SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------
                                    FORM 10-K
                            ------------------------

(Mark One)
  [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

           For the fiscal year ended September 30, 1998.

                                          OR

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

           For the transition period from __________ to ___________

                       COMMISSION FILE NUMBER: 0000906420

                               BANK UNITED CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                        13-3528556
   (STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)
 3200 SOUTHWEST FREEWAY, SUITE 1600
           HOUSTON, TEXAS                                       77027
   (ADDRESS OF PRINCIPAL EXECUTIVE                            (ZIP CODE)
              OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 543-6500

        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, PAR VALUE $0.01 PER SHARE

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

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

     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. [X]

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant, as of December 15, 1998, was $1,048,604,659.

     The number of shares outstanding as of the registrant's $0.01 par value
common stock, as of December 15, 1998, was as follows:

         TITLE OF EACH CLASS                               NUMBER OF SHARES
         -------------------                               ----------------
               Class A                                        28,324,076
               Class B                                        3,241,320

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement for the registrant's 1998 Annual
Meeting of Shareholders are incorporated by reference to Part III of this Annual
Report on Form 10-K.

================================================================================
<PAGE>
                               BANK UNITED CORP.
                          1998 FORM 10-K ANNUAL REPORT
                               TABLE OF CONTENTS
                                                                        PAGE
                                                                        ----
                                   PART I

ITEM  1. BUSINESS....................................................      1
              General................................................      1
              Commercial Banking Group...............................      2
              Financial Markets Group................................      3
              Mortgage Servicing Group...............................      5
              Community Banking Group................................      7
              Mortgage Banking Group.................................      8
              Loan Portfolio.........................................      9
              Investment Portfolio...................................     10
              Deposits...............................................     11
              Market Risk Analysis...................................     12
              Competition............................................     15
              Subsidiaries...........................................     15
              Personnel..............................................     15
              Federal Financial Assistance...........................     15
              Regulation.............................................     17
              Taxation...............................................     27

ITEM  2. PROPERTIES..................................................     29

ITEM  3. LEGAL PROCEEDINGS...........................................     29

ITEM  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........     30


                                  PART II

ITEM  5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS.......................................     31

ITEM  6. SELECTED FINANCIAL DATA.....................................     32

ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS.................................     36
              Discussion of Results of Operations....................     36
              Discussion of Changes in Financial Condition...........     41
              Asset Quality..........................................     44
              Capital Resources and Liquidity........................     48
              Contingencies and Uncertainties........................     50
              Recent Accounting Standards............................     51
              Forward-Looking Information............................     51

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK........................................................     53

ITEM  8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................     53

ITEM  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE..................................     53

                                      (i)
<PAGE>
                                                                        PAGE
                                                                        ----
                                  PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........     53

ITEM 11. EXECUTIVE COMPENSATION......................................     53

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT................................................     53

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............     53


                                  PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
           8-K.......................................................     54

                                  SIGNATURES                              58

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS              60

                                      (ii)
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Bank United Corp. (the "Parent Company") became the holding company for
Bank United (the "Bank") upon the Bank's formation in December 1988. The Bank
is a federally chartered savings bank, and its deposits are insured by the
Savings Association Insurance Fund (the "SAIF"), which is administered by the
Federal Deposit Insurance Corporation ("FDIC"). In December 1996, the Parent
Company formed a wholly owned Delaware subsidiary, BNKU Holdings, Inc.
("Holdings"), which is now the parent company of the Bank. The Consolidated
Financial Statements included herein include the accounts of the Parent Company,
Holdings, the Bank, and the Bank's wholly owned subsidiaries (collectively known
as the "Company").

     The Company is a broad-based financial services provider to consumers and
businesses in Texas and selected markets throughout the United States. At
September 30, 1998, the Company operated an 84-branch community banking network
serving nearly 265,000 households, 21 commercial banking offices in 18 states
and eight wholesale mortgage origination offices in seven states. As of
September 30, 1998, the Company was the largest publicly traded depository
institution headquartered in Texas, with $13.7 billion in assets, $6.3 billion
in deposits and $684.4 million in stockholders' equity. The Company's address is
3200 Southwest Freeway, Houston, Texas 77027, and its telephone number is (713)
543-6500.

     Historically, the Company's operating strategy emphasized traditional
single family mortgage lending and deposit gathering activities. Over the past
few years, management has pursued a strategy designed to reduce the Company's
reliance on single family mortgage lending by developing higher margin
commercial and consumer lending and fee producing lines of business. During
fiscal 1997, the Company sold certain of its mortgage origination offices, but
retained its mortgage servicing business, its retail mortgage origination
capability in Texas through its community banking branches, and its wholesale
mortgage capabilities. During fiscal 1998, the Company continued to increase its
commercial and consumer loan portfolios, its mortgage servicing portfolio and
the level of lower cost transaction and commercial deposit accounts.

     While pursuing this strategy entails risks different from those present in
single family mortgage lending, the Company believes it has taken appropriate
measures to manage these risks. The Company has developed a comprehensive credit
approval process and formalized underwriting policies and procedures. The
Company has hired experienced commercial banking professionals, trained other
personnel to manage and staff these businesses, developed effective loan
administration functions, and closely monitors the performance of the
businesses.

     The Company's operations are subject to various material business risks.
For example, changes in prevailing interest rates can have significant effects
on the Company's profitability. The Company's business risks may become more
acute in periods of economic slowdown or recession. During such periods, payment
delinquencies, loan collection proceedings, and foreclosures generally increase
and could result in an increased incidence of claims and legal actions against
the Company. In addition, such conditions could lead to a decline in demand for
the Company's products and services.

     The Company has traditionally managed its business to limit overall
exposure to changes in interest rates. However, management has latitude to
increase the Company's interest rate sensitivity position within certain limits.
As a result, changes in market interest rates may have a greater impact on the
Company's financial performance than they have had historically. See "-- Market
Risk Analysis."

     An increase in the general level of interest rates may affect the Company's
net interest spread because of the periodic caps that limit the interest rate
change on the Company's mortgage-backed securities ("MBS") and loans that pay
interest at adjustable rates. Additionally, an increase in interest rates may
reduce, among other things, the demand for loans and the Company's ability to
originate loans while negatively impacting the Company's cost of funds. A
decrease in interest rates may affect the Company through, among other things,
increased prepayments on its loan and servicing portfolios and increased
competition for deposits. Accordingly,

                                       1
<PAGE>
changes in market interest rates affect the Company's net interest spread, loan
origination volume, loan and servicing portfolios, and overall operating
results.

     The Company's business is conducted through the Commercial Banking,
Financial Markets, and Community Banking Groups, which comprise the Banking
Segment, and the Mortgage Servicing Segment. See Note 17 to the Consolidated
Financial Statements for summarized financial information by business segment.

COMMERCIAL BANKING GROUP

     The Commercial Banking Group provides credit and a variety of cash
management and other services primarily to real estate related commercial
businesses. Other products and industry specialties of this group include
healthcare lending, commercial syndications, and other commercial and industrial
loan products. Business is solicited in Texas and in targeted markets throughout
the United States. At September 30, 1998, the commercial banking network
consisted of 21 offices in 18 states, compared to 11 offices in nine states at
September 30, 1997. A majority of the $3.5 billion of commercial loans
outstanding at September 30, 1998, was managed and serviced by the Commercial
Banking Group. During fiscal 1998, the commercial loan portfolio increased by
$1.3 billion or 58%. See "-- Loan Portfolio."

     MORTGAGE BANKER FINANCE ("MBF")

     The Commercial Banking Group provides small- and medium-sized mortgage
companies with credit facilities, including warehouse lines of credit,
securities purchased under agreements to resell ("repurchase agreements"),
term loans secured by mortgage servicing rights ("MSRs"), and working capital
credit lines. The credit facilities provided to these mortgage companies usually
are secured by single family mortgages or related servicing rights. The Company
advances funds to approved borrowers based on a percentage of the market value
of the collateral security. MBF loans and lines of credit are subject to the
risk of collateral value changes with changing interest rates. The loans also
are subject to the risk that the collateral may be documented fraudulently or
improperly. MBF customers usually have higher leverage than other commercial
borrowers. At September 30, 1998, this business line had $787.7 million of loans
outstanding, $123.5 million of repurchase agreements outstanding, and $501.6
million in unfunded commitments. The Commercial Banking Group also offers
commercial banking services, including cash management, document custody, and
deposit services to its mortgage banking customers. Deposits related to MBF
activities totalled $1.1 billion at September 30, 1998, and had an average cost
of funds to the Company of 5.48% for fiscal 1998. See "-- Deposits."

     MULTI-FAMILY LENDING

     The Commercial Banking Group provides financing for operating multi-family
properties, real estate investment trusts, and selected construction,
acquisition, and rehabilitation projects. These loans are solicited directly in
Texas and in targeted markets throughout the United States through regional
offices and preapproved multi-family mortgage banking correspondents.
Multi-family lending is subject to the risk that the borrower may not complete
construction in a timely manner or may misrepresent the progress or status of
the project. Additionally, the value of the completed collateral is subject to
market value changes and may be adversely affected by the presence of
undetected, environmentally sensitive substances. To reduce these risks, the
Company limits the loan amount to an amount less than the appraised value of the
collateral, verifies historical cash flows, and assesses general economic
conditions and the financial condition of the borrower. At September 30, 1998,
this business line had $875.5 million of loans outstanding and $227.8 million of
unfunded commitments ($684.0 million in permanent loans, $172.4 million in
construction loans, and $19.1 million of loans held for sale).

     RESIDENTIAL CONSTRUCTION LENDING

     The Commercial Banking Group provides financing to builders for the
construction of single family properties, including loans for the acquisition
and development of improved residential lots. These loans are made on a
commitment term that generally is for a period of one to three years.
Residential construction loans are subject to the risk that a general downturn
in the builder's local economy could prevent the builder from marketing its
product profitably. Such loans are also subject to the risk that a builder might
misrepresent the completion status of the homes against which it has drawn loan
funds. The Company seeks to limit these risks by

                                       2
<PAGE>
reviewing the builder's experience, reputation, general financial condition, and
speculative inventory levels. Additionally, construction status is reviewed by
on-site inspections and the builder's ongoing financial position is monitored.
During fiscal 1995 and 1994, the Company expanded into several major markets
outside of Texas, including Atlanta, Chicago, Denver, Orlando, Phoenix, and
Philadelphia. The Company opened offices in San Francisco, San Diego, and
Washington, D.C. during fiscal 1997. During fiscal 1998, the Company expanded
into the Las Vegas market and opened offices in Charlotte, Nashville, and
Seattle. Current markets in Texas include Houston, Dallas, Austin, and San
Antonio. At September 30, 1998, this business line had $779.5 million of loans
outstanding and $592.4 million in unfunded commitments.

