Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended September 30, 2003

OR

Commission File Number 1-13921

BANKUNITED FINANCIAL CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (305) 569-2000

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $.01 par value

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, and (2) has been subject to such filing requirements for the past 90 days.            Yes X             No             

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

The aggregate market value of the Class A Common Stock and Class B Common Stock held by non-affiliates of the Registrant, based upon the average price on December 5, 2003, was $738,831,964*. The Class A Common Stock is the only publicly traded voting security of the Registrant.

The shares of the Registrant’s common stock outstanding as of December 5, 2003 were as follows:

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s Definitive Proxy Statement for its 2004 Annual Meeting of Stockholders will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to General Instruction G(3) of the Form 10-K. Information from such Definitive Proxy Statement will be incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 hereof.

Table of Contents

BANKUNITED FINANCIAL CORPORATION

Form 10-K Table of Contents

1

Table of Contents

Forward-Looking Statements

This Annual Report on Form 10-K 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:

Actual results or performance could differ from those implied or contemplated by forward-looking statements. BankUnited Financial Corporation, a Florida corporation, and its subsidiaries (“BankUnited”), wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and are not historical facts. Forward-looking statements are subject to certain risks and uncertainties, including, among others: general economic or political conditions, whether national, regional or international; 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, but not limited to, changes in accounting standards, guidelines and policies; changes in the regulation of financial services companies; the issuance of additional equity or debt securities; the concentration of operations in south Florida, if the Florida economy or real estate values decline; the impact of war or natural disasters and the threat and impact of terrorism. Information in this Annual Report on Form 10-K is as of the dates, and for the periods, indicated. BankUnited does not undertake, and specifically disclaims any obligation, to publicly update or revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, whether as the result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in or incorporated by reference into this report might not occur.

2

Table of Contents

PART I

Item 1.     Business

General

BankUnited Financial Corporation is the holding company for BankUnited, FSB (the “Bank”), the largest banking institution headquartered in Florida based on assets. (As used in this Form 10-K, “BankUnited,” “we,” “us” and “our” refers to BankUnited Financial Corporation and its subsidiaries on a consolidated basis.) BankUnited’s primary business consists of the Bank’s operations. The Bank, which was founded in 1984, offers a broad array of banking products and services to consumers and businesses located primarily in south Florida.

BankUnited’s revenues consist mainly of interest earned on loans and investments and fees received for our financial services and products. Sources of funds also include deposits, borrowings, proceeds from issuances of our equity securities, sales of loans and securities, and loan servicing income. BankUnited’s expenses consist primarily of interest paid on deposits and borrowings and expenses incurred in providing services and products. At September 30, 2003, BankUnited had assets of $7.1 billion, loans of $4.2 billion, liabilities of $6.7 billion, deposits of $3.2 billion and stockholders’ equity of $447 million. The Bank’s distribution system includes 45 full service banking offices, four mortgage production offices, an extensive wholesale network for originating loans through mortgage broker relationships, and channels for conducting business through automated teller machines, PC banking, telebanking and internet banking.

Fiscal 2003 Developments

BankUnited continued to build its management team during fiscal 2003 and realigned responsibilities in accordance with its marketing strategies. The Bank strengthened its commercial lending and commercial real estate lending teams and infrastructure to expand these business lines. These business lines are making a transition from focusing on large corporate participations to emphasizing middle market commercial relationships that are more stable. A new “micro-market” strategy was launched for the consumer banking area and expanded to encompass small business customers. This strategy focuses on the specific needs of the diverse communities comprising the south Florida market, with the goal of providing a neighborhood banking experience combined with a competitive array of products and services.

Employees

At September 30, 2003, BankUnited had 736 full-time equivalent employees. Management considers relations with its employees to be good.

Market Area and Competition

BankUnited’s main competitors for deposits and loans are other banking institutions, savings associations, lenders and financial institutions. These competitors include out-of-state organizations that offer premium rates to offset their lack of physical locations in our market area, as well as regional and super-regional institutions that are substantially larger and have more extensive operations than BankUnited. BankUnited competes for deposits and loans by emphasizing competitive rates, personalized service with high customer service standards and responsive decision-making. The experience and involvement of our management team in our market area and our localized decision-making are expected to help us compete against other institutions. Larger institutions, however, are sometimes able to achieve economies of scale, offer a broader and more sophisticated product mix, have a reduced cost of capital and offer more extensive electronic banking facilities.

3

Table of Contents

Lending Activities

BankUnited’s lending activities are targeted mainly at increasing customer relationships and loan originations in its commercial lending and commercial real estate areas, and on continuing to increase residential mortgage loan originations and consumer loan originations, including specialty consumer mortgage loan originations.

Applicable regulations permit BankUnited to engage in various categories of secured and unsecured commercial and consumer lending, in addition to residential real estate financing, subject to limitations on the percentage of total assets attributable to certain categories of loans. An additional regulatory limitation requires that certain types of loans only be made in aggregate amounts that do not exceed specified percentages of the Bank’s capital.

One-to-four Family Residential Mortgage Lending.    BankUnited originates both adjustable and fixed rate one-to-four family loans typically secured by first mortgages on the borrower’s primary or secondary residence. BankUnited offers an extensive array of residential mortgage products and originates loans for both the Bank’s loan portfolio and for sale or securitization in the secondary market to governmental agencies or other investors. Mortgage loans are originated primarily through our network of mortgage brokers, internal retail loan originators, our branch sales force and our mortgage operations centers. These distribution channels allow BankUnited to cost-effectively generate high levels of loan volume as well as to offer additional products and services to loan customers through its retail banking offices.

BankUnited’s first mortgage loans generally have contractual maturities of between 15 and 30 years. However, residential loans typically remain outstanding for shorter periods than their contractual maturities because borrowers prepay the loans in full upon sale of the mortgaged property or upon refinancing of the original loan.

At September 30, 2003, $3.6 billion, or 84% of total loans, including loans held for sale, consisted of one-to-four family residential loans, including specialty consumer mortgage loans made through the consumer lending area, of which $2.3 billion, or 64%, were adjustable rate mortgage (“ARM”) loans and $1.3 billion, or 36%, were fixed rate mortgage loans. BankUnited’s ARMs generally have interest rates that adjust after an initial fixed-rate period. More than half of BankUnited’s ARM loans reprice after an initial period of five years.

BankUnited’s total loan portfolio at September 30, 2003 included approximately $207 million, or 5%, of purchased one-to-four family residential mortgage loans serviced by others. The balance of these loans, which were purchased prior to 2000 and comprised $692 million, or 17%, of BankUnited’s total loan portfolio as of September 30, 2002, declined significantly during 2003 due to loan pre-payments, and is expected to continue decreasing. BankUnited ceased purchasing wholesale residential mortgage loans in the secondary market during fiscal 1999 and expects to continue focusing on originations.

For the fiscal years ended 2003, 2002, and 2001, interest income generated from one-to-four family residential mortgage loans represented 91%, 91%, and 88%, respectively, of total interest income.

Consumer Lending.    BankUnited’s consumer lending originations are generated through our branch network, and consist of our specialty consumer mortgage loans, home equity loans and lines, and to a lesser extent, lines of credit, automobile and boat loans.

Our specialty consumer mortgage loans offer our customers the convenience of an accelerated application, review and approval process. The loans are both adjustable and fixed rate first mortgage loans secured by owner occupied, single-family residences. These loans have contractual terms of up to 30 years, with the majority of these loans having 15 year maturities, but tend to prepay at a much faster rate than their contractual maturities. Origination of these specialty consumer mortgages totaled $420 million, or 74% of total consumer lending production for fiscal 2003, as compared to $264 million, or 71% of total consumer lending production for

4

Table of Contents

fiscal 2002. For financial statement and tabular presentation purposes, the specialty consumer mortgage loan balances of $613 million as of September 30, 2003 and $317 million as of September 30, 2002 are combined with one-to-four family residential mortgages.

