 million of new issuances. See note 5. Trust Preferred Securities and Junior Subordinated Deferrable Interest Debentures for more information on the redemptions and issuances.


	*Asset Quality*

Non-performing assets as of June 30, 2003 were $52.7 million, which represents an increase of $21.0 million, or 66%, from $31.7 million as of September 30, 2002. BankUnited places great importance on safeguarding its credit quality, and supports this through high credit standards and a centralized credit policy area. Net charge-offs during the nine-month period ended June 30, 2003 were $1.7 million compared to the pro-rata equivalent of $3.6 million for the twelve months ended September 30, 2002. Accordingly, the net annualized charge-off ratio decreased from 0.12% at September 30, 2002 to 0.06% at June 30, 2003.

Although BankUnited achieved an anticipated reduction in certain non-performing assets during the past quarter, the period-end deterioration of a secured credit relationship contributed to an increase in non-performing assets as a percentage of total assets to 0.75% from 0.53% at the end of fiscal year 2002. The increase in non-performing loans of $19.2 million over September 30, 2002 includes an increase in non-performing residential loans of $3.4 million, an increase in non-performing commercial real estate loans of $10.1 million, and an increase in non-performing commercial business loans of $5.7 million.

BankUnited’s allowance for loan losses as a percentage of total loans is currently at 0.54% as of June 30, 2003, up from 0.51% as of September 30, 2002. Management believes it to be prudent given the composition of its loan portfolio, with more than 90% secured by real estate.

The following table sets forth additional information concerning BankUnited’s non-performing assets at June 30, 2003 and September 30, 2002.


		June 30,			September 30,
		2003			2002


		(Dollars in thousands)
Non-accrual loans		$	46,597		$	27,664
Restructured loans			309			315
Loans past due 90 days and still accruing			318			—

	Total non-performing loans		47,224			27,979
Non-accrual tax certificates			355			696
Real estate owned			5,100			3,003

	Total non-performing assets	$	52,679		$	31,678

Allowance for losses on tax certificates		$	365		$	771
Allowance for loan losses			22,441			20,293

	Total allowance	$	22,806		$	21,064

Non-performing assets as a percentage of total assets			0.75	%		0.53	%
Non-performing loans as a percentage of total loans			1.14	%		0.70	%
Allowance for loan losses as a percentage of total loans			0.54	%		0.51	%
Allowance for loan losses as a percentage of non-performing loans			47.52	%		72.53	%
Total allowance as a percentage of non-performing assets			43.29	%		66.49	%
Net annualized year-to-date charge-offs as a percentage of average total loans			0.06	%		0.12	%

BankUnited’s allowance for loan losses is established and maintained based upon management’s evaluation of the risks inherent in BankUnited’s loan portfolio, including the economic trends and other conditions in specific geographic areas as they relate to the nature of BankUnited’s portfolio.

The following table sets forth the change in BankUnited’s allowance for loan losses for the three and nine months ended June 30, 2003 and 2002.



			For the Three						For the Nine
			Months Ended						Months Ended

			June 30,			June 30,			June 30,			June 30,
			2003			2002			2003			2002


			(In thousands)
Allowance for loan losses, balance (at beginning of period)			$	21,662		$	17,831		$	20,293		$	15,940
Provisions for loan losses				1,375			1,900			3,925			7,300
Loans charged off:
	One-to-four family residential mortgages(1)			(85	)		(123	)		(256	)		(443	)
	Commercial real estate			—			—			—			(887	)
	Commercial business			(448	)		(733	)		(1,423	)		(2,934	)
	Consumer(1)			(80	)		(66	)		(156	)		(249	)

		Total loans charged off		(613	)		(922	)		(1,835	)		(4,513	)

Recoveries:
	One-to-four family residential mortgages(1)			—			4			—			4
	Commercial real estate			—			2			—			71
	Commercial business			13			39			44			40
	Consumer(1)			4			2			14			14

		Total recoveries		17			47			58			129

Allowance for loan losses, balance (at end of period)			$	22,441		$	18,856		$	22,441		$	18,856

(1) Specialty consumer mortgage loans originated through our branch network are included in one-to-four family residential loans.

The following table sets forth BankUnited’s allocation of the allowance for loan losses by category as of June 30, 2003 and September 30, 2002.