     COMMERCIAL REAL ESTATE LENDING

     The Commercial Banking Group is engaged in commercial real estate lending
for specific products, emphasizing permanent mortgages on income producing
properties, such as retail shopping centers. Commercial real estate loans are
typically made to single purpose business entities with limited secondary
sources of repayment other than the specific project financed. The value of the
collateral for such loans may be adversely affected by local market conditions
and by the presence of environmentally sensitive substances. Competitive
marketplace underwriting guidelines are applied in evaluating each loan
transaction. At September 30, 1998, this business line had $510.8 million of
loans outstanding and $129.4 million of unfunded commitments ($411.4 million in
permanent loans, $91.6 million in construction loans, and $7.8 million of loans
held for sale).

     HEALTHCARE LENDING

     In fiscal 1996, the Commercial Banking Group began funding construction and
permanent loans to experienced operators of senior housing and long-term care
facilities. In addition, the Commercial Banking Group makes construction and
permanent loans for medical offices. Such loans are subject to risks specific to
the industry, such as occupancy and competition. The Company applies competitive
marketplace underwriting guidelines in evaluating the creditworthiness of these
loans. At September 30, 1998, this business line had $267.8 million of loans
outstanding and $257.2 million in unfunded commitments ($122.7 million in
permanent loans and $145.1 million in construction loans).

     SBA SECURITIZATIONS

     In May 1996, the Commercial Banking Group began purchasing the
government-guaranteed portion of Small Business Administration ("SBA") loans
through Bank United Securities Corp., the Bank's broker-dealer subsidiary. These
loans are pooled, securitized, and usually sold. During fiscal 1998 and 1997,
the Commercial Banking Group purchased $495.4 million and $406.3 million of SBA
loans, of which $506.1 million and $341.5 million were pooled into securities
and $494.8 million and $335.1 million were sold. The Company was the second
largest SBA pool assembler in the United States as of September 30, 1998, up
from fourth at September 30, 1997. The SBA interest-only strips related to these
securitizations were retained by the Company and totalled $71.6 million at
September 30, 1998. See "-- Investment Portfolio." At September 30 1998, the
Commercial Banking Group held $37.8 million of SBA loans for sale.

     COMMERCIAL SYNDICATIONS

     As part of the Company's strategy to increase its commercial lines of
business, the Company began purchasing participation interests in syndicated
commercial loans in fiscal 1996. The underlying loans in these syndications are
made to companies in a broad range of industries, are underwritten using prudent
cash flow projections, and are usually further secured by tangible collateral.
The Company regularly monitors general economic conditions, developments in the
borrower's industry, and the borrower's financial condition. When entering into
these participations, the Company seeks to avoid geographic concentrations and
industries that are cyclical. At September 30, 1998, this business line had
$174.5 million of loans outstanding, $23.4 million of letters of credit, and
$61.8 million in unfunded loan commitments.

FINANCIAL MARKETS GROUP

     The Financial Markets Group manages the Company's asset portfolio
activities, including the acquisition, securitization and sale of loans. In
February 1997, the Financial Markets Group assumed management of the

                                       3
<PAGE>
Company's wholesale mortgage origination business. The Financial Markets Group
also manages the Company's single family loan portfolio, which totalled $6.7
billion at September 30, 1998. Additionally, under the supervision of the Asset
and Liability Committee ("ALCO"), the Financial Markets Group is responsible
for the Company's investment portfolio, for interest rate risk hedging
strategies, and for securing funding sources other than consumer and commercial
deposits. See "-- Loan Portfolio" and "-- Market Risk Analysis."

     LOAN ACQUISITIONS

     The Financial Markets Group acquires loans, primarily single family loans,
through traditional secondary market sources (mortgage companies, financial
institutions, and investment banks). In fiscal 1998, 1997, and 1996, the Company
purchased approximately $1.1 billion, $795.8 million, and $226.3 million of
single family loans. While the Company intends to continue to pursue this
strategy on a selective basis, there can be no assurance of the continued
availability of portfolio acquisition opportunities or the Company's ability to
obtain such portfolios on favorable terms.

     WHOLESALE MORTGAGE BANKING

     In February 1997, the wholesale mortgage origination offices that were not
sold or closed in the restructuring of the Mortgage Banking Group and other
mortgage origination activities that were retained, were integrated into the
Financial Markets Group. See " -- Mortgage Banking Group". These offices
provide qualified mortgage brokers nationwide with a variety of fixed and
adjustable-rate mortgage products. The wholesale mortgage origination offices
originate loans for the Company's portfolio and for sale and originated $3.6
billion and $1.5 billion of loans in fiscal 1998 and 1997. During fiscal 1998,
$1.9 billion of single family mortgage loans were sold in the secondary market.
At September 30, 1998, this business line had $477.1 million in unfunded
commitments.

     WHOLESALE FUNDINGS

     The Financial Markets Group arranges funding sources other than consumer
and commercial deposits for the Company. Wholesale funding sources include
advances from the Federal Home Loan Bank of Dallas ("FHLB Dallas"), borrowings
on securities sold under agreements to repurchase ("reverse repurchase
agreements") and brokered deposits. At September 30, 1998, wholesale activities
provided $5.6 billion in funding. See "Management's Discussion and
Analysis -- Capital Resources and Liquidity" and Notes 8 and 9 to the
Consolidated Financial Statements.

     INVESTMENT PORTFOLIO MANAGEMENT

     The Financial Markets Group manages the Company's investment portfolio,
which totalled approximately $1.5 billion at September 30, 1998. The Financial
Markets Group seeks to maintain a portfolio of assets that provides for
liquidity needs, maintains an interest rate spread over matched funded
liabilities, and maximizes utilization of the Bank's risk-based capital. See
"-- Investment Portfolio," "-- Market Risk Analysis," and Notes 2, 3, and 4
to the Consolidated Financial Statements.

     SECURITIZATION

     From time to time, the Financial Markets Group evaluates the Company's loan
portfolio for securitization opportunities and, when appropriate, creates
securities and retains the master servicing. In fiscal 1992 through 1994, the
Financial Markets Group structured seven single family securitization
transactions, creating $1.8 billion in MBS. The Company has sold substantially
all of the noninvestment grade MBS created, thus enhancing the Bank's risk-based
capital ratios and credit quality. During fiscal 1996, the Financial Markets
Group participated in the structuring and issuance of a multi-family MBS
totalling $152.7 million.

     FHLB OF CHICAGO PROGRAM

     During fiscal 1998, the Company sold $83.1 million of single family loans
through the FHLB of Chicago's Mortgage Partnership Finance program ("MPF").
The Company is the first FHLB-system member outside of the FHLB of Chicago's
district to participate in the MPF program. This program has been established as
an alternative to selling loans into the traditional secondary market.

                                       4
<PAGE>
     To cover its risk of loss on the loans purchased through this program, the
FHLB of Chicago determines the total loss profile for the loans. A portion of
the loan coupon remitted each month is retained by the FHLB of Chicago to fund a
spread account set up to absorb normal and expected losses from such loans. Over
time, if losses are greater than the accumulated amount of the spread account,
the second level of loss protection is provided by the Company. This coverage is
provided in the form of recourse, which is limited to the credit enhancement
guarantee provided by the Company. If losses become greater than the recourse
coverage, all further losses are borne solely by the FHLB of Chicago.

     SERVICING RETENTION UNIT

     In September 1997, the Company established a Servicing Retention Unit to
focus on refinancing loans within its servicing portfolio. This group seeks to
solicit borrowers that have an identified possibility of refinance. The
Servicing Retention Unit's objective is to extend the life of the existing
servicing portfolio.

MORTGAGE SERVICING GROUP

     At September 30, 1998, the Company's single family mortgage servicing
portfolio totalled $27.9 billion or 292,000 loans, including $4.4 billion of
loans serviced for the Company's own account. Mortgage loan servicing activities
include collecting and accounting for payments from borrowers, remitting
payments to investors, collecting funds for and paying mortgage-related expenses
such as taxes and insurance, inspecting the collateral as required, collecting
from and, if necessary, foreclosing on delinquent borrowers, disposing of
properties received in foreclosures, and generally administering the loans.
Mortgage servicing operations are technology and process management intensive.
The Company views itself as being competitively positioned to service loans in
an efficient and cost effective manner relative to its peers.

     SERVICING FOR OTHERS

     The Company enters into agreements to service loans for other loan
investors, in exchange for servicing fees, primarily through the purchase of
servicing rights and secondarily through the sale of loans it has originated
while retaining the right to service the loans. The Mortgage Servicing Group
services loans owned by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC"), private mortgage investors, and the Company.

     Servicing fees are withheld from the monthly payments made to investors,
are usually based on the principal balance of the loan being serviced, and
generally range from 0.25% to 0.55% annually of the outstanding principal amount
of the loan. Minimum servicing fees for substantially all loans serviced that
have been securitized into MBS are set from time to time by the sponsoring
agencies. As a servicer of loans securitized by the GNMA, the FNMA, and the
FHLMC, the Company may be obligated to make timely payment of principal and
interest to security holders, whether or not such payments have been made by
borrowers on the underlying mortgage loans. With respect to mortgage loans
securitized under GNMA programs, the Company is insured by the Federal Housing
Administration ("FHA") against foreclosure loss on FHA loans and by the
Department of Veteran's Affairs ("VA") through guarantees on VA loans.
Although the GNMA, the FNMA, and the FHLMC are obligated to reimburse the
Company for principal and interest payments advanced by the Company as a
servicer, the funding of delinquent payments or the exercise of foreclosure
rights involves costs to the Company that may not be fully reimbursed or
recovered.

     Loan administration contracts with the FNMA, and typically with private
investors, provide for continuation of servicing over the term of the loan, but
permit termination for cause or termination without cause upon payment of a
cancellation fee. Loan administration contracts with the GNMA and the FHLMC can
be terminated only for cause. Management believes that the Mortgage Servicing
Group is currently in substantial compliance with all material rules,
regulations, and contractual obligations related to mortgage loan servicing.