Home equity lines of credit are made with adjustable rates indexed to the prime rate, and generally have maturities of 15 years or less with mandatory repayment during the last 5 years. Home equity loans are fixed rate loans with maturities up to 15 years. Automobile and boat loans are offered on a fixed rate basis.

The underwriting standards employed by BankUnited for consumer loans include a determination of the applicant’s payment history on other debts, an assessment of the borrower’s ability to make payments on the proposed loan and other indebtedness and a review of the value of the collateral. In addition, BankUnited utilizes an on-line application and credit scoring system to assist in determining an applicant’s creditworthiness.

Commercial Real Estate and Multi-Family Lending.    BankUnited’s commercial real estate lending area originates and participates in commercial real estate loans, and to a lesser degree, multi-family loans. This business line also makes real estate construction loans and land loans. Loans made by this business line may have fixed or variable interest rates. BankUnited’s commercial real estate strategy is to increase originations by developing long-term relationships with businesses, real estate developers, investors, and other professionals in the real estate market. The commercial real estate loan portfolio includes loans secured by apartment buildings, office buildings, industrial/warehouses, retail centers and other properties located primarily in BankUnited’s market area.

Real Estate Construction Lending.    BankUnited makes real estate construction loans to builders and real estate developers for the construction of commercial and single and multi-family real estate. These loans are primarily secured by single family homes, condominiums, apartments, retail centers, industrial warehouse properties, office buildings, medical facilities or other property. The loans are structured to be converted to permanent loans at the end of the construction phase, which usually runs from 12 to 60 months. The loans generally provide for the payment of interest and loan fees from loan proceeds and are underwritten to the same standards as commercial real estate loans. Because of the uncertainties inherent in estimating construction costs and the market for the project upon completion, it is often difficult to determine the total loan funds that will be required to complete a project, the related loan-to-value ratios and the likelihood of a project’s ultimate success. Construction loans to borrowers other than owner-occupants also involve many of the same risks applicable to commercial real estate loans and tend to be sensitive to general economic conditions.

Land.    BankUnited makes land loans to individuals for the purchase of land for their residences, as well as to builders and real estate developers for the purchase of land slated for future commercial development. The Bank generally requires that the properties securing land loans be developed within 12 to 18 months and these loans generally have a lower loan-to-value ratio than other commercial real estate loans.

Commercial Lending.    BankUnited makes and participates in both secured and unsecured commercial business loans to companies in its market area. The strategy for commercial lending focuses on forming and maintaining customer relationships with primarily middle market companies doing business in south Florida. The majority of BankUnited’s commercial business loan portfolio is secured by real estate, accounts receivable, inventory, equipment, and/or general corporate assets of the borrowers, as well as the personal guarantee of the principal. BankUnited also makes and participates in loans guaranteed by third parties. Commercial business loans not secured by real estate may have fixed or variable interest rates and are typically originated for maturities ranging from one to five years. While commercial business loans are generally made for shorter maturities and at higher yields than mortgage loans, these loans may involve a higher level of risk because of the difficulty in liquidating the underlying collateral in the event of default. We are diversifying our commercial lending and small business portfolios in pursuit of higher returns within the context of our conservative credit culture.

See “Discussion of Financial Condition Changes in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), for more information on the composition of

5

Table of Contents

BankUnited’s loan portfolio by type of loan, including mortgage loans held for sale, at the end of each of the five past fiscal years, and for information on asset quality.

Mortgage Loan Servicing

BankUnited sells a portion of the mortgage loans that it originates, primarily through securitization of residential mortgage loans that conform to Federal National Mortgage Association “FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) standards. Loans that are securitized are delivered to FNMA or FHLMC, and BankUnited receives a security, guaranteed as to payment of principal and interest, which it may retain or sell to investors. In addition to servicing the loans that it originates, BankUnited generally retains the right to service loans that it has securitized and sold to investors or sponsoring agencies under mortgage-backed securities programs. BankUnited receives fees for servicing loans, which are collected from the borrowers’ payments and generally expressed as a percentage of the unpaid principal balance. The fees received for mortgage servicing rights arising from the securitization and sale of loans to sponsoring agencies are either negotiated or set by the sponsoring agencies. The fees received for mortgage servicing rights arising from the securitization and sale of loans to independent third parties are negotiated with those parties. At September 30, 2003, 2002, and 2001 BankUnited was servicing approximately $1 billion, $559 million, and $349 million in loans for others. As of September 30, 2003, BankUnited had mortgage servicing rights with a carrying amount of $12.9 million. BankUnited, however, is subject to the risk that a decline in the market rates of interest for mortgage loans or other economic conditions may cause a revaluation of its servicing assets as borrowers refinance or otherwise prepay higher interest rate loans. See “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” and MD&A for more information about mortgage servicing rights.

BankUnited is subject to certain costs and risks related to servicing delinquent loans. Servicing agreements relating to the mortgage-backed security programs of FNMA and FHLMC require the servicer to advance funds to make scheduled payments of interest, taxes and insurance, and in some instances principal, even if such payments have not been received from the borrowers. In general, BankUnited recovers substantially all of the advanced funds upon cure of default by the borrower, or through foreclosure proceedings and claims against agencies or companies that have insured or guaranteed the loans. Certain servicing agreements for loans sold directly to other investors require BankUnited to remit funds to the loan purchaser only upon receipt of payments from the borrower and, accordingly, the investor bears the risk of loss.

Deposits

BankUnited offers transaction accounts which include personal and commercial checking accounts, and negotiable order of withdrawal (“NOW”) accounts. BankUnited also offers a variety of deposit products ranging from money market and regular savings accounts to certificates of deposit with maturities of up to five years. Core deposits, which include all deposits except certificates of deposit, provide BankUnited with a source of funds that have a lower cost. For this reason, BankUnited’s strategy focuses on building core deposits through its marketing initiatives and service efforts, branch expansion, and the offering of competitive products and rates.

The following table sets forth average amounts and average rates paid on each of BankUnited’s deposit categories for the periods indicated:

6

Table of Contents

See note (7) Deposits to the notes to Consolidated Financial Statements for more information about BankUnited’s deposits.

Investments and Mortgage-Backed Securities

BankUnited maintains an investment portfolio consisting of U.S. Government and agency securities, mortgage-backed securities, trust preferred securities issued by others, and other investments. Federal regulations limit the instruments in which BankUnited may invest its funds. BankUnited’s current investment policy permits purchases primarily of securities which are rated investment grade by a nationally recognized rating agency, however, substantially all of the investments in BankUnited’s portfolio at September 30, 2003 were rated in one of the two highest grades.

The majority of BankUnited’s investment portfolio consists of mortgage-backed securities which are primarily acquired for their liquidity, yield, and credit characteristics. Such securities may be used as collateral for borrowing or pledged as collateral for certain deposits, including public funds deposits. Mortgage-backed securities acquired include fixed and adjustable-rate agency securities (Government National Mortgage Association, FNMA and FHLMC), private issue securities and collateralized mortgage obligations. BankUnited also securitizes residential mortgage loans with FNMA and FHLMC. At September 30, 2003, BankUnited’s investments and mortgage backed securities totaled $2.4 billion. See MD&A and notes (1) Summary of Significant Accounting Policies and (4) Investments and Mortgage-Backed Securities to the Notes to Consolidated Financial Statements for more information on BankUnited’s investments and mortgage-backed securities.