			June 30,		September 30,
			2003		2002


			(In thousands)
Balance at the end of the period applicable to:
	One-to-four family residential mortgages(1)		$	4,371	$	4,096
	Multi-family residential mortgages			323		281
	Commercial real estate			4,856		3,834
	Construction			1,586		1,007
	Land			716		746
	Commercial business			6,541		5,420
	Consumer(1)			2,115		2,094
	Unallocated			1,933		2,815

		Total allowance for loan losses	$	22,441	$	20,293

(1) Specialty consumer mortgage loans originated through our branch network are included in one-to-four family residential loans.

Loan Portfolio

The following table sets forth the composition of BankUnited’s loan portfolio, including loans held for sale, at June 30, 2003 and September 30, 2002.



			June 30, 2003						September 30, 2002

						Percent of						Percent of
			Amount			Total(1)			Amount			Total(1)


			(Dollars in thousands)
Mortgage loans:
	One-to-four family residential mortgages(2)		$	3,167,258			83.2	%	$	3,096,312			83.4	%
	Multi-family residential mortgages			27,973			0.7	%		25,456			0.7	%
	Commercial real estate			186,909			4.9	%		183,311			4.9	%
	Construction			146,848			3.9	%		98,697			2.7	%
	Land			23,348			0.6	%		27,636			0.7	%

		Total mortgage loans		3,552,336			93.3	%		3,431,412			92.4	%

Other loans:
	Commercial business			136,891			3.6	%		168,679			4.5	%
	Consumer(2)			107,420			2.8	%		103,118			2.8	%

	Total other loans			244,311			6.4	%		271,797			7.3	%

		Total loans		3,796,647			99.7	%		3,703,209			99.7	%
Unearned discounts, premiums and deferred loan fees, net				34,380			0.9	%		30,449			0.8	%
Allowance for loan losses				(22,441	)		(0.6	)%		(20,293	)		(0.5	)%

Loans held for investment, net			$	3,808,586			100.0	%	$	3,713,365			100.0	%

Mortgage loans held for sale				308,463						278,759

Total loans, net			$	4,117,049					$	3,992,124

(1) Percent of Total is calculated using “Loans held for investment, net” in the denominator.

(2) Specialty consumer mortgage loans originated through our branch network are included in one-to-four family residential loans.

Securities Portfolio (See Note 3. Securities Portfolio of BankUnited condensed notes to consolidated financial statements for information on investment and mortgage-backed securities).

Related Party Transactions

The Bank, as an insured depository institution as defined under Section 3 of the Federal Deposit Investment Act, extends loans to directors, officers and employees, as well as to members of their immediate families and their affiliates. The following discussion pertains to significant changes to related party transactions during the nine month period ending June 30, 2003. As of June 30, 2003, there were approximately $3.5 million in loans receivable from an entity in which a director has interests. As of September 30, 2002 there were approximately $1 million in loans receivables from entities in which two directors had interests. As of June 30, 2003, BankUnited had loans receivable from BankUnited’s executive officers in the aggregate amount of $2.4 million. Loans receivable from executive officers as of September 30, 2002 were $986 thousand. These loans are secured by each executive’s primary residence.

These loans were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. These loans and their terms have been reviewed and approved by the Bank’s board of directors.


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*

The discussion contained in BankUnited’s Annual Report on Form 10-K/A for the year ended September 30, 2002, under Item 7a, “Quantitative and Qualitative Disclosures about Market Risk,” provides detailed quantitative and qualitative disclosures about market risk and should be referenced for information thereon. In addition, the following discussion addresses the sources and effects of developments during the nine months ended June 30, 2003 which related to risks associated with investments and mortgage-backed securities.

Risks Associated with Changing Interest Rates. As a financial intermediary, BankUnited invests in various types of interest-earning assets (primarily loans, mortgage-backed securities, and investment securities), which are funded largely by interest-bearing liabilities (primarily deposits, FHLB advances, senior notes, and Trust Preferred Securities). Such financial instruments have varying levels of sensitivity to changes in market interest rates, which creates interest rate risk for BankUnited. Accordingly, BankUnited’s net interest income, the most significant component of its net income, is subject to substantial volatility due to changes in interest rates or market yield curves, particularly if there are differences, or gaps, in the re-pricing frequencies of its interest-earning assets and the interest-bearing liabilities which fund them. BankUnited monitors such interest rate gaps and seeks to manage its interest rate risk by adjusting the re-pricing frequencies of its interest-earning assets and interest-bearing liabilities. Additionally, BankUnited utilizes, on a limited basis, derivative financial instruments designed to reduce the interest rate risks associated with its interest-earning assets and interest-bearing liabilities.