     MORTGAGE SERVICING RIGHTS

     Mortgage servicing portfolio levels are influenced by market interest
rates. As interest rates rise, prepayments generally decrease, resulting in an
increase in the value of the servicing portfolio. Lower market interest rates
prompt an increase in prepayments as consumers refinance their mortgages at
lower rates of interest. As

                                       5
<PAGE>
prepayments increase, the life of the servicing portfolio is reduced, decreasing
the servicing fee revenue that will be earned over the life of that portfolio
and the price third-party purchasers are willing to pay. Increased prepayment
activity also impacts earnings through higher amortization of MSRs and any MSR
impairment valuations, which are deducted from servicing fee revenue. The
Company actively seeks to mitigate the negative effect of prepayments on the
servicing portfolio by entering into interest rate floor agreements
("floors"). The Company pays a one-time premium to enter into the floor
agreement and if rates fall below an agreed rate, the Company will receive
payments equal to the difference between the market rate and the agreed rate
multiplied by the notional amount. The Company is not exposed to loss with a
floor agreement beyond the initial premium paid. See Note 11 to the Consolidated
Financial Statements.

     During fiscal 1998, a MSR valuation allowance totalling $4.8 million was
established due to the effect of a decline in long-term market interest rates.
There was no MSR valuation allowance at September 30, 1997 or 1996. When
determining the value of MSRs, the Company estimates future prepayment rates
based on current interest rate levels, market forecasts, and other economic
conditions, as well as relevant characteristics of the servicing portfolio, such
as recent prepayment experience, delinquency rates, and interest rate
stratification. The weighted average interest rate in the servicing portfolio
has decreased from 9.57% at September 30, 1991 to 7.78% at September 30, 1998,
principally as a result of the origination of mortgage loans with increasingly
lower rates from fiscal 1991 to 1998, the prepayment and refinancing of higher
rate mortgages, and purchases of MSRs on loans originated by others at lower
rates. At September 30, 1998, the weighted-average contractual maturity
(remaining years to maturity) of the loans in the servicing portfolio was
approximately 24 years.

     The performance of the loans in the servicing portfolio may be affected by
changes in local economic and business conditions. At September 30, 1998, the
largest concentrations of the servicing portfolio were in California (31.0%) and
Texas (9.7%). At September 30, 1998, 5.09% of the loans serviced by the Mortgage
Servicing Group were delinquent and an additional 1.12% were in foreclosure. The
following table presents the servicing portfolio at September 30, 1998, by
interest rate category:
<TABLE>
<CAPTION>
                                         LESS
                                         THAN       7.00-      8.01-     9.01-     10.01-    11.01-    12.01%
                                         7.00%      8.00%      9.00%     10.00%    11.00%    12.00%    & ABOVE
                                       ---------  ---------  ---------   ------    ------    ------    -------
<S>                                    <C>        <C>         <C>        <C>       <C>       <C>       <C> 
Government...........................        3.1%      23.5%       6.6%    1.6%      0.3%      0.1%      0.1%
Conventional.........................       10.6       30.5       20.9     2.0       0.5       0.1       0.1
                                       ---------  ---------  ---------   ------    ------    ------    -------
     Total...........................       13.7%      54.0%      27.5%    3.6%      0.8%      0.2%      0.2%
                                       =========  =========  =========   ======    ======    ======    =======
</TABLE>
                                       6
<PAGE>
     The following table shows activity in the single family loan servicing
portfolio.

                                           FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                    (IN THOUSANDS)
ACTIVITY
Beginning balance....................  $ 24,518,396  $ 13,246,848  $ 12,532,472
    Purchases(1).....................     8,050,799    12,384,544     1,233,117
    Servicing on originated loans....     3,899,903     2,219,294     3,689,994
    Prepayments......................    (7,447,519)   (1,870,400)   (1,600,195)
    Sales(1).........................      (154,709)     (929,687)   (2,130,004)
    Amortization.....................      (850,081)     (436,541)     (373,964)
    Foreclosures.....................       (81,489)      (95,662)     (104,572)
                                       ------------  ------------  ------------
Ending balance.......................  $ 27,935,300  $ 24,518,396  $ 13,246,848
                                       ============  ============  ============
BY TYPE
    Conventional.....................  $ 18,125,325  $ 19,034,564  $  9,663,715
    Government.......................     9,809,975     5,483,832     3,583,133
                                       ------------  ------------  ------------
                                       $ 27,935,300  $ 24,518,396  $ 13,246,848
                                       ============  ============  ============
BY OWNER
    Others...........................  $ 23,491,960  $ 20,521,294  $  9,494,788
    Company..........................     4,443,340     3,997,102     3,752,060
                                       ------------  ------------  ------------
                                       $ 27,935,300  $ 24,518,396  $ 13,246,848
                                       ============  ============  ============

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

(1) The actual release or transfer of servicing does not necessarily take place
    during the same period as the related sale or purchase of MSRs.

     During fiscal 1998 and 1997, the Company continued to be an active
opportunistic purchaser of MSRs. MSRs increased by $138.7 million, or 51%,
during fiscal 1998 due to purchases of servicing rights associated with $8.1
billion of single family mortgage loans at a cost of $166.5 million. These
acquisitions also contributed to the increase in servicing related receivables
and payables included in other assets and other liabilities. See Note 6 to the
Consolidated Financial Statements.

     INSURANCE PRODUCT SALES

     Commonwealth Insurance Services, Inc., an affiliate of the Bank, markets
and sells insurance products to the Company's consumer customer base. A broad
range of insurance products, including life, credit life, accidental death,
disability services, disaster mortgage protection, and other select insurance
products are offered. The primary methods of marketing are direct mail,
telemarketing, and agent sales. In fiscal 1998, the Bank began offering auto and
homeowners insurance to its employees, mortgage customers, and community bank
customers.

COMMUNITY BANKING GROUP

     The Community Banking Group's principal activities include deposit
gathering, consumer lending, small business banking, and investment product
sales. The Community Banking Group operates an 84-branch community banking
network, a 24-hour telephone banking center, and an 81-unit ATM network, which
together serve as the platform for the Company's consumer and small business
banking activities. The community banking branch network includes 43 branches in
the greater Houston area, 37 branches in the Dallas / Ft. Worth metropolitan
area, and two branches each in Austin and San Antonio. Through this branch
network, the Company maintains approximately 624,000 accounts for approximately
265,000 households and businesses.

     DEPOSIT GATHERING

     The Community Banking Group offers a variety of traditional deposit
products and services, including checking and savings accounts, money market
accounts, certificates of deposit ("CDs"), and deposit products and services
tailored specifically to consumer and small business needs. The Community
Banking Group's strategy is to become the primary financial services provider to
its customers by emphasizing high levels of customer service and innovative
products. At September 30, 1998, the Community Banking Group maintained nearly
397,000 deposit accounts with $5.2 billion in deposits. See " -- Deposits."

                                       7
<PAGE>
     CONSUMER LENDING

     The Community Banking Group offers a variety of consumer loan products,
including home equity loans, home improvement loans, purchase-money second lien
loans, and automobile loans. The Community Banking Group also provides a
specialty lending program in which a preferred rate and faster service is
offered to home improvement loan prospects referred to the Company by
contractors. In addition, while the Company has offered its customers credit
cards since 1990, the Company began credit card lending for its own portfolio in
fiscal 1997. At September 30, 1998, consumer loans outstanding totalled $493.5
million, up by $187.9 milion, or 62%, from the prior year and there were $44.9
million in unfunded commitments.

     Consumer loans generally have higher risk of loss than single family
residential loans. For example, credit card loans are easily accessible to
consumers, which contributes to an increased level of risk, fraud in particular.
Credit card loans also generally have no collateral and are subject to complex
consumer protection laws and regulations. Automobile loans carry the risk of
collateral depreciation, and mobility and repossession laws can make it
difficult to take possession of the collateral to enforce lien rights.

     SMALL BUSINESS BANKING

     The Community Banking Group's small business strategy is focused on
offering loan products and services tailored specifically to most small business
needs, with highly responsive credit decision-making. It provides a broad range
of credit services to its small business customers, including lines of credit,
working capital loans, equipment loans, owner-occupied real estate loans, SBA
loans and cash and treasury management services. These loans are offered with
both fixed and adjustable-rates on a term basis and adjustable-rates on a
revolving basis with maturities of up to 10 years for term loans and one year
for revolving loans. These loans are underwritten on the financial strength of
the guarantor, the value of pledged collateral, and the projected cash flows of
the borrower. Additionally, borrowers are contractually required to provide
periodic financial information for review. At September 30, 1998, the Community
Banking Group had 1,020 small business loans outstanding, totalling $82.5
million, $36.1 million in unfunded commitments, and $72.3 million in pending
applications. Small business loans outstanding increased by $33.1 million, or
67%, during fiscal 1998.

     RETAIL MORTGAGE ORIGINATIONS

     In fiscal 1997, the Company began offering mortgages through its community
banking branch network. The types of loans offered through the community banking
branch network were primarily limited to 15-and 30-year fixed-rate mortgage
loans. The Community Banking Group has developed an abbreviated initial
application, a promised response within two days of application, and provides a
discount on the rate if the customer has the payment automatically withdrawn
from a Bank United checking account. For fiscal 1998 and 1997, the Community
Banking Group originated $167.1 million and $38.2 million of retail mortgage
loans.

     INVESTMENT PRODUCT SALES

     Bank United Securities Corp., a subsidiary of the Bank, markets investment
products to the Company's consumer customer base. A broad range of investment
products, including stocks, bonds, mutual funds, annuities, securities, and
certain other insurance policies is offered by commissioned Series 7 and Group I
licensed, registered representatives. As of September 30, 1998, there were 41
such representatives operating out of certain offices located in the community
banking branches. Each representative will typically be responsible for
investment product sales at two to three community banking branches.

MORTGAGE BANKING GROUP

     The Mortgage Banking Group's principal activities were comprised of retail
and wholesale mortgage originations, and mortgage servicing. During February
1997, the Company sold certain of its mortgage origination offices. In
connection with this sale, the remaining offices were restructured or closed.
The Company retained its mortgage servicing business, its retail mortgage
origination capability in Texas through its community banking branches, and its
wholesale mortgage and other origination capabilities through its Financial
Markets Group. For the four months ended January 31, 1997 and fiscal 1996, the
Mortgage Banking Group originated $638.4 million and $2.1 billion in retail
mortgage loans and $614.5 million and $1.7 billion in mortgage loans through its
wholesale operations. See " -- Financial Markets Group -- Wholesale Mortgage
Originations" and Note 17 to the Consolidated Financial Statements.