Borrowings

BankUnited has borrowings consisting of advances from the Federal Home Loan Bank of Atlanta (“FHLB”), securities sold under agreements to repurchase, notes, and trust preferred securities, and subordinated debentures. These borrowings may be entered into on a short-term or long-term basis. Generally, any borrowing having an original maturity of one year or greater is considered long-term. For more information on borrowings see MD&A and note (8) Borrowings to the Notes to Consolidated Financial Statements.

Activities of Subsidiaries

Bay Holdings, Inc., a Florida corporation (“Bay Holdings”), is a wholly owned operating subsidiary of the Bank that holds title to, maintains, manages and supervises the disposition of one-to-four family residential property acquired through foreclosure. Bay Holdings was established for these purposes in 1994.

BankUnited Capital, BankUnited Capital II, and BankUnited Capital III are trusts that were created under Delaware law in 1996, 1997 and 1997, respectively. BankUnited Statutory Trust I was formed in 2001; BankUnited Statutory Trust II, BankUnited Statutory Trust III, BankUnited Statutory Trust IV and BankUnited Statutory Trust V were formed in 2002; and BankUnited Statutory Trust VI was formed in 2003, as trusts under Connecticut law. BUFC Statutory Trust VII was formed in 2003 as a Delaware trust. In fiscal 2003, all of the outstanding preferred and common securities of BankUnited Capital II and BankUnited Capital III were redeemed. BankUnited Financial Corporation owns all of the common stock outstanding of each of the other trusts. Trust preferred securities issued by the trusts are held by investors. Each of the trusts was formed for the purpose of issuing trust preferred securities and investing the proceeds from the sale thereof solely in junior subordinated debentures issued by BankUnited. See note (8) Borrowings to the Notes to Consolidated Financial Statements for more information on these trust subsidiaries.

BankUnited Financial Services, Incorporated, is a Florida corporation and wholly owned subsidiary of BankUnited Financial Corporation. It was organized in 1997 for the purpose of selling annuities, mutual funds and other insurance and securities products to customers of the Bank and others.

7

Table of Contents

CRE Properties, Inc., a Florida corporation, is a wholly owned operating subsidiary of the Bank that holds title to and maintains, manages and supervises the disposition of commercial real estate acquired through foreclosure. CRE Properties, Inc. was established for these purposes in 1998.

BU Delaware, Inc. is a Delaware corporation and wholly owned subsidiary of the Bank formed in 2002. BU Delaware, Inc. holds and manages investments, and owns all of the common stock of BU REIT, Inc.

BU REIT, Inc. (the “REIT”) is a Florida corporation formed in 2002. It has elected to be taxed as a real estate investment trust for both federal and Florida income tax purposes for calendar years 2002 and forward. The REIT holds a 100% participation interest in certain of the Bank’s residential mortgage loans. All of the REIT’s outstanding common stock is owned by BU Delaware, Inc. The REIT’s outstanding shares of non-voting preferred stock are owned primarily by the Bank, and non-voting preferred shares representing less than one percent of the REIT’s total equity are held by certain non-executive officers of the Bank and others.

Regulation

General

BankUnited is a unitary savings and loan holding company and is subject to Office of Thrift Supervision (“OTS”) regulation and examination pursuant to the Home Owner’s Loan Act (the “HOLA”). The Bank is a federal savings bank and is subject to regulation and examination by the OTS, our primary federal regulator. The Bank’s is also subject to regulation by the Federal Deposit Insurance Corporation (the “FDIC”), which insures the Bank’s deposit accounts through the Savings Association Insurance Fund (the “SAIF’).

Savings and Loan Holding Company Regulations

Activities Limitations.    As a unitary savings and loan holding company that existed before May 4, 1999 and a qualified thrift lender, BankUnited generally has the broadest authority to engage in various types of business activities, including nonfinancial activities. This authority could be restricted if BankUnited was to fail to meet the qualified thrift lender test. The Gramm-Leach-Bliley Act (“GLB”) could also limit this authority if BankUnited were to acquire a non-OTS regulated subsidiary or a subsidiary institution that was not merged into the Bank. The Director of the OTS may take enforcement action against the holding company if there is reasonable cause to believe that a particular activity is a serious risk to the financial safety, soundness, or stability of the Bank, and may limit any activities of the Bank that pose a serious risk of causing the liabilities of the holding company and its affiliates to be imposed on the Bank.

Acquisitions.    The holding company generally may not directly or indirectly acquire control of a savings association or savings association holding company, or substantially all of the assets or more than 5% of the voting shares of a savings association or savings association holding company, without prior OTS approval. No director or officer of a savings and loan holding company, or person owning or controlling by proxy or otherwise more than 35% of such company’s stock, may acquire control of any savings institution, other than a subsidiary savings institution, or of any other savings and loan holding company, without prior OTS approval.

Reporting and Examinations.    The holding company must file periodic reports with the OTS and comply with OTS record keeping requirements. BankUnited is also subject to examination by the OTS.

Securities Regulation and Corporate Governance.    BankUnited’s common stock is registered with the Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934, and BankUnited is subject to restrictions, reporting requirements and review procedures under federal securities laws and regulations. BankUnited is also subject to the rules and reporting requirements of the Nasdaq Stock Market, on which its Class A Common Stock is traded. Like other issuers of publicly traded securities, BankUnited must also comply with the corporate governance reforms enacted under the Sarbanes-Oxley Act of 2002 (“The Sarbanes-Oxley Act”) and the rules of the Securities and Exchange Commission (the “Commission”) and Nasdaq

8

Table of Contents

Stock Market adopted pursuant to the Sarbanes Oxley Act. Among other things, these reforms, which go into effect at various dates, require certification of financial statements by the chief executive officer and chief financial officer, prohibit the provision of specified services by independent auditors and require pre-approval of independent auditor services, define director independence and require certain committees, and a majority of a subject company’s board of directors, to consist of independent directors, establish additional disclosure requirements in reports filed with the Commission, require expedited filing of reports, require management evaluation and auditor attestation of internal controls, prohibit loans by the company (but not by certain depository institutions) to directors and officers, set record-keeping requirements, mandate complaint procedures for the reporting of accounting and audit concerns by employees, and establish penalties for non-compliance.

Savings Institution Regulations

The Bank is chartered by the OTS, is a member of the FHLB system, and insured by the SAIF. Federal laws empower the Bank to accept deposits and pay interest on them, make real estate loans, consumer loans and commercial loans, invest in corporate obligations, government debt securities and other securities, offer various banking services, and, subject to OTS notice and approval requirements, engage in activities such as trust operations and real estate investment. FDIC approval or notice may also be required for some activities. The Bank must file reports with the OTS and is subject to periodic examination by the OTS.

Insurance of Accounts.    The Bank’s deposits are insured by the SAIF up to $100,000 for each insured account holder, subject to applicable terms and conditions. The FDIC examines the Bank and may terminate SAIF deposit insurance or impose sanctions if it finds that the Bank has engaged in unsafe and unsound practices, cannot continue operations because it is in an unsafe and unsound condition, or has violated regulatory requirements. The Bank’s management does not know of any present condition pursuant to which the FDIC would seek to impose sanctions on the Bank or terminate insurance of its deposits.