Risks Associated with Investments and Mortgage-Backed Securities. BankUnited purchases fixed and adjustable rate mortgage-backed securities and other securities for liquidity, yield and risk management purposes. Changes in market interest rates associated with BankUnited’s investments and mortgage-backed securities could have a material adverse effect on BankUnited’s carrying value of its securities. Such changes in the carrying value of mortgage-backed securities and other securities classified as available-for-sale would be reflected, net of taxes, as a component of stockholders’ equity. See note 8. Comprehensive Income to the Accompanying Condensed Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Securities Portfolio.”

Derivative and Hedging Activities. BankUnited uses derivative instruments as part of its interest rate risk management activities to reduce risks associated with its borrowing activities. Derivatives used for interest rate risk management include various interest rate swaps that relate to the pricing of specific on-balance sheet instruments and forecasted transactions. In connection with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), we recognize all derivatives as either assets or liabilities on the consolidated balance sheet and report them at fair value with realized and unrealized gains and losses included in either earnings or in other comprehensive income, depending on the purpose for which the derivative is held and whether the derivative qualifies for hedge accounting.

BankUnited uses interest rate swap agreements that qualify as fair value hedges and those that qualify as cash flow hedges. Fair value hedges are used to hedge fixed rate debt. BankUnited uses cash flow hedges to hedge interest rate risk associated with variable rate debt.

In connection with its interest rate management activities, BankUnited may use other derivatives as economic hedges of on-balance sheet assets and liabilities or forecasted transactions which do not qualify for hedge accounting under SFAS 133. Accordingly, these derivatives are reported as fair value on the consolidated balance sheet with realized gains and losses included in earnings.

By using derivative instruments, BankUnited is exposed to credit and market risk. Credit risk, which is the risk that a counterparty to a derivative instrument will fail to perform, is equal to the extent of the fair value gain in a derivative. Credit risk is created when the fair value of a derivative contract is positive, since this generally indicates that the counterparty owes us. When the fair value of a derivative is negative,

no credit risk exists since BankUnited would owe the counterparty. BankUnited minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties as evaluated by management. Market risk is the adverse effect on the value of a financial instrument from a change in interest rates or implied volatility of rates. We manage the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken. The market risk associated with derivatives used for interest rate risk management activity is fully incorporated into our market risk sensitivity analysis.

Item 4. Controls and Procedures

An evaluation of the effectiveness of the design and operation of BankUnited’s disclosure controls and procedures was carried out by BankUnited, as of period end under the supervision and with the participation of BankUnited’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that BankUnited’s disclosure controls and procedures have been designed and are being operated in a manner that provides reasonable assurance that the information required to be disclosed by BankUnited in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Subsequent to the date of the most recent evaluation of BankUnited’s internal controls, there were no significant changes in BankUnited’s internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II — OTHER INFORMATION


Item 6.	*Exhibits and Reports on Form 8-K*

(a) Exhibits.


	10.1			Form of Change in Control Agreement between BankUnited Financial Corporation and Felix Garcia.*
	10.2			Form of Change in Control Agreement between BankUnited Financial Corporation and Abel Iglesias.*
	10.3			Form of Amendment to Employment Agreement between BankUnited Financial Corporation and Alfred R. Camner.*
	10.4			Form of Amendment to Employment Agreement between BankUnited, FSB and Alfred R. Camner.*
	31.1			Certification of the Chief Executive Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.
	31.2			Certification of the Chief Financial Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.
	32			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Contract with Management.

(b) Reports on Form 8-K.

A current Report on Form 8-K was filed on April 23, 2003 relating to BankUnited’s April 23, 2003 press release setting forth BankUnited’s second quarter 2003 earnings.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.

BANKUNITED FINANCIAL CORPORATION

By: /s/ HUMBERTO L. LOPEZ

Humberto L. Lopez

Senior Executive Vice President and

Chief Financial Officer

Date: August 11, 2003

BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003

INDEX TO EXHIBITS


Exhibit No.		Numbered Page

	10.1	Form of Change in Control Agreement between BankUnited Financial Corporation and Felix Garcia.*
	10.2	Form of Change in Control Agreement between BankUnited Financial Corporation and Abel Iglesias.*
	10.3	Form of Amendment to Employment Agreement between BankUnited Financial Corporation and Alfred R. Camner.*
	10.4	Form of Amendment to Employment Agreement between BankUnited, FSB and Alfred R. Camner.*
	31.1	Certification of the Chief Executive Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of the Chief Financial Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.
	32	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Contract with Management.