                                       8
<PAGE>
LOAN PORTFOLIO

     The Company has focused in recent years on originating and servicing
commercial and consumer loans. However, the loan portfolio still shows the
impact of substantial single family mortgage loan fundings. The following table
shows loan funding levels. Fundings include originations of new loans and
increases in existing loans, such as lines of credit. Commercial loans include
the following loan categories: single family construction, multi-family,
multi-family construction, commercial real estate, commercial real estate
construction, commercial syndications, healthcare, healthcare construction,
small business, and MBF lines of credit ("commercial"). A summary of the
activity in the loan portfolio is shown in "Management's Discussion and
Analysis -- Discussion of Changes in Financial Condition."

                                           FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                    (IN THOUSANDS)
FUNDINGS
Single family........................  $  3,789,389  $  2,188,273  $  3,602,009
Commercial...........................     2,876,328     1,492,931       891,306
Consumer.............................       367,097       152,665       125,596
                                       ------------  ------------  ------------
          Total......................  $  7,032,814  $  3,833,869  $  4,618,911
                                       ============  ============  ============

     The following table shows the composition of the loan portfolio.
<TABLE>
<CAPTION>
                                                                 AT SEPTEMBER 30,
                                       ---------------------------------------------------------------------
                                           1998           1997          1996          1995          1994
                                       -------------  ------------  ------------  ------------  ------------
                                                                  (IN THOUSANDS)
<S>                                    <C>            <C>           <C>           <C>           <C>         
HELD FOR INVESTMENT
     Single family...................  $   4,694,628  $  5,820,495  $  6,152,504  $  7,061,088  $  4,203,614
     Mortgage banker finance lines of
       credit........................        787,736       464,189       139,872       109,339       147,754
     Single family construction......        779,542       389,230       242,525       115,436        57,786
     Multi-family....................        684,000       661,774       479,833       356,587       256,362
     Consumer........................        493,457       305,545       173,518       123,096       108,179
     Commercial real estate..........        411,396       275,694        10,538        27,393        61,919
     Commercial syndications.........        174,522        72,981       --            --            --
     Multi-family construction.......        172,422       107,215        31,355        35,430        20,437
     Healthcare construction.........        145,095        30,091       --            --            --
     Healthcare......................        122,665        65,886         8,750       --            --
     Commercial real estate
       construction..................         91,649        29,088        21,551         3,613       --
     Small business..................         59,106        45,350        22,798         6,495       --
                                       -------------  ------------  ------------  ------------  ------------
                                           8,616,218     8,267,538     7,283,244     7,838,477     4,856,051
     Allowance for credit losses.....        (47,027)      (39,172)      (39,633)      (36,763)      (23,378)
     Accretable unearned discounts
       and net deferred loan
       origination fees..............         (2,479)       (6,740)      (16,458)      (38,038)      (52,345)
                                       -------------  ------------  ------------  ------------  ------------
                                           8,566,712     8,221,626     7,227,153     7,763,676     4,780,328
                                       -------------  ------------  ------------  ------------  ------------
HELD FOR SALE
     Single family...................      2,048,483       697,410       256,656       406,563       253,310
     SBA.............................         37,765        65,872        32,543       --            --
     Small business..................         23,422         4,121         3,136           825       --
     Multi-family....................         19,067         6,200       --             89,176        12,536
     Commercial real estate..........          7,769       --            --            --            --
                                       -------------  ------------  ------------  ------------  ------------
                                           2,136,506       773,603       292,335       496,564       265,846
                                       -------------  ------------  ------------  ------------  ------------
          Total loans................  $  10,703,218  $  8,995,229  $  7,519,488  $  8,260,240  $  5,046,174
                                       =============  ============  ============  ============  ============
</TABLE>
     The Company's loan portfolio is concentrated in certain geographical
regions, particularly California and Texas. The performance of such loans may be
affected by changes in local economic and business conditions. Unfavorable or
worsened economic conditions throughout California could have a materially
adverse effect on

                                       9
<PAGE>
the Company's financial condition, results of operations, or liquidity. See Note
5 to the Consolidated Financial Statements for a geographic distribution of the
loan portfolio. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Asset Quality."

INVESTMENT PORTFOLIO

                                                   AT SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                    (IN THOUSANDS)
Securities purchased under agreements
  to resell and federal funds sold...  $    474,483  $    349,209  $    674,249
Securities and other investments
     U.S. government and agency......        18,425        29,085        64,544
     SBA interest-only strips........        71,561        37,511       --
     Other...........................         1,364        11,213         1,149
Mortgage-backed securities
     U.S. government and agency......       277,975       651,292       556,853
     Other...........................       654,083       918,413     1,101,055
                                       ------------  ------------  ------------
          Total......................  $  1,497,891  $  1,996,723  $  2,397,850
                                       ============  ============  ============

     The Company maintains an investment portfolio for investment and liquidity
purposes. The investment portfolio consists primarily of MBS. MBS were acquired
as a means of investing in housing-related mortgage instruments while incurring
less credit risk than holding a portfolio of non-securitized loans.
Additionally, MBS include securities created through the securitization of the
Company's single family loans. The MBS in the investment portfolio have
different credit quality quarantees and structures and include FNMA, FHLMC, and
GNMA certificates ("agency securities"), privately issued and credit enhanced
MBS ("non-agency securities"), and certain types of collateralized mortgage
obligations ("CMOs"). Agency pass-through securities guarantee the timely
payment of principal and interest, whether collected or not, and pay-off if the
mortgagor defaults. GNMA is an agency of the federal government that guarantees
GNMA MBS. GNMA MBS are backed by the full faith and credit of the United States.
FNMA and FHLMC are government-sponsored enterprises, and their MBS only carry
the guarantee of the issuing agency. However, these agencies have lines of
credit with the Treasury, which provide a large measure of security and
certainty.

     The Company also invests in securities sponsored by private issuers with no
explicit or implicit government guarantee. There are a variety of structuring
techniques used to protect investors against default risk and delays in payment
of principal and interest. The forms of credit enhancements include insurance,
letters of credit, and subordination within the MBS structure. As of September
30, 1998, all of the non-agency MBS had a credit rating of AA/Aa or higher as
defined by Standard & Poor's Corporation or Moody's Investor Services, Inc.

     The Company holds SBA interest-only strips in its securities and other
investments portfolio. These SBA interest-only strips were created in connection
with the Company's securitization of SBA loans. These investments represent the
contractual right to receive a portion of the interest due on the underlying SBA
loans. If actual prepayment speeds remain at higher levels than originally
anticipated in the securitization process, the value of the recorded investment
may be permanently impaired. SBA loans are generally less sensitive to changes
in interest rates, which reduces the likelihood of prepayments.

     See Notes 1 through 4 to the Consolidated Financial Statements for
additional information related to the assets in the investment portfolio.

                                       10
<PAGE>
DEPOSITS

     The Company attracts a majority of its deposits through its 84-branch
community banking network located primarily in the Houston area and the
Dallas/Ft. Worth metroplex. Over the past few years, the Company's management
has pursued a strategy designed to increase the level of lower cost transaction
and commercial deposit accounts. During fiscal 1998, the outstanding balances of
transaction accounts increased to 46% of total deposits, from 45% at September
30, 1997. The number of consumer and commercial checking accounts increased to
over 176,000 at September 30, 1998, up by 8% from 163,000 at September 30, 1997.
The composition of the Company's deposits by business unit, type of customer,
and type of account was as follows:

                                                   AT SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                    (IN THOUSANDS)
BUSINESS UNIT
Community Banking....................  $  5,188,523  $  4,201,898  $  4,051,055
Commercial Banking...................     1,100,313       973,123       889,039
Financial Markets....................        31,640        72,647       207,851
                                       ------------  ------------  ------------
                                       $  6,320,476  $  5,247,668  $  5,147,945
                                       ============  ============  ============
TYPE OF CUSTOMER
Consumer.............................  $  5,015,524  $  4,071,214  $  3,939,631
Commercial...........................     1,273,312     1,103,807     1,000,463
Wholesale............................        31,640        72,647       207,851
                                       ------------  ------------  ------------
                                       $  6,320,476  $  5,247,668  $  5,147,945
                                       ============  ============  ============
TYPE OF ACCOUNT
Time (CDs)...........................  $  3,382,882  $  2,878,952  $  3,122,200
Transaction..........................     2,937,594     2,368,716     2,025,745
                                       ------------  ------------  ------------
                                       $  6,320,476  $  5,247,668  $  5,147,945
                                       ============  ============  ============

     Currently, the principal methods used by the Community Banking Group to
attract and retain deposit accounts include offering generally competitive
interest rates, having branch locations in major Texas markets, and offering a
variety of services for the Company's customers. The Company uses traditional
marketing methods to attract new customers and savings deposits, including
newspaper, radio, and television advertising. The Company offers traditional
deposit products including checking, commercial checking, money market, savings
accounts, and CDs, as well as offering treasury management services to small
business customers. These deposit products are specifically tailored to meet the
needs of the Company's consumer and small business banking customers. The
following table illustrates the levels of deposits gathered by the Company's
community banking network by region at September 30, 1998.

                                                                    AVERAGE
                                                                   DEPOSITS
                                        NUMBER OF     DEPOSITS        PER
              LOCATION                  BRANCHES    OUTSTANDING     BRANCH
-------------------------------------   ---------   ------------   ---------
                                               (DOLLARS IN THOUSANDS)
Houston area.........................       43      $  2,884,069    $ 67,071
Dallas/Ft. Worth metroplex...........       37         2,082,321      56,279
Other................................        4           222,133      55,533
                                            --
                                                    ------------
     Total...........................       84      $  5,188,523      61,768
                                            ==      ============

     The Company also obtains deposits through acquisitions. In January 1998,
the Company purchased 18 branches and related deposits from Guardian Savings and
Loan Association. The branches, six in the Houston area and 12 in the Dallas/Ft.
Worth Metroplex, had combined deposits of $1.44 billion. In December 1997, the
Company purchased three branches in the Dallas area, having $66 million in
deposits, from California Federal Savings Bank, FSB.

     In September 1998, the Company signed an agreement to purchase Midland
American Bank, a commercial bank operating five branches in Midland, Texas,
having assets of $225 million and deposits of $203 million. Closing of this
transaction is expected early in 1999.