The FDIC’s deposit insurance premiums are assessed through a risk-based system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their level of capital and supervisory evaluation. Institutions which the FDIC considers well capitalized and financially sound pay the lowest premium, while institutions that are less than adequately capitalized and of substantial supervisory concern pay the highest premium. The FDIC is authorized to increase or decrease assessment rates on a semiannual basis, up to a maximum increase or decrease of 5 basis points after aggregating all increases and decreases, if it determines that the reserve ratio of the SAIF will be less than the designated reserve ratio of 1.25% of SAIF insured deposits. The FDIC may also impose special assessments on SAIF members to repay amounts borrowed from the United States Treasury or for any other reason deemed necessary by the FDIC. During fiscal 2003 assessment rates for SAIF insured institutions ranged from 0% of insured deposits for well capitalized institutions with minor supervisory concerns to 27% of insured deposits for undercapitalized institutions with substantial supervisory concerns. If the FDIC were to significantly increase its assessment rates, such action could adversely affect the Bank’s earnings. If the reserve ratio for the SAIF falls below the required level, the fund may re-institute deposit insurance assessments for all institutions. In addition to deposit insurance assessments, the FDIC may collect assessments against insured deposits to service debt incurred in the 1980s. The assessment rate is adjusted quarterly.

Regulatory Capital Requirements.    OTS regulations incorporate a risk-based capital requirement that is designed to be at least as stringent as the capital standard applicable to national banks and that is similar to FDIC requirements. Associations whose exposure to interest-rate risk is deemed to be above normal must deduct a portion of such exposure in calculating their risk-based capital. As of September 30, 2003, the Bank exceeded all applicable regulatory requirements. See note (10) Regulatory Capital to the Notes to Consolidated Financial Statements. There are currently no regulatory capital requirements directly applicable to holding companies.

Regulators have also established capital levels for institutions to implement the “prompt corrective action” provisions of the Federal Deposit Insurance Corporation improvement Act (“FDICIA”). Insured institutions are

9

Table of Contents

categorized under the following levels: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized or critically undercapitalized. An institution’s category depends upon its capital levels in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure, and certain other factors. A “well capitalized” institution must have a ratio of total capital to risk-weighted assets (a Total risk-based capital ratio) of 10% or more, a ratio of capital to risk-weighted assets (Tier 1 risk-based capital ratio) of 6% or more and a ratio of capital to adjusted total assets (Tier 1 leverage ratio) of 5% or more, and may not be subject to any written agreement order capital directive, or prompt corrective action directive issued by the OTS. An institution will be categorized as “adequately capitalized” if it has a total risk- based capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4% or more, and either a Tier 1 leverage ratio of 4% or more or a Tier 1 leverage ratio of 3% or more, if the institution is assigned a composite rating of 1. The composite rating is the numeric rating assigned by the OTS under its rating system, as a result of the most recent OTS examination. Any institution that is neither well capitalized nor adequately capitalized will be considered undercapitalized. The OTS would be required to take prompt corrective action to resolve the Bank’s situation if the Bank failed to satisfy these minimum capital requirements. The Bank is a well capitalized institution under the definitions as adopted.

Risk-based capital guidelines take into account various factors, including concentration of credit risk, risks associated with nontraditional activities, and the actual performance and expected risk of loss of multi-family mortgages. OTS regulations include an interest-rate risk component to the risk-based capital requirements for savings associations such as the Bank. Management monitors interest rate risk based on the OTS’s and BankUnited’s standards, and believes that the effect of including such an interest rate risk component in the calculation of risk-adjusted capital will not cause the Bank to cease being well-capitalized. The FDIC also requires the OTS to review its capital standards every two years to ensure that its standards require sufficient capital to facilitate prompt corrective action and to minimize loss to the SAIF and the Bank Insurance Fund (‘‘BIF’’).

Restrictions on Dividends and Other Capital Distributions.    The Bank must provide the OTS with at least 30 days written notice before declaring any dividend or approving any capital distribution. The OTS may object to any distribution on safety and soundness grounds and prior approval, instead of notice, may be required in some cases.

Transactions with Affiliates.    Transactions between the Bank and its affiliates are regulated under the HOLA and OTS regulations, which incorporate Sections 23A, 23B, 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the Federal Reserve Board. The OTS issued a final rule effective November 6, 2003 conforming its regulations on affiliate transactions with Regulation W, a new regulation adopted by the Federal Reserve Bank Board which comprehensively implements sections 23A and 23B of the Federal Reserve Act and imposing additional restrictions on savings associations under §11(a) of the Home Owners’ Loan Act (“HOLA”). “Affiliates” of the Bank include the holding company and all subsidiaries other than those of the Bank. Under these regulations, “covered transactions” and certain other transactions with affiliates must be on terms and conditions that are consistent with safe and sound banking practices and substantially the same, or at least as favorable to the institution or its subsidiary, as those for comparable transactions with non-affiliated parties. These laws and regulations limit the amount of covered transactions in which the Bank may engage and set collateralization requirements. “Covered transactions” generally include loans or extensions of credit to an affiliate, purchases of securities issued by an affiliate, purchases of assets from an affiliate, and certain other transactions. The Bank may not extend credit to an affiliate other than a Bank subsidiary, unless the affiliate engages only in activities permissible for bank holding companies. Limitations are also imposed on loans and extensions of credit from an institution to its executive officers, directors and principal shareholders and each of their related interests. A savings association is also restricted from purchasing or investing in securities issued by any affiliate other than shares of the affiliate.

Qualified Thrift Lender Test.    The qualified thrift lender test (QTL) measures the proportion of a savings institution’s assets invested in loans or securities supporting residential construction and home ownership. A

10

Table of Contents

savings institution qualifies as a QTL if its qualified thrift investments equal or exceed 65% of its portfolio assets on a monthly average basis in nine of every 12 months. Qualified thrift investments include (i) housing-related loans and investments, (ii) obligations of the FDIC, (iii) loans to purchase or construct churches, schools, nursing homes and hospitals, (iv) consumer loans, (v) shares of stock issued by any FHLB, and (vi) shares of stock issued by the FHLMC or the FNMA. Portfolio assets consist of total assets minus (a) goodwill and other intangible assets, (b) the value of properties used by the savings institution to conduct its business, and (c) certain liquid assets in an amount not exceeding 20% of total assets. If the Bank fails to remain a QTL, it must either convert to a national bank charter or be subject to restrictions specified under OTS regulations. A savings institution may re-qualify as a QTL if it thereafter complies with the QTL test. At September 30, 2003, the Bank exceeded the QTL requirements.

General Lending Regulations

Consumer Regulations.    The Bank’s lending activities are subject to federal regulations, including the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the Community Reinvestment Act. Pursuant to OTS regulations, the Bank generally may extend credit as authorized under federal law, without regard to state laws purporting to regulate or affect its credit activities, other than state contract and commercial laws, real property laws, homestead laws, tort laws, criminal laws and other state laws designated by the OTS.

Community Reinvestment Act.    Under the Community Reinvestment Act (the “CRA”), as implemented by OTS regulations, a savings institution has a continuing and affirmative obligation consisting with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements for financial institutions and does not limit an institutions’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the OTS to assess the Bank’s record of meeting the community’s credit needs and to take such records into account in its evaluation of certain applications.

Under OTS regulations there are three tests for evaluating a savings institution’s CRA performance. The lending test evaluates a savings institution’s record of helping to meet the credit needs of its assessment area through its lending activities, by considering an institution’s home mortgage, small business, small farm, and community development lending. The investment test evaluates a savings institution’s record of helping to meet the needs of its assessment area through qualified investments that benefit its assessment area or a broader statewide or regional area including the assessment area, and the service test evaluates a savings institution by analyzing both the availability and the effectiveness of the institutions’s systems for delivering retail banking services and the extent and innovativeness of its community development services. The OTS assigns the savings institution a rating of outstanding, satisfactory, needs to improve or substantial noncompliance. Based upon the most recent OTS examination completed in fiscal 2000, the Bank’s CRA rating is satisfactory.