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(1)	Other includes mutual funds, preferred stock of FHLMC, and Bonds.


(1)	The annual rate adjusts quarterly not to exceed 11.90% prior to November 15, 2007.

(2)	The annual rate adjusts quarterly not to exceed 11.75% prior to December 26, 2007.

(3)	The annual rate adjusts quarterly not to exceed 11.75% prior to March 26, 2008.

(4)	The annual rate adjusts quarterly.

(5)	Created under Connecticut law.

(6)	Created under Delaware law.


(1)	The fair value of each option has been estimated on the date of the grant using the Black Scholes option pricing model.


	•	Projections of revenues, expenses, income, earnings per share, margin, asset growth, loan production, deposit growth, and other performance measures;

	•	Expansion of operations, including branch openings, entrance into new markets, development of products and services and plans for new marketing strategies; and

	•	Discussions on the outlook of the economy.


(1)	The yields and rates along with the corresponding interest rate spread and net interest margin represent the yields earned and rates paid on BankUnited’s interest-earning assets and interest-bearing liabilities, respectively, during the three-month periods ended June 30, 2003 and 2002, and do not include any estimates of the effect that accelerated amortization of premiums or discounts would have on the yields earned.

(2)	Includes average non-accruing loans of $45 million and $26 million for the three months ended June 30, 2003 and 2002, respectively. The yields on loans receivable, net include amortization of loan fees.

(3)	Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(4)	Long-term investments include agency securities and Trust Preferred Securities of other issuers.

(5)	Interest and rates include the effect of interest rate swaps.


(1)	Short-term investments include FHLB overnight deposits, federal funds sold, and securities purchased under agreements to resell.

(2)	Long-term investments include agency securities and Trust Preferred Securities of other issuers.

(3)	Includes the effect of interest rate swaps.


	•	Effecting growth in core deposits.

	•	Increasing non-interest bearing deposits.

	•	Capitalizing on deposit re-pricing opportunities. Given the lagging nature of time deposit re-pricing, we have an opportunity to continue to lower our time deposit cost of funds over the next several quarters.

	•	Expanding the portfolio of loans originated by BankUnited. BankUnited’s portfolio of bank-originated loans grew by $171 million, or 5% from the quarter ended March 31, 2003. This growth should help to expand net interest margin. Management sees tremendous benefit to increasing its portfolio of self-originated loans. These loans are slower to pre-pay, and offer BankUnited significant cross-selling opportunities. Successful execution of this strategy should allow BankUnited to overcome the pressure of pre-payments on its margin in the long term.

	•	Eventual run-off of previously purchased residential loans serviced by others (LSBO); BankUnited’s LSBO portfolio has received the hardest impact from the trend in pre-payments. This portfolio, which stood at $692 million at September 30, 2002, continues to be pre-paid at a rate more than double that of the Bank’s self-originated residential portfolio, and at quarter end had a balance of $278 million. BankUnited has followed a policy of allowing the LSBO portfolio to run off, replacing them with loans originated by BankUnited. We expect the significant pressure on our net interest margin resulting from the pre-payments on the LSBO portfolio to subside during the next several quarters. Until full depletion of the portfolio, management expects that pre-payments will continue to have an adverse effect on net interest margin.

	•	Targeting consumer and commercial loan growth and diversification of the portfolio; management continues to implement proven consumer and commercial lending strategies to grow and diversify the Bank’s loan portfolio. The result of our lending strategies, as shown through record production in key areas, should serve to ease margin pressures, especially in light of our focus on gathering lower-cost deposits.

	•	Asset sensitive balance sheet; BankUnited maintains as asset sensitive position allowing us to re-price our assets faster than our liabilities in a rising interest rate environment.

	•	Strategically reducing high-interest debt.


(1)	Specialty consumer mortgage loans originated through our branch network are included in one-to-four family residential loans.


(1)	Percent of Total is calculated using “Loans held for investment, net” in the denominator.

(2)	Specialty consumer mortgage loans originated through our branch network are included in one-to-four family residential loans.



	Humberto L. Lopez
	Senior Executive Vice President and
	Chief Financial Officer