                                       11
<PAGE>
     The Commercial Banking Group obtains deposits by offering cash management
services to its MBF customers. These commercial deposit accounts include
operating accounts of MBF customers, escrow deposits, and principal and interest
payments on the loans serviced by MBF customers. While the Company does not
generally solicit brokered deposits, the Financial Markets Group from time to
time accepts brokered deposits when permitted by regulation and available at
favorable rates. Wholesale deposits are raised from time to time by the
Financial Markets Group from institutional investors. These deposits tend to be
interest rate sensitive and are subject to withdrawal if the rates paid on these
deposits are not competitive with other markets rates. See Note 7 to the
Consolidated Financial Statements.

MARKET RISK ANALYSIS

     Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's principal market risk exposure is to changes in
interest rates. Interest rate risk arises primarily from differences in the
duration or repricing of the Company's assets, liabilities, and financial
instruments with off-balance-sheet risk. The Company is most affected by changes
in U.S. Treasury rates and London InterBank Offered Rates ("LIBOR") because
many of the Company's financial instruments reprice based on these indices.
Substantial changes in these indices may adversely impact the Company's
earnings. To that end, management actively monitors and manages its interest
rate risk exposure. This effort is accomplished through structuring the balance
sheet and off-balance-sheet portfolios by seeking to maximize net interest
income while maintaining an acceptable level of risk to changes in market
interest rates. The achievement of this goal requires a balance between
profitability, liquidity, and interest rate risk.

     ASSET AND LIABILITY MANAGEMENT

     Interest rate risk is managed by the ALCO, which is composed of senior
officers of the Company, in accordance with policies approved by the Company's
Board of Directors. The ALCO formulates strategies based on appropriate levels
of interest rate risk. In determining the appropriate level of interest rate
risk, the ALCO considers the impact on earnings and capital of the current
outlook on interest rates, potential changes in interest rates, regional
economies, liquidity, business strategies, and other factors. The ALCO meets
regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and fair values of assets and
liabilities, unrealized gains and losses, purchase and sale activity, loans held
for sale and commitments to originate loans ("mortgage pipeline"), and the
maturities of investments, borrowings and time deposits. Additionally, the ALCO
reviews liquidity, cash flow flexibility, and consumer and commercial deposit
activity.

     To effectively measure and manage interest rate risk, the Company uses
sensitivity analysis to determine the impact on net interest income of various
interest rate scenarios, balance sheet trends, and strategies. From these
simulations, interest rate risk is quantified and appropriate strategies are
developed and implemented. Additionally, duration and market value sensitivity
measures are utilized when they provide added value to the overall interest rate
risk management process. The overall interest rate risk position and strategies
are reviewed by executive management and the Company's Board of Directors on an
ongoing basis. The Company has traditionally managed its business to reduce its
overall exposure to changes in interest rates. However, management has latitude
to increase the Company's interest rate sensitivity position within certain
limits if, in management's judgment, it will enhance profitability. As a result,
changes in market interest rates may have a greater impact on the Company's
financial performance than they have had historically.

     The Company manages its exposure to interest rates by entering into certain
financial instruments with on and off-balance-sheet risk in the ordinary course
of business. The Company does not enter into instruments such as leveraged
derivatives or structured notes for the purposes of reducing interest rate risk.
The financial instruments used to manage interest rate risk may include interest
rate swaps, caps, floors, locks, short sales, financial options, financial
futures contracts, and forward delivery contracts. A hedge is an attempt to
reduce risk by creating a relationship whereby any losses on the hedged asset or
liability are expected to be offset in whole or in part by gains on the hedging
financial instrument. Thus, market risk resulting from a particular instrument
is normally offset by other on or off-balance-sheet transactions. See Note 11 to
the Consolidated Financial Statements.

                                       12
<PAGE>
     SENSITIVITY ANALYSIS

     The following table presents an analysis of the changes inherent in the
Company's net interest income over a 12 month period and market value of
portfolio equity arising from hypothetical changes in market interest rates
("MVE"). MVE is the market value of assets, less the market value of
liabilities, adjusted for the market value of MSRs and off-balance-sheet
instruments. The interest rate scenarios presented in the table include interest
rates at September 30, 1998 and 1997 and as adjusted by instantaneous parallel
rate changes upward and downward of up to 200 basis points. The fiscal 1998 and
1997 scenarios are not comparable due to differences in the interest rate
environments, including the absolute level of rates and the shape of the yield
curve.
<TABLE>
<CAPTION>
                                          1998                                  1997
                            ---------------------------------     ---------------------------------
           CHANGE IN        NET INTEREST     MARKET VALUE OF      NET INTEREST     MARKET VALUE OF
         INTEREST RATES        INCOME        PORTFOLIO EQUITY        INCOME        PORTFOLIO EQUITY
         --------------     ------------     ----------------     ------------     ----------------
<S>                         <C>              <C>                   <C>             <C>    
              +200              (2.92)%            (4.63)%            (9.92)%            (8.56)%
              +100              (0.48)             (2.63)             (3.01)             (0.57)
                 0               0.00               0.00               0.00               0.00
              -100               1.13              (3.86)              1.23              (7.78)
              -200               2.39               1.68               3.56             (12.01)
</TABLE>
     The MVE is negatively impacted by the estimated effect of prepayments on
the value of single family loans, MBS, and MSRs as rates decline. Further, this
analysis is based on the Company's interest rate exposure at September 30, 1998
and 1997 and does not contemplate any actions the Company might undertake in
response to changes in market interest rates, which could impact MVE.

     Each rate scenario shows unique prepayment, repricing, and reinvestment
assumptions. Management derived these assumptions considering published market
prepayment expectations, the repricing characteristics of individual instruments
or groups of similar instruments, the Company's historical experience, and the
Company's asset and liability management strategy. Further, this analysis
assumes that certain of the Company's instruments would not be affected by the
changes in interest rates or would be partially affected due to the
characteristics of the instruments.

     There are limitations inherent in any methodology used to estimate the
exposure to changes in market interest rates. It is not possible to fully model
the market risk in instruments with leverage, option, or prepayment risks. Also,
the Company is affected by basis risk, which is the difference in repricing
characteristics of similar term rate indices. As such, this analysis is not
intended to be a forecast of the effect of a change in market interest rates on
the Company.

     GAP ANALYSIS

     The interest rate sensitivity gap ("gap") is defined as the difference
between interest-earning assets and interest-bearing liabilities maturing or
repricing within a given time period. During a period of rising interest rates,
a positive gap (where the amount of maturing and repricing assets exceeds
liabilities) would tend to have a positive impact on net interest income, while
a negative gap (where the amount of maturing and repricing liabilities exceeds
assets) would tend to have a detrimental impact. During a period of declining
interest rates, a negative gap would tend to have a positive impact on net
interest income, while a positive gap would tend to have a detrimental impact.

     The Company's one-year cumulative gap position at September 30, 1998 was
negative $1.5 billion or 10.91% of assets. This is a one-day position that
changes frequently and is not indicative of the Company's position at any other
time. While the gap position is a useful tool in measuring interest rate risk
and contributes toward effective asset and liability management, it is difficult
to predict the effect of changing interest rates solely on that measure without
accounting for alterations in the maturity or repricing characteristics of the
balance sheet that occur during changes in market interest rates. For example,
the gap position shows only the prepayment assumptions pertaining to the current
rate environment. Assets tend to prepay more rapidly during periods of declining
interest rates than during periods of rising interest rates. Because of this and
other risk factors not contemplated by the gap position, an institution could
have a matched gap position in the current rate environment and still have its
net interest income exposed to interest rate risk.

                                       13
<PAGE>
     The following table sets forth the expected maturity and repricing
characteristics of the Company's consolidated assets, liabilities, and
off-balance-sheet contracts at September 30, 1998:
<TABLE>
<CAPTION>
                                                         AMOUNTS MATURING OR REPRICING IN
                                       --------------------------------------------------------------------
                                                        AFTER
                                                        THREE          AFTER         AFTER
                                       LESS THAN       MONTHS       SIX MONTHS      ONE YEAR
                                         THREE       BUT WITHIN     BUT WITHIN     BUT WITHIN      AFTER          NON-
                                         MONTHS      SIX MONTHS      ONE YEAR      FIVE YEARS    FIVE YEARS    REPRICING
                                       ----------    -----------    -----------    ----------    ----------    ----------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                    <C>           <C>            <C>            <C>            <C>          <C>   
ASSETS(1)
  Cash and investment
    securities(2)....................  $1,035,294    $   --         $   --         $  --          $ 30,000     $   --
  Adjustable-rate loans..............   4,820,633     1,154,610        887,018       819,903        26,334         --
  Fixed-rate loans...................     296,494       167,029        291,729     1,405,931       885,706         --
  Adjustable-rate mortgage-backed
    securities.......................     508,243       186,682         72,119        --            --             --
  Fixed-rate mortgage-backed
    securities.......................      15,588        15,589         31,178        62,357        --             --
  Other assets.......................      --            --             --            --            --            952,555
                                       ----------    -----------    -----------    ----------    ----------    ----------
      Total assets...................  $6,676,252    $1,523,910     $1,282,044     $2,288,191     $942,040     $  952,555
                                       ==========    ===========    ===========    ==========    ==========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Certificates of deposit............  $  762,678    $  764,988     $1,286,209     $ 568,392      $    615     $   --
  Checking and savings(3)............   2,937,594        --             --            --            --             --
                                       ----------    -----------    -----------    ----------    ----------    ----------
      Total deposits.................   3,700,272       764,988      1,286,209       568,392           615         --
  Notes payable......................      --            --             --            --           220,000         --
  FHLB advances and other
    borrowings.......................   4,425,445       637,046        470,000        62,545        --             --
  Other liabilities..................      --            --             --            --            --            659,568
  Minority interest..................      --            --             --            --            --            185,500
  Stockholders' equity...............      --            --             --            --            --            684,412
                                       ----------    -----------    -----------    ----------    ----------    ----------
      Total liabilities, minority
        interest, and stockholders'
        equity.......................  $8,125,717    $1,402,034     $1,756,209     $ 630,937      $220,615     $1,529,480
                                       ==========    ===========    ===========    ==========    ==========    ==========
Gap before off-balance-sheet
  financial instruments..............  $(1,449,465)  $  121,876     $ (474,165 )   $1,657,254     $721,425     $ (576,925)
OFF-BALANCE-SHEET(4)
  Interest rate swap
    agreements -- pay fixed..........     376,000       (65,000 )       --          (275,500 )     (35,500)        --
                                       ----------    -----------    -----------    ----------    ----------    ----------
Gap..................................  $(1,073,465)  $   56,876     $ (474,165 )   $1,381,754     $685,925     $ (576,925)
                                       ==========    ===========    ===========    ==========    ==========    ==========
Cumulative gap.......................  $(1,073,465)  $(1,016,588)   $(1,490,753)
                                       ==========    ===========    ===========
Cumulative gap as a percentage of
  total assets.......................       (7.86)%       (7.44 )%      (10.91 )%
                                       ==========    ===========    ===========
</TABLE>
                                         TOTAL
                                       ----------
ASSETS(1)
  Cash and investment
    securities(2)....................  $1,065,294
  Adjustable-rate loans..............   7,708,498
  Fixed-rate loans...................   3,046,889
  Adjustable-rate mortgage-backed
    securities.......................     767,044
  Fixed-rate mortgage-backed
    securities.......................     124,712
  Other assets.......................     952,555
                                       ----------
      Total assets...................  $13,664,992
                                       ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Certificates of deposit............  $3,382,882
  Checking and savings(3)............   2,937,594
                                       ----------
      Total deposits.................   6,320,476
  Notes payable......................     220,000
  FHLB advances and other
    borrowings.......................   5,595,036
  Other liabilities..................     659,568
  Minority interest..................     185,500
  Stockholders' equity...............     684,412
                                       ----------
      Total liabilities, minority
        interest, and stockholders'
        equity.......................  $13,664,992
                                       ==========
Gap before off-balance-sheet
  financial instruments..............
OFF-BALANCE-SHEET(4)
  Interest rate swap
    agreements -- pay fixed..........
Gap..................................
Cumulative gap.......................
Cumulative gap as a percentage of
  total assets.......................