Loans-to-one-borrower Limitations.    The loans-to-one borrower limitations applicable to national banks also apply to savings institutions. Under current limits, loans and extensions of credit outstanding at one time to a single borrower and not fully secured generally may not exceed 15% of the savings institution’s unimpaired capital and unimpaired surplus. Loans and extensions of credit fully secured by certain readily marketable collateral may represent an additional 10% of unimpaired capital and unimpaired surplus. As of September 30, 2003, the Bank was in compliance with the loans-to-one-borrower limitations.

Other Regulation

Federal Reserve System.    The Bank must comply with Federal Reserve Board regulations requiring the maintenance of reserves against its transaction accounts (primarily interest-bearing and non-interest-bearing checking accounts) and non-personal time deposits. As of September 30, 2003, the Bank had $650 thousand in cash reserves maintained at the FHLB for this purpose. The balances maintained to meet these requirements may

11

Table of Contents

be used to satisfy liquidity requirements imposed by the OTS. Federal Reserve Board regulations also limit the periods within which depository institutions must provide availability for and pay interest on deposits to transaction accounts, and require depository institutions to disclose their check-hold policies and any changes to those policies in writing to customers. The Bank is in compliance with these regulations. Other Federal Reserve Board regulations affecting business operations include those relating to equal credit opportunity, electronic fund transfers, collection of checks, truth in lending, truth in savings and availability of funds.

Consumer Financial Privacy Regulations.    Pursuant to the GLB, the federal banking agencies have jointly adopted a privacy regulation with which savings institutions have had to comply since July 1, 2001. Subject to certain exceptions, the privacy regulation requires each financial institution to give a consumer notice of its privacy policies and practices before disclosing nonpublic personal information about the consumer to any non-affiliated third party, to give each customer notice of its privacy policies and procedures at the time a customer relationship is established and annually thereafter, and to give each consumer an opt out notice and reasonable opportunity for the customer to opt out of having his nonpublic personal information disclosed by the financial institution to non-affiliated third parties.

Regulation of Non-Banking Affiliates.    BankUnited Financial Services, Incorporated (“BUFS”) is an insurance agency subsidiary of BankUnited that sells fixed and variable annuities and mutual funds. BUFS’s activities must comply with Florida insurance laws and regulations, and its employees are licensed insurance agents subject to continuing education, licensing and oversight by the Florida Department of Insurance. BUFS’s employees are also registered representatives of Essex National Securities, Inc., a broker-dealer regulated by the National Association of Securities Dealers (“NASD”), with which BankUnited has a brokerage agreement. BUFS’s activities are also subject to regulations adopted by the federal banking agencies, requiring that sales of non-deposit insurance products comply with standards for disclosures, physical separation of activities from banking activities, due diligence, oversight, consumer privacy and other functions.

Legislative and Regulatory Developments

USA PATRIOT ACT    The final rules on USA PATRIOT Act Section 326 Customer Identification Programs were effective as of October 1, 2003. Under the Section 326 rules, each institution must develop a Customer Identification Program (CIP) as part of it Bank Secrecy Act compliance program. The objective of the CIP is for banks to determine the true identity of its customers based on risk factors such as: types of accounts; methods of opening accounts; types of identifying information; and characteristics of the bank. Information to be collected includes, but is not limited to: name, address, and identifying number on every new customer (with certain exceptions, like government agencies and publicly traded companies), and the date of birth for individuals prior to opening an account. This information must be verified within a reasonable time through documentary or non-documentary methods. Furthermore, all new customers must be screened against any Section 326 government lists of known or suspected terrorists within a reasonable time after opening the account.

HMDA and Regulation C.    Financial institutions must implement programs to respond to significant changes in the Home Mortgage Disclosure Act (“HMDA”) and Regulation C promulgated thereunder, which will go into effect in 2004. Regulation C has been revised to expand the collection and reporting of data including: disclosure of pricing data on higher cost loans; information on ethnicity as well as race; details about the rate and rate spread; and whether the application was for a pre-approval.

Income Taxes

BankUnited and its subsidiaries are subject to income taxes at the federal level and are individually subject to state taxation based on the laws of each state in which an entity operates. BankUnited and its subsidiaries other than BU REIT, Inc. file a consolidated federal tax return with a fiscal year ending on September 30. BU REIT, Inc. files a separate tax return with a calendar year-end. BankUnited and its subsidiaries will file separate tax returns for each state jurisdiction affected in 2003. No tax return is currently subject to examination.

12

Table of Contents

Bad Debt Reserve Deductions

In August of 1996, legislation was enacted that repealed the reserve method of accounting (including the percentage of taxable income method) used by many thrifts, including the Bank, to calculate their bad debt deduction for federal income tax purposes. Under Federal legislation thrifts are required to account for bad debts for federal income tax purposes on the same basis as commercial banks for tax years beginning after December 31, 1995. As such, thrifts like the Bank with assets whose tax basis exceeds $500 million are required to use the specific charge off method in computing its bad debt deduction. As a result of this change in accounting method, the Bank must recapture the excess of its September 30, 1996 bad debt reserve over the reserve in existence on December 31, 1987. This recapture commenced over a six-year period, with the first taxable year beginning after December 31, 1997. This legislation has not had a material impact on BankUnited.

Available Information

BankUnited’s Internet address is www.buexpress.com. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports are available, free of charge, through our website as soon as reasonably practicable after their filing with the Securities and Exchange Commission.

Segment Reporting

See note (1) Summary of Significant Accounting Policies (q) Segment Reporting to the Notes to Consolidated Financial Statements for BankUnited’s policy on segment reporting.

BankUnited leases executive and administrative office space located at 225 Alhambra Circle, Coral Gables, Florida 33134, pursuant to a lease terminating in 2014. In addition to its operations center in Miami Lakes, Florida, BankUnited operates three mortgage-production offices located in Tampa, Chicago, and Rockville, Maryland with lease terms extending through 2008. There is also a lease on the operations center, which terminates in 2007.

Currently BankUnited operates 45 full-service banking offices located in south Florida, two of which are owned and 43 of which are leased with terms extending through 2013. There are 17 offices located in Miami Dade County, 18 in Broward County, eight in Palm Beach County, and two in Collier County.

BankUnited has multiple options to renew leases at all leased banking offices and other locations.

BankUnited and its subsidiaries, from time to time, are involved as plaintiff or defendant in various legal actions arising in the normal course of their businesses. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is the opinion of management that no proceedings exist, either individually or in the aggregate, which, if determined adversely to BankUnited and its subsidiaries, would have a material effect on BankUnited’s consolidated financial condition, results of operations or cash flows.

No matters were submitted to a vote of BankUnited’s security holders during the fourth quarter of the fiscal year ended September 30, 2003.

13

Table of Contents

The following table sets forth information concerning BankUnited’s directors and executive officers.

Alfred R. Camner has served as Chairman of the Board and Chief Executive Officer of BankUnited Financial Corporation (the “Company”) since 1993, as President from 1993 to 1998 and 2001 to 2002, and as Chief Operating Officer from 2001 to 2002. He has served as the Bank’s Chairman of the Board and Chief Executive Officer since 1984, as its President from 1984 to 1993, 1994 to 1998, and 2001 to 2002, and as its Chief Operating Officer from 2001 to 2002. He is the Senior Managing Director of the law firm of Camner, Lipsitz and Poller, P. A. and has held that position since 1996. Mr. Camner was General Counsel to CSF Holdings, Inc. and its subsidiary, Citizens Federal Bank, from 1973 to 1996. He was also a Director and Executive Committee member of Loan America Financial Corporation from 1985 to 1994.

Lawrence H. Blum has served as Vice Chairman of the Board of Directors of the Company since 1993, and as its Secretary since 2002. He has served as the Bank’s Vice Chairman of the Board since 1984, and its Secretary since 2002. Mr. Blum has served as the Managing Director of Rachlin, Cohen & Holtz LLP, certified public accountants and consultants, since 1993, and has been a partner there since 1974.