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

(1) Fixed-rate loans and MBS are distributed based on contractual maturity
    adjusted for anticipated prepayments. Adjustable-rate loans and MBS are
    distributed based on the interest rate reset date and contractual maturity
    adjusted for anticipated prepayments. Loans and MBS runoff and repricing
    assume a constant prepayment rate based on coupon rate and maturity. The
    weighted-average annual projected prepayment rate was 20%.

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

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

(4) The above table includes only those off-balance-sheet financial instruments
    that impact the gap in all interest rate environments. The Company also has
    certain off-balance-sheet financial instruments that hedge specific interest
    rate risks.

                                       14
<PAGE>
COMPETITION

     The Company competes primarily with certain commercial banks and thrift
institutions, some of which have a substantial presence in the same markets as
the Company. Competitors for deposits include commercial banks, thrift
institutions, credit unions, full service and discount broker dealers, and other
investment alternatives, such as mutual funds, money market funds, savings
bonds, and other government securities. The Company and its peers compete
primarily on the price at which products are offered and on customer service.

     The Company competes for loan originations with mortgage companies, banks,
thrift institutions, and insurance companies. Primary competitive factors
include service quality, relationships with builders and real estate brokers,
and rates and fees. Many of the Company's competitors are, or are affiliated
with, organizations with substantially larger asset and capital bases (including
regional and multi-national banks and bank holding companies) and with lower
funding costs.

SUBSIDIARIES

     In December 1996, the Parent Company formed a wholly owned Delaware
subsidiary, Holdings. The Bank is a subsidiary of Holdings.

     The Bank is permitted to invest in the capital stock, obligations, and
other securities of its service corporations in an aggregate amount not to
exceed 2% of the Bank's assets, plus an additional 1% of assets if such
investment is used for community development or inner city development purposes.
In addition, if the Bank meets minimum regulatory capital requirements, it may
make certain conforming loans in an amount not exceeding 50% of the Bank's
regulatory capital to service corporations when the Bank owns more than 10% of
the stock. At September 30, 1998, the Bank was authorized to have a maximum
investment of approximately $409.0 million in its subsidiaries. Only one of the
Bank's subsidiaries, Bank United Securities Corp. ("BUS"), is material.

    BANK UNITED SECURITIES CORP.

     The Bank is the sole shareholder of BUS, a Texas corporation, which acts as
a full-service broker-dealer. BUS, through its institutional division, sells
various securities products and whole loans and engages in the deposit referral
business with institutional and sophisticated retail customers. Through its
retail division, BUS markets annuities and securities, including mutual funds,
stocks, and bonds, to the Bank's community banking customers. BUS is a
broker-dealer registered with the Securities and Exchange Commission and a
member of the National Association of Securities Dealers, Inc.

PERSONNEL

     At September 30, 1998, the Company employed 1,793 full-time employees and
251 part-time employees. The employees are not represented by a collective
bargaining agreement, and the Company believes that it has good relations with
its employees. See Note 12 to the Consolidated Financial Statements.

FEDERAL FINANCIAL ASSISTANCE

     In December 1988, in connection with the acquisition of United Savings
Association of Texas (the "Acquisition"), the Company, the Bank, and certain
related entities entered into several agreements with the Federal Savings and
Loan Insurance Corporation ("FSLIC") and the Federal Home Loan Bank Board
("FHLBB"). The principal agreement was the assistance agreement that, among
other things, provided significant financial assistance to the Bank from the
FSLIC Resolution Fund ("FRF") (the "Assistance Agreement").

     In December 1993, the Parent Company, the Bank, and certain related
entities entered into a settlement agreement with the FDIC to settle certain
disputes that had arisen over the years relating to these agreements (the
"Settlement Agreement"). Simultaneously, the Assistance Agreement and all
other original Acquisition related agreements were terminated, except one
provision of the Assistance Agreement granting certain indemnities to the Parent
Company, the Bank, and certain related entities, a forbearance letter
("Forbearance Agreement"), and the tax benefits agreement ("Tax Benefits
Agreement"). The Tax Benefits Agreement governs the sharing of tax benefits
with the FDIC as manager of the FRF. See "-- Taxation -- FSLIC Assistance."
The Settlement

                                       15
<PAGE>
Agreement also provided for the continuation of certain Parent Company and Bank
claims against the United States in the United States Court of Federal Claims.
See "-- Forbearance."

    WARRANT AGREEMENT

     Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into an agreement that granted the FSLIC a warrant to purchase up
to 158,823 shares of common stock of the Bank at an exercise price of $0.01 per
share ("Warrant"). The Settlement Agreement provided that the Bank make
payments in lieu of dividends to the holder of the Warrant upon any payment of
dividends on the common stock of the Bank (other than dividends for which
anti-dilution adjustments were made) beginning December 28, 1993. In May 1996,
the Bank made a payment in lieu of such dividends to the FDIC-FRF of $5.9
million in connection with the declaration of a $100 million dividend on the
common stock of the Bank.

     In August 1996, the FDIC surrendered a portion of the Warrant for a cash
payment of $6.1 million, exercised the remainder of the Warrant for common stock
of the Bank, and immediately exchanged the shares of Bank common stock for
1,503,560 shares of Class B common stock of the Company. As part of the
Company's public offering in August 1996, the FDIC-FRF sold all such shares of
Class B common stock of the Company. Following the consummation of this
offering, all rights and obligations under the Warrant were terminated and the
FDIC-FRF no longer owned any shares of common stock of the Company.

    FORBEARANCE

     In connection with the original acquisition of the Bank by the Parent
Company, the FHLBB approved the Forbearance Agreement. Under the terms of the
Forbearance Agreement, the FSLIC agreed to waive or forbear from the enforcement
of certain regulatory provisions with respect to regulatory capital
requirements, liquidity requirements, accounting requirements, and other
matters. After the enactment of the Financial Institutions Reform Recovery and
Enforcement Act of 1989 ("FIRREA"), the Office of Thrift Supervision ("OTS")
took the position that the capital standards set forth in FIRREA applied to all
savings institutions, including those institutions that had been operating under
previously granted capital and accounting forbearances, and that FIRREA
eliminated those forbearances. While the Bank has not had to rely on such
forbearances or waivers in order to remain in compliance with existing capital
requirements as interpreted by the OTS, the position of the OTS adversely
affected the Bank by curtailing the growth and reducing the leverage
contemplated by the terms of the Forbearance Agreement. The Bank has been and
continues to be in compliance with regulatory capital provisions and,
accordingly, has not had to rely on the waivers or forbearances provided in the
Acquisition.

     On July 25, 1995, the Bank, the Parent Company, and Hyperion Partners filed
suit against the United States in the Court of Federal Claims in connection with
claims relating to the forbearances. See "Legal Proceedings -- WINSTAR-based
Claims."

                                       16
<PAGE>
REGULATION

    GENERAL

     The Parent Company is a savings and loan holding company that is regulated
and subject to examination by the OTS. The Bank is a federally chartered savings
bank and is subject to the regulations, examinations, and reporting requirements
of the OTS. The Bank's deposits are insured by the FDIC through the SAIF. As the
administrator of the SAIF, the FDIC has certain regulatory and full examination
authority over OTS regulated savings associations. The FDIC may terminate
deposit insurance under certain circumstances involving violations of law or
unsafe or unsound practices.

     The Bank is a member of the FHLB Dallas, which is one of 12 regional FHLBs,
each subject to supervision and regulation by the Federal Housing Finance Board.
The FHLBs provide a central credit facility primarily for member thrift
institutions as well as for qualified commercial banks and other entities
involved in home mortgage finance. The Bank, as a member of the FHLB Dallas, is
required to purchase and hold shares of the capital stock in that FHLB in an
amount at least equal to the greater of: (1) 1% of the aggregate principal
amount of its unpaid mortgage loans, home purchase contracts, and similar
obligations at the beginning of each year; (2) 0.3% of its assets; or (3) 5% (or
greater fraction as established by the FHLB) of its advances (I.E., borrowings)
from the FHLB. The regional FHLBs have authority to periodically conduct
Community Support reviews of member institutions.

     The descriptions of the statutes and regulations applicable to savings and
loan holding companies and savings associations set forth below is not a
complete description of the statutes and regulations or all such statutes and
regulations and their effects on the Parent Company and the Bank.

     HOLDING COMPANY ACQUISITIONS

     The Parent Company is a savings and loan holding company within the meaning
of the Home Owner's Loan Act, as amended (the "HOLA"). HOLA and OTS
regulations generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring, directly or indirectly, the ownership or control
of any other savings association or savings and loan holding company, or all, or
substantially all, of the assets or more than 5% of the voting shares thereof.
These provisions also prohibit, among other things, any director or officer of a
savings and loan holding company, or any individual who owns or controls more
than 25% of the voting shares of such holding company, from acquiring control of
any savings association that is not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.

     HOLDING COMPANY ACTIVITIES

     The Parent Company currently operates as a unitary savings and loan holding
company. Generally, there are few restrictions on the activities of a unitary
savings and loan holding company and its non-savings association subsidiaries
provided that the savings association subsidiary is a qualified thrift lender.
See "Investment Authority -- QTL Test." If the Company ceases to be a unitary
savings and loan holding company, the activities of the Company and its
non-savings association subsidiaries would thereafter be subject to substantial
restrictions.

     The HOLA requires that every savings association subsidiary of a savings
and loan holding company give the OTS at least 30 days advance notice of any
proposed dividends to be made on its guaranty, permanent, or other
non-withdrawable stock or such dividend will be invalid. See "-- Capital
Distributions."

     TRANSACTIONS WITH AFFILIATES

     Pursuant to Section 11 of the HOLA, transactions between a savings
association and its affiliates ("Covered Transactions") are subject to
quantitative and qualitative restrictions substantially similar to those imposed
upon member banks under Sections 23A and 23B of the Federal Reserve Act
("FRA"). Savings associations are also prohibited from extending credit to any
affiliate engaged in an activity not permissible for a bank holding company.

     The term "affiliate" includes any company that controls or is controlled
by a company that controls the Bank or a bank or savings association subsidiary
of the Bank. The term "affiliate" also includes any company

                                       17
<PAGE>
controlled by controlling stockholders of the Bank or the Parent Company and any
company sponsored and advised on a contractual basis by the Bank or any
subsidiary or affiliate of the Bank. The OTS regulation generally excludes all
non-bank and non-savings association subsidiaries of savings associations from
treatment as affiliates, except to the extent that the director of the OTS
decides to treat such subsidiaries as affiliates. The Parent Company is an
affiliate of the Bank.

     Section 23A of the FRA limits Covered Transactions with any one affiliate
to 10% of an association's capital stock and surplus (as defined therein) and
limits aggregate affiliate transactions to 20% of the Bank's capital stock and
surplus. A Covered Transaction is defined generally as a loan to an affiliate,
the purchase of securities issued by an affiliate, the purchase of assets from
an affiliate, the acceptance of securities issued by an affiliate as collateral
for a loan, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate. In addition, the Bank generally may not purchase
securities issued or underwritten by an affiliate, or low quality assets from an
affiliate. Sections 23A and 23B of the FRA provide that a loan transaction with
an affiliate generally must be collateralized (but may not be collateralized by
a low quality asset or securities issued by an affiliate) and that all Covered
Transactions, as well as the sale of assets, the payment of money, or the
provision of services by the Bank to an affiliate, must be on terms and
conditions that are substantially the same, or at least as favorable to the
Bank, as those prevailing for comparable nonaffiliate transactions.

     The OTS generally requires savings associations, such as the Bank, to
attribute to an affiliate the amounts of all transactions conducted with
subsidiaries of that affiliate, requires savings associations to make and retain
records that show affiliate transactions in reasonable detail, and provides that
certain classes of savings associations may be required to give the OTS prior
notice of affiliate transactions.

     INSURANCE ASSESSMENTS

     The FDIC establishes premium assessment rates for SAIF deposit insurance.
There is no statutory limit on the maximum assessment and the percent of
increase in the assessment that the FDIC may impose in any one year, provided,
however, that the FDIC may not collect more than is necessary to reach or
maintain the SAIF's designated reserve ratio and must rebate any excess
collected. Under the FDIC's risk-based insurance system, SAIF-assessable
deposits are now subject to premiums of between 0 to 27 cents per $100 of
deposits, depending upon the institution's capital position and other
supervisory factors.

     To arrive at a risk-based assessment for each bank and thrift, the FDIC
places it in one of nine risk categories using a two-step process based first on
capital ratios and then on relevant supervisory information. Each institution is
assigned to one of three groups (well-capitalized, adequately capitalized, or
undercapitalized) based on its capital ratios. A "well-capitalized"
institution is one that has at least a 10% "total risk-based capital" ratio
(the ratio of total capital to risk-weighted assets), a 6% "tier 1 risk-based
capital" ratio (the ratio of tier 1 (core) capital to risk-weighted assets),
and a 5% "leverage capital" ratio (the ratio of core capital to adjusted total
assets). An "adequately capitalized" institution has at least an 8% total
risk-based capital ratio, a 4% tier 1 (core) risk-based capital ratio, and a 4%
leverage capital ratio. An "undercapitalized" institution is one that does not
meet either the definition of well-capitalized or adequately capitalized.

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

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

     For purposes of assessments of FDIC insurance premiums, the Company
believes that the Bank is a "well-capitalized" institution as of September 30,
1998. FDIC regulations prohibit disclosure of the supervisory

                                       18
<PAGE>
subgroup to which an insured institution is assigned. The Bank's insurance
assessments for fiscal 1998 and 1997 were $4.2 million and $4.8 million.

     The Economic Growth and Paperwork Reduction Act of 1996 (the "1996 Act")
was signed into law on September 30, 1996, and required the FDIC to impose a
one-time assessment on institutions holding SAIF deposits in an amount
sufficient to increase the SAIF's net worth to 1.25% of SAIF-insured deposits.
The special assessment was 65.7 basis points times the amount of deposits held
by an institution as of March 31, 1995. The Bank's special assessment was $33.7
million, or $20.7 million net of tax.

     ASSESSMENTS TO PAY FICO BONDS.  The 1996 Act also obligates banks, for the
first time, to pay assessments to be used to service the bonds issued by the
Financing Corporation ("FICO") to resolve the thrift failures during the late
1980s and early 1990s. Under the 1996 Act, during the period beginning January
1, 1997 through December 31, 1999, SAIF-insured institutions will pay 6.48 basis
points toward FICO bonds and Bank Insurance Fund ("BIF") insured institutions
will pay 1.296 basis points. Starting in the year 2000, BIF and SAIF
institutions will begin sharing the FICO burden on a pro rata basis until
termination of the FICO obligation in 2017 at an estimated rate of approximately
2.4 basis points.

     AUDIT REQUIREMENTS.  In May 1993, the FDIC adopted rules implementing
statutory annual independent audit and financial reporting requirements for all
depository institutions with assets of more than $500 million, and for their
management, and their independent auditors. The rules also establish
requirements for the composition, duties, and authority of such institutions'
audit committees and boards of directors. Among other things, all depository
institutions with assets in excess of $500 million are required to prepare and
make available to the public, annual reports on their financial condition and
management, including statements of management's responsibility for preparing
the institution's financial statements, for establishing and maintaining an
internal control structure and procedures for financial reporting, and for
complying with specified laws and regulations relating to safety and soundness,
and an assessment of the effectiveness of such internal controls and procedures
and the institution's compliance with laws and regulations designated by the
FDIC. The institution's independent auditors are required to attest to these
management assertions, except the procedures employed by management to detect
and report violations of designated laws. Each such institution also is required
to have an audit committee composed of directors who are independent of
management of the institution. Audit committees of large institutions
(institutions with assets exceeding $3.0 billion) must (1) include members with
banking or related financial management expertise; (2) have the ability to
engage their own independent legal counsel; and (3) must not include any
individuals designated as "large customers" of the institution.

     RESERVE REQUIREMENTS.  The Federal Reserve Board ("FRB") requires all
depository institutions (including savings associations) to maintain reserves
against their deposit accounts (primarily transaction accounts and nonpersonal
time deposits) and Eurocurrency liabilities. Reserves of 3% are required to be
maintained against net transaction accounts of $47.8 million or less. In
addition, if net transaction accounts exceed $47.8 million, institutions are
required to maintain reserves equal to 10% of the excess. The reserve
requirement for nonpersonal time deposits and Eurocurrency liabilities is 0%.
Reserve requirements are subject to adjustment by the FRB, and must be adjusted
at least annually. The balances maintained to meet the reserve requirements
imposed by the FRB may be used to satisfy liquidity requirements imposed by the
OTS. See " -- Investment Authority -- Liquidity"

     CAPITAL REQUIREMENTS

     REQUIREMENTS AND STANDARDS.  The OTS capital regulations have three
components: a leverage limit, a tangible capital requirement, and a risk-based
capital requirement. See Note 14 to the Consolidated Financial Statements for
compliance with the regulatory capital requirements. The OTS has broad
discretion to impose capital requirements in excess of minimum applicable
ratios. See " -- Enforcement."

     LEVERAGE LIMIT.  The leverage limit requires that a savings association
maintain "core capital" of at least 3% of its adjusted total assets. For
purposes of this requirement, total assets are adjusted to exclude intangible
assets and investments in certain subsidiaries, and to include the assets of
certain other subsidiaries, certain intangibles arising from prior period
supervisory transactions, and permissible MSRs. "Core capital" includes common
shareholders' equity and retained earnings, noncumulative perpetual preferred
stock and related surplus

                                       19
<PAGE>
and minority interests in consolidated subsidiaries, minus intangibles, plus
certain MSRs and certain goodwill arising from prior regulatory accounting
practices.

     Certain MSRs are not deducted in computing core and tangible capital. Prior
to August 10, 1998, generally, the lower of 90% of the fair market value of
readily marketable MSRs, or the current unamortized book value as determined
under GAAP could be included in core and tangible capital up to a maximum of 50%
of core capital computed before the deduction of any disallowed qualifying
intangible assets. Effective August 10, 1998, the OTS increased the maximum
amount of MSRs that are includable in regulatory capital from 50% to 100% of
core capital. At September 30, 1998, the Bank's core capital included $323.9
million of MSRs.

     In determining core capital, all investments in and loans to subsidiaries
engaged in activities not permissible for national banks, which are generally
more limited than activities permissible for savings associations and their
subsidiaries, must be deducted. Certain exceptions are provided, including
exceptions for mortgage banking subsidiaries and subsidiaries engaged in agency
activities for customers (unless determined otherwise by the FDIC on safety and
soundness grounds). Generally, all subsidiaries engaged in activities
permissible for national banks are required to be consolidated for purposes of
calculating capital compliance by the parent savings association.

     TANGIBLE CAPITAL REQUIREMENT.  The tangible capital requirement mandates
that a savings association maintain tangible capital of at least 1.5% of
adjusted total assets. For purposes of this requirement, adjusted total assets
are calculated on the same basis as for the leverage limit. "Tangible capital"
is defined in the same manner as core capital, except that all intangible assets
must be deducted. At September 30, 1998, the Bank's tangible capital ratio was
6.75%.