Ramiro A. Ortiz has served as a director, President and Chief Operating Officer of the Company and of the Bank since August 2002. He previously served as the Chairman and Chief Executive Officer, from July 2002 to August 2002, as President, from 1996 to August 2002, and as Executive Vice President of Community Banking, from 1987 to 1996, of SunTrust Bank, Miami. He was the Chairman of the Greater Miami Chamber of Commerce from 2001 to 2002 and the Campaign Co-Chair of the United Way of Dade County in 1999.

Allen M. Bernkrant has served as a director of the Company since 1993, and of the Bank since 1985. He has been a private investor in Miami, Florida since 1990.

Sharon A. Brown has served as a director of the Company and of the Bank since January 2003. She served at the University of Miami School of Business Administration as the Director of Alumni and External Affairs from 2002 to 2003, and as Assistant Dean for Administration and Development from 1992 to 2001. Ms. Brown was a Partner from 1979 to 1992 at Coopers and Lybrand, certified public accountants, where her clients

14

Table of Contents

included financial institutions, nonprofit organizations and major organizations in government and education. She is a member of the Audit Committee of the School Board of Miami-Dade County, and served on the five-member citizen board appointed in 1998 to oversee the financial recovery of the City of Miami. She served as a Director of the United Way of Miami-Dade County from 1988-2003.

Marc D. Jacobson has served as a director of the Company since 1993, and as the Company’s Secretary from 1993 to 1997. He has served as a director of the Bank since 1984, and as its Secretary from 1985 to 1996. Mr. Jacobson has been the Senior Vice President of Head-Beckham AmerInsurance Agency, Inc., and its predecessor, Head-Beckham Insurance Agency, Inc., since 1990.

Hardy C. Katz has served as a director of the Company and the Bank since March 2002. He has been the Vice President of Finance for Communications and Show Management, Inc., a trade show marketing and management company, and Industry Publishers, Inc., a publishing company, since 1972. Mr. Katz has also served as the managing partner of BiZBashFla, LLC, a publishing and trade show company, since 2003.

Neil H. Messinger, M.D has served as a director of the Company and the Bank since 1996. He is a Radiologist and has served as the President of Radiological Associates, Professional Association, since 1986. Dr. Messinger has also been the Chairman of Imaging Services of Baptist Hospital since 1986.

Edward L. Pinckney has served as a director of the Company and the Bank since May 2002. He became an assistant coach of the Villanova University Men’s Basketball team in May 2003, and was a television and radio broadcaster and commentator for ESPN and the Miami Heat from 1997 until May 2003. Mr. Pinckney also served as the Manager and Coach of the Miami Pro Summer League, L.C., which he established in 2000, and was a professional basketball player from 1985 to 1997.

Albert E. Smith joined the Board of and the Company and the Bank in November 2003. He has served as the President of Florida Memorial College since 1993 and served as President of South Carolina State College from 1986 to 1993. Dr. Smith currently serves as a director of the Greater Miami Chamber of Commerce and the Orange Bowl Committee and as the Vice Chair on the Miami-Dade County Social and Economic Development Council. He is a member of the Executive Committee of The College Fund/UNCF.

Humberto L. Lopez has served as Senior Executive Vice President of Finance of the Company and the Bank since 2001, and as Executive Vice President of Finance of the Company and the Bank from 1999 to 2001. He has served as the Chief Financial Officer of the Company and the Bank since 1999. Mr. Lopez was a Director at PricewaterhouseCoopers LLP from 1998 to 1999. He also served as the Chief Financial Officer from 1997 to 1998, of Barnett Bank, South Florida and its successor by merger, Nations Bank, NA in south Florida, and the Regional Financial Officer from 1993 to 1996, of Barnett Banks, Inc.

John Kuczwanski has served as the Executive Vice President of Residential Lending of the Bank since 2002. He served as the Managing Director of Sierra Grove Associates from 1995 to 2002 and was the President of Loan America Financial Corporation from 1985 to 1995. Mr. Kuczwanski served as Executive Vice President of Citizens Federal Bank from 1982 to 1985.

Felix M. Garcia was appointed the Bank’s Executive Vice President of Risk Management in June 2003. He served as the Executive Vice President and Senior Lender at Eagle National Bank, from 2002 to 2003, Executive Vice President and Head of Domestic Lending at Hamilton Bank from 2000 to 2002, and Executive Vice President and Head of Corporate Lending at Union Planters Bank from 1999 to 2000. Mr. Garcia also served as Executive Vice President from 1985 to 1999, and Chief Credit Officer from 1993 to 1999, at Republic National Bank.

Douglas B. Sawyer has served as Executive Vice President of Consumer Banking for the Bank since October 2003, and as Executive Vice President of Wealth Management since February 2003. He previously served as the Executive Vice President of Retail from 2002 to 2003, Executive Vice President of Private Client Services from 2000 to 2002, and Senior Vice President from 1997 to 2000, for SunTrust Bank, Miami.

15

Table of Contents

Robert A. Marsden has served as the Executive Vice President of Operations for the Bank since 2002. He served as the Executive Vice President of Operations from 1998 to 2002 of SunTrust Bank, Miami and was an Account Manager from 1995 to 1998 at The SCA Group.

Roberta R. Kressel has served as the Executive Vice President of Human Resources for the Bank since January 2003. She was Vice President of Human Resources from 2001 to 2002 at Kemper National Services. Ms. Kressel also served as Senior Vice President, Human Resources Relationship Manager from 2000 to 2001, and Senior Vice President, Human Resources Manager from 1998 to 2000, at SunTrust Bank, South Florida and SunTrust Bank, Miami.

Carlos R. Fernandez-Guzman has served as the Executive Vice President of Marketing for the Bank since February 2003. He served as the Executive Vice President, Chief Operating Officer and Director from 1999 to 2003, of XTec, Incorporated. Mr. Fernandez-Guzman was also the President, Chief Operating Officer and Director from 1995 to 1999 at CTI, and the Executive Vice President of Market Development, from 1992 to 1995, at American Savings of Florida.

Abel L. Iglesias was appointed the Executive Vice President of Corporate and Commercial Banking for the Bank in May 2003. He served as the Executive Vice President and Chief Lending Officer of Colonial Bank, South Florida Region, from 1998 to May 2003. Mr. Iglesias was the Executive Vice President and Chief Lending Officer of Eastern National Bank from 1992 to 1998.

Clay F. Wilson was appointed the Executive Vice President of Commercial Real Estate for the Bank in May 2003, and served as Senior Vice President of Commercial Real Estate from 1999 to 2003. He served as the Group Senior Vice President of Commercial Real Estate from 1996 to 1999, and the Vice President of Commercial Real Estate from 1991 to 1996, of Barnett Bank, South Florida and its successor by merger, NationsBank, Inc. in south Florida.

Gary Laurash has served as Senior Vice President and Treasurer of the Company since January 2003 and of the Bank since 2000. Mr. Laurash served as the First Vice President of MBNA America from 1998 to 2000 and as the First Vice President/Administration Director of MBNA Marketing Systems, Inc. from 1996 to 1998.

16

Table of Contents

PART II

Item 5.    Market for the Registrant’s Common Stock and Related Stockholder Matters

Stock Information

BankUnited’s Class A Common Stock, $.01 par value (“Class A Common Stock”), is traded in the over-the-counter market and quoted in the Nasdaq-Amex Stock Market, National Market (“NASDAQ”) under the symbol “BKUNA”. BankUnited’s Class B Common Stock, $.01 par value (“Class B Common Stock”), is not traded on any established public market.

At December 5, 2003, there were 518 and 12 holders of record of BankUnited’s Class A Common Stock and Class B Common Stock, respectively. The number of holders of record of the Class A Common Stock includes nominees of various depository trust companies for an undeterminable number of individual stockholders. Class B Common Stock is convertible into Class A Common Stock at a ratio (subject to adjustment upon the occurrence of certain events) of one share of Class A Common Stock for each share of Class B Common Stock surrendered for conversion.

No dividends were declared or paid in fiscal 2003 or 2002 on Common Stock. See note (10) Regulatory Capital to the Notes to Consolidated Financial Statements for a discussion of restrictions on the Bank’s payment of dividends to BankUnited.

For the range of high and low bid prices for the Class A Common Stock quoted on Nasdaq for each quarter of fiscal 2003 and 2002, see Selected Quarterly Financial Data.

17

Table of Contents

Item 6.    Selected Financial Data

The following selected financial data should be read in conjunction with BankUnited’s Consolidated Financial Statements and Notes thereto.

(Continued on the next page)

18

Table of Contents

19

Table of Contents

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis and the related financial data present a review of the consolidated operating results and financial condition of BankUnited for the fiscal years ended September 30, 2003, 2002 and 2001. This discussion and analysis is presented to assist the reader in understanding and evaluating the financial condition, results of operations and future prospects of BankUnited, and is intended to supplement, and should be read in conjunction with, the Consolidated Financial Statements and Notes thereto.

BankUnited’s results of operations are dependent primarily on its net interest income, which is the difference between the interest earned on its assets, primarily its loan and securities portfolios, and its cost of funds, which consists of the interest paid on its deposits and borrowings. BankUnited’s results of operations are also affected by its provision for loan losses as well as non-interest income, non-interest expenses and income tax expense. Non-interest expenses consist of employee compensation and benefits, occupancy and equipment, insurance, professional fees, telecommunications and data processing, loan servicing expense, and other operating expenses. Results of operations are also dependent on the dollar volume and asset quality of BankUnited’s loans and investments.

In addition to the foregoing, results of BankUnited’s operations, like those of other financial institution holding companies, are affected by BankUnited’s asset and liability management policies, as well as factors beyond BankUnited’s control, such as general economic conditions and the monetary and fiscal policies of the federal government. Lending activities are affected by the demand for mortgage financing and other types of loans, and are thus influenced by interest rates and other factors affecting the supply of housing and the availability of funds. Deposit flows and costs of funds are influenced by yields available on competing investments and by general market rates of interest.

Fiscal 2003 Highlights

During fiscal 2003, BankUnited increased assets by 19% to $7.1 billion and reported $39.1 million in net income, an improvement of 29% over 2002. Basic and diluted earnings per share for the year were $1.45 and $1.36, respectively, compared to $1.20 and $1.12, respectively, for 2002. Earnings per share for fiscal 2003 include the dilutive effect of 3,936,500 shares of Class A common stock issued in the May 2003 secondary public offering. Fiscal 2003 marks BankUnited’s fourth consecutive year of record net income. Other notable BankUnited milestones include:

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. In implementing its policies, management must make estimates and assumptions about the effect of matters that are inherently less

20

Table of Contents

than certain. Actual results could differ significantly from these estimates which could materially affect the reported amounts of our assets, liabilities, income and expenses. For a detailed discussion of BankUnited’s significant accounting policies, see note (1) Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements. The most critical accounting policies applied by BankUnited are those that relate to the allowance for loan losses, and the valuation of mortgage servicing rights.

Estimates of the amount of the allowance for portfolio loan losses, and the valuation of loans held for sale both affect the carrying amount of the loan portfolio.

The allowance for loan losses is a subjective judgment that management must make regarding the loan portfolio, and is established and maintained at levels that management believes are adequate to cover losses resulting from the inability of borrowers to make required payments on loans. Estimates for loan losses are made by analyzing historical loan losses, current trends in delinquencies and charge-offs, plans for problem loan administration and resolution, the views of regulators, changes in the size and composition of the loan portfolio, and peer group information. In addition, the economic climate and direction, increases or decreases in overall lending rates, political conditions, legislation directly or indirectly impacting the banking industry, and economic conditions affecting specific geographical areas in which BankUnited conducts business are all considered. Where there is a question as to the impairment of a specific loan, management obtains valuations of the property or collateral securing the loan, and current financial information of the borrower, including financial statements, when available. Since the calculation of appropriate loan loss allowances relies on management’s estimates and judgments relating to inherently uncertain events, actual results may differ from these estimates. For a more detailed discussion on the allowance for loan losses, see Asset Quality and, (e) Allowance for Loan Losses in note (1) Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements.

Several estimates impact mortgage servicing rights, including the amount of gains or losses recognized upon the securitization and sale of residential mortgage loans, the amortization of the assets, and the periodic valuation of the assets. The initial and ongoing valuation and amortization of mortgage servicing rights is significantly impacted by interest rates, prepayment experience and the credit performance of the underlying loans. In general, in periods of declining interest rates, the value of these assets declines due to prepayments on loans serviced. For a more detailed discussion on mortgage servicing rights, see discussion Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” and (k) Mortgage Servicing Rights in note (1) Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements.

Liquidity and Capital Resources

Liquidity management is the process of allocating assets and structuring liabilities to provide sufficient cash or cash equivalents to meet an entity’s daily operating needs on an ongoing basis. It is the policy of BankUnited to manage our funds so that there is no need to make unplanned sales of assets or to borrow funds under emergency conditions. Sources of liquidity include: cash and cash equivalents, retail deposit growth, FHLB advances, Federal Reserve borrowings, loan repayments, investment portfolio run-off, liquidation of investments and mortgage-backed securities, and overnight and term reverse repurchase agreements.

BankUnited’s objective in managing liquidity is to maintain sufficient resources of available cash to address both short and long-term business funding needs such as loan demand, investment purchases, deposit fluctuations, and debt service requirements. In doing so, BankUnited maintains an overall liquidity position that has an aggregate amount of readily accessible and marketable assets, cash flow and borrowing capacity to meet unexpected deposit outflows and/or increases in loan demand. Cash levels are minimized to levels required by regulation and necessary to meet the projected anticipated needs for business operations.

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

For information on deposits, see note (7) Deposits to the Notes to Consolidated Financial Statement.

21

Table of Contents

Borrowings

BankUnited utilizes both short and long-term borrowings. Short-term borrowings are due within one year, long-term borrowings are due in one year or more. The Bank may borrow funds from the FHLB of Atlanta and from other sources. The FHLB system acts as a source of funding for member financial institutions. In addition, BankUnited uses subordinated notes, securities sold under agreements to repurchase and trust preferred securities in order to increase available funds. As a shareholder of the FHLB of Atlanta, the Bank must hold shares of stock in the FHLB, which totaled $123 million at September 30, 2003.

The FHLB of Atlanta offers a wide variety of borrowing plans, each with its own maturity and interest rate. FHLB borrowings, known as “advances,” are secured by a member’s share of stock in the FHLB and by certain types of mortgages and other eligible collateral. The terms and rates charged for FHLB advances vary in response to general economic conditions. A portion of the Bank’s advances have been obtained through a convertible advances program that permits the FHLB to call an advance at its discretion on a specified “call” date which generally occurs every three months following an initial period ranging from three months to four years. Should the FHLB elect to exercise this option, the Bank can either convert the advance from a fixed rate basis to floating rate basis or repay it in full. See Item 7A. “Quantitative and Qualitative Disclosure About Market Risk.”

The FHLB of Atlanta will consider various factors, including an institution’s regulatory capital position, net income, quality and composition of assets, lending policies and practices, and level of current borrowings from all sources, in determining the amount of credit to extend to an institution. BankUnited had $75 million of unused credit lines with the FHLB as of September 30, 2003. BankUnited may seek increases in available credit lines with the FHLB based on additional available collateral. In addition, an institution that fails to meet the qualified thrift lender test may have restrictions imposed on its ability to obtain FHLB advances. The Bank currently meets the qualified thrift lender test.

Securities sold under agreements to repurchase is another source of borrowed funds which is available to BankUnited. Under this type of borrowing, securities are pledged against borrowed funds and are released when the funds are repaid. BankUnited typically uses this type of borrowing alternative on a short-term basis, but may also use these instruments on a long-term basis.

In February 1999, the Bank issued and sold $200 million of Senior Notes that mature in February 2004 and bear interest at an annual rate of 5.40% payable semiannually. The Bank used the net proceeds from the sale of the notes for general corporate purposes, loan financing, and assisting in the Bank’s asset/liability management. As a condition of issuance, interest, principal and any redemption premium on all offered Senior Notes are supported by an irrevocable standby letter of credit of the FHLB of Atlanta. Repayment of the Senior Notes will be funded through BankUnited’s asset/liability management activities.

BankUnited has issued trust preferred securities through its trust subsidiaries, which in turn have invested the proceeds from the sale thereof in Junior Subordinated Deferrable Debentures issued by BankUnited (the “Junior Subordinated Debentures”). See Item 1. Business—Activities of Subsidiaries for a list of the trust subsidiaries and when they were formed. In the past three fiscal years, all of the trust preferred securities issued by BankUnited’s trust subsidiaries have been sold through participation in “pools”, whereby a number of financial institutions issue trust preferred securities through their trust subsidiaries, and sell such securities to investors in private placement transactions. In November 1999, the Board of Directors of BankUnited authorized the purchase from time-to-time in the open market, or otherwise, of up to 300,000 shares of trust preferred securities issued by BankUnited’s trust subsidiaries. As of September 30, 2003, BankUnited had purchased a total of 203,419 shares of trust preferred securities issued by its trust subsidiaries on the open market at a cost of $48 million. Proceeds from the sale of Junior Subordinated Debentures, if contributed to the Bank as additional paid-in-capital, increase Tier 1 equity capital for regulatory purposes.

22

Table of Contents

The following tables set forth information as to BankUnited’s short-term borrowings as of the dates and for the periods indicated.

For more information on BankUnited’s borrowings see note (8) Borrowings to Notes to Consolidated Financial Statements.

Discussion of Cash Flows

Please refer to the Consolidated Statement of Cash Flows when reading the following discussion.

Cash and cash equivalents as of September 30, 2003 were $227 million which represents a decrease of $245 million from September 30, 2002. This decrease is the result of net cash used in operating and investing activities of $654 million and $647 million, respectively, offset by net cash provided by financing activities of $1.1 billion.

Significant Uses of Funds

For the year ended September 30, 2003, BankUnited funded approximately $3.4 billion in loans compared to $2.6 billion and $1.6 billion for fiscal 2002 and 2001, respectively. This growth in fundings reflects the expansion of our lending products and activities as well as a declining interest rate environment during fiscal 2001, 2002, and most of 2003.

Other significant uses of funds during the year ended September 30, 2003 were for the purchase of investment and mortgage-backed securities in the aggregate of approximately $2.6 billion, and for the retirement of trust preferred securities issued by BankUnited’s trust subsidiaries of $160 million. BankUnited purchased these investments and mortgage-backed securities to enhance liquidity. BankUnited retired the trust preferred securities as a means of reducing high rate debt. See note (8) Borrowings to Notes to Consolidated Financial Statements.

Significant Sources of Funds

The decline in interest rates provided a significant amount of cash flow from the prepayment of existing loans and mortgage-backed securities. For the year ended September 30, 2003, BankUnited received $2.4 billion

23

Table of Contents

from principal repayments, compared to $1.9 billion and $1.3 billion for fiscal 2002 and 2001, respectively. For the year ended September 30, 2003, BankUnited received $1.2 billion from repayments of mortgage-backed securities compared to $478 million and $143 million for fiscal 2002 and 2001, respectively.

BankUnited raised $73 million from a secondary public offering of its Class A Common Stock issued in May of 2003.

BankUnited has seen an increase in deposits of $260 million to $3.2 billion at September 30, 2003 from $3.0 billion at September 30, 2002. Approximately 74% of this increase relates to core deposits.

BankUnited sold $1 billion of investment and mortgage-backed securities during fiscal year 2003, compared to $342 million for 2002 and $283 million for 2001. The majority of these sales, or $733 million, were generated through the securitization of loans fueled by the increase in loan production experienced during 2003. In addition, BankUnited raised $66 million from the issuance of trust preferred securities issued by its trust subsidiaries during fiscal year 2003, $68 million for 2002 and none for 2001. Funds provided by borrowings for fiscal year 2003, including FHLB advances, were $816 million compared to $368 million and $532 million for 2002 and 2001, respectively. These activities were carried out through the implementation of BankUnited’s asset/ liability management function.

Share Repurchase Program

BankUnited announced on October 24, 2002 that its Board of Directors had authorized a stock repurchase program on its Class A Common Stock. Under the program, BankUnited may purchase up to 1,000,000 shares of its Class A Common Stock in open market transactions, from time to time, at such prices and on such conditions as the Executive Committee of the Board determines to be advantageous. BankUnited initiated this program because we believe that the volatility of the financial markets has at times generated a market price that does not adequately reflect the real value of BankUnited stock or the level of confidence that management and the Board of Directors has in BankUnited’s ability to implement its strategy and achieve continued growth. As of the filing date of this Form 10-K, there have been no repurchases under this authorization.

Off-Balance Sheet Arrangements

See note (14) Commitments and Contingencies for a discussion of commitments entered into by BankUnited which may require capital resources. BankUnited expects to have sufficient capital resources to satisfy its commitments.

Discussion of Financial Condition Changes for the Years Ended September 30, 2003 and 2002

The following is a discussion of material changes from September 30, 2002 to September 30, 2003 in the Consolidated Statement of Financial Condition.

Assets

Investments available for sale    Investments available for sale increased by $125 million or 73% from $172 million at September 30, 2002 to $297 million at September 30, 2003. This increase is predominantly the result of purchases of $213 million offset by maturities of $51 million and sales of $40 million.

Mortgage-backed securities available for sale    Mortgage-backed securities available for sale increased by $928 million or 82% to just under $2.1 billion at September 30, 2003 from $1.1 billion at September 30, 2002. This increase is predominantly the result of purchases of $2.4 billion and securitizations of $750 million offset by repayments of $1.2 billion and sales of $1 billion.

24

Table of Contents

The following table sets forth additional information regarding BankUnited’s investments and mortgage-backed securities available for sale as of the dates indicated. Investments and mortgage-backed securities available for sale are carried by BankUnited at fair value on the financial statements.

The following table sets forth information regarding the maturities of BankUnited’s investments and mortgage-backed securities available for sale as of September 30, 2003.

For additional information regarding BankUnited’s investments and mortgage-backed securities, see note (3) Investments and Mortgage-backed Securities to the Notes to Consolidated Financial Statements.

25

Table of Contents

Loans.    Loans receivable, net (including loans held for sale) increased by $234 million, or 6% from $4 billion at September 30, 2002 to $4.2 billion at September 30, 2003. BankUnited funded $3.4 billion in loans during fiscal 2003, which was offset by repayments of $2.4 billion, securitizations of $750 million, sales of $60 million, a transfer to real estate owned of $7.3 million and a provision of $5.4 million.

The following table sets forth certain information with respect to the composition of BankUnited’s loan portfolio, including mortgage loans held for sale, by collateral type as of the dates indicated.