     RISK-BASED CAPITAL REQUIREMENT.  The risk-based requirement promulgated by
the OTS is required by the HOLA to track the standard applicable to national
banks, except that the OTS may determine to reflect interest rate and other
risks not specifically included in the national bank standard. However, such
deviations from the national bank standard may not result in a materially lower
risk-based requirement for savings associations than for national banks. The
risk-based standard adopted by the OTS is similar to the Office of the
Comptroller of the Currency standard for national banks.

     The risk-based standards of the OTS require maintenance of core capital
equal to at least 4% of risk-weighted assets and total capital equal to at least
8% of risk-weighted assets. "Total capital" includes core capital plus
supplementary capital (to the extent it does not exceed core capital).
Supplementary capital includes cumulative perpetual preferred stock; mutual
capital certificates, income capital certificates and net worth certificates;
nonwithdrawable accounts and pledged deposits to the extent not included in core
capital; perpetual and mandatory convertible subordinated debt and maturing
capital instruments meeting specified requirements; and general loan and lease
loss allowances, up to a maximum of 1.25% of risk-weighted assets. At September
30, 1998, the Bank's core capital and total capital ratios were 6.77% and
10.48%.

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

     INTEREST RATE RISK ("IRR") COMPONENT.  OTS regulations add an IRR
component to the 8% risk-based capital requirement discussed above. Only savings
associations with more than a "normal" level of IRR are subject to IRR
requirements. Specifically, savings associations with IRR exposure in excess of
2% (measured in accordance with an OTS Model and Guidelines) must deduct an IRR
component from total capital prior to calculating their risk-based capital
ratios. The IRR component is calculated as one-half of the difference between
the institution's measured IRR and 2%, multiplied by the market value of the
institution's assets. This deduction will have the effect of requiring savings
associations with IRR exposures of more than 2% to hold more capital than those
with IRR exposure of 2% or less. On August 21, 1995, the OTS adopted and
approved an appeal process, but delayed the IRR capital deduction indefinitely.

    CAPITAL DISTRIBUTIONS

     Limitations are imposed upon all "capital distributions" by savings
associations, including cash dividends, payments by an institution in a cash-out
merger, and other distributions charged against capital. The capital

                                       20
<PAGE>
distribution regulation establishes a three-tiered system, with the greatest
flexibility afforded to well-capitalized institutions.

     Under the OTS capital distribution regulation, an association that
immediately prior to a proposed capital distribution, and on a pro forma basis
after giving effect to a proposed capital distribution, has capital that is
equal to or greater than the amount of its fully phased-in capital requirement
is a "tier 1 association". To qualify, an association must maintain the
following capital ratios: (1) tangible capital to adjusted total assets ratio of
1.50%, (2) core capital to adjusted total assets ratio of 3.00%, and (3) total
risk-based capital to risk-weighted assets ratio of 8.00%, of which at least
4.00% must be core capital. An association that immediately prior to a proposed
capital distribution, and on a pro forma basis after giving effect to a proposed
capital distribution, has capital that is equal to or in excess of its minimum
capital requirements but that is less than the amount of its fully phased-in
capital requirement, is a "tier 2 association". An association that
immediately prior to a proposed capital distribution, and on a pro forma basis
after giving effect to a proposed capital distribution, has capital that is less
than its minimum regulatory capital requirement is a "tier 3 association". The
Bank currently qualifies as a tier 1 association.

     Upon 30 days' written notice to the OTS, a tier 1 association may make
capital distributions during a calendar year up to the higher of 100% of its net
income to date during the calendar year, plus the amount that would reduce by
one-half its surplus capital ratio at the beginning of the calendar year or 75%
of its net income over the most recent four quarter period. A tier 1 association
may make capital distributions in excess of the foregoing limitations if, after
written notice to the OTS, the OTS does not object to such capital distribution.
The OTS may prohibit an otherwise permissible capital distribution upon a
determination that making such a distribution would be an unsafe or unsound
practice. The OTS may notify a tier 1 association that it is subject to more
than normal supervision and thereafter, treat it as a tier 2 or tier 3
association.

     Under the prompt corrective action provisions discussed below, no insured
depository institution may make a capital distribution if it would be
undercapitalized after such distribution. See " -- Enforcement -- Prompt
Corrective Action."

    INVESTMENT AUTHORITY

     PERMISSIBLE LOANS AND INVESTMENTS.  Federally chartered savings banks, such
as the Bank, are authorized to originate, invest in, sell, purchase, service,
participate, and otherwise deal in: (1) loans made on the security of
residential and nonresidential real estate, (2) commercial loans (up to 20% of
assets, the last 10% of which must be small business loans), (3) consumer loans
(subject to certain percentage of asset limitations), and (4) credit card loans.
The lending authority of federally chartered associations is subject to various
OTS requirements, including, as applicable, requirements governing loan-to-value
ratio, percentage-of-assets limits, and loans to one borrower limits. In
September 1996, the OTS substantially revised its investment and lending
regulations eliminating many of their specific requirements in favor of a more
general standard of safety and soundness.

     Federally chartered savings associations may invest, without limitation, in
the following assets: (1) obligations of the United States government or certain
agencies thereof; (2) stock issued or loans made by the FHLBs or the FNMA; (3)
obligations issued or guaranteed by the FNMA, the Student Loan Marketing
Association, the GNMA, or any agency of the United States government; (4)
certain mortgages, obligations, or other securities that have been sold by the
FHLMC; (5) stock issued by a national housing partnership corporation; (6)
demand, time, or savings deposits, shares, or accounts of any insured depository
institution; (7) certain "liquidity" investments approved by the OTS to meet
liquidity requirements; (8) shares of registered investment companies the
portfolios of which are limited to investments that a federal association is
otherwise authorized to make; (9) certain MBS; (10) general obligations of any
state of the United States or any political subdivision or municipality thereof,
PROVIDED that not more than 10% of a savings association's capital may be
invested in the general obligations of any one issuer; (11) loans secured by
residential real property; (12) credit card loans; and (13) education loans.
Federally chartered savings associations may invest in secured or unsecured
loans for commercial, corporate, business, or agricultural purposes, up to 20%
of assets, provided that the last 10% is invested in small business loans. The
HOLA also limits a federal savings association's aggregate nonresidential real
property loans to 400% of the savings association's capital as determined
pursuant to the OTS's capital requirements. See "-- Capital Requirements." The
OTS may allow a savings association to exceed the

                                       21
<PAGE>
aggregate limitation, if the OTS determines that exceeding the limitation would
pose no significant risk to the safe and sound operations of the association and
would be consistent with prudent operating practices. Federally chartered
savings associations are also authorized by the HOLA to make investments in
consumer loans, business development credit corporations, certain commercial
paper and corporate debt securities, service corporations, and small business
investment companies, all of which investments are subject to
percentage-of-assets and various other limitations.

     LENDING LIMITS.  Generally, savings associations, such as the Bank, are
subject to the same loans to one borrower limits that apply to national banks.
Generally, a savings association may lend to a single borrower or group of
related borrowers, on an unsecured basis, in an amount not greater than 15% of
its unimpaired capital and unimpaired surplus. An additional amount, not greater
than 10% of the savings association's unimpaired capital and unimpaired surplus,
may be loaned if the loan is secured by readily marketable collateral, which is
defined to include certain securities and bullion, but generally does not
include real estate. Notwithstanding the general lending limits, a savings
association may make loans to one borrower for any purpose of up to $500,000; or
to develop domestic residential housing units, up to the lesser of $30 million
or 30% of the savings association's unimpaired capital and unimpaired surplus,
if certain conditions are satisfied. The OTS may also impose more stringent
limits on an association's loans to one borrower, if it determines that such
limits are necessary to protect the safety and soundness of the association.

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

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

     OPERATING SUBSIDIARIES.  All federal savings associations are authorized to
establish or acquire one or more operating subsidiaries. Operating subsidiaries
are subject to examination and supervision by the OTS to the same extent as the
parent thrift. An "operating subsidiary" is a corporation that meets all of
the following requirements: (1) it engages only in activities that a federal
savings association is permitted to engage in directly; (2) the parent savings
association owns, directly or indirectly, more than 50% of the subsidiary's
voting stock; and (3) no person or entity other than the parent thrift may
exercise effective operating control over the subsidiary. While a savings
association's investment in its service corporations is generally limited to an
amount that does not exceed 3% of the parent savings association's total assets,
OTS regulations do not limit the amount that a parent savings association may
invest in its operating subsidiaries. Operating subsidiaries may be incorporated
and operated in any geographical location where its parent may operate. An
operating subsidiary that is a depository institution may accept deposits in any
location, provided that the subsidiary has federal deposit insurance.

     QUALIFIED THRIFT LENDER ("QTL") TEST.  All savings associations are
required to meet a QTL test for, among other things, future eligibility for FHLB
advances. A savings association that fails to satisfy the QTL test is subject to
substantial restrictions on its activities and to other significant penalties. A
savings association is a QTL if it either meets the test for being a domestic
building and loan association, as that term is defined in Section 7701(a)(19) of
the Internal Revenue Code of 1986, as amended; or has invested at least 65% of
its portfolio assets in qualified thrift investments and maintains this level of
qualified thrift investments on a monthly average basis in nine of every 12
months.

     The term "portfolio assets" is defined as total assets less intangibles,
properties used to conduct business and liquid assets (up to 20% of total
assets). The following assets may be included as qualified thrift investments

                                       22
<PAGE>
without limit: domestic residential housing or manufactured housing loans; home
equity loans and MBS backed by residential housing or manufactured housing
loans; FHLB stock; certain obligations of the FDIC and certain other related
entities; and education, small business, and credit card loans. Other qualifying
assets, which may be included up to an aggregate of 20% of portfolio assets,
are: (1) 50% of originated residential mortgage loans sold within 90 days of
origination; (2) investments in debt or equity of service corporations that
derive 80% of their gross revenues from housing-related activities; (3) 200% of
certain loans to, and investments in, low cost one-to four-family housing; (4)
200% of loans for residential real property, churches, nursing homes, schools,
and small businesses in areas where the credit needs of low- and moderate-income
families are not met; (5) other loans for churches, schools, nursing homes, and
hospitals; and (6) personal, family, or household loans (other than education,
small business, or credit card loans).

     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies. A savings association may
requalify the next time it meets the requirement in nine of the preceding 12
months, but it may requalify only one time. If an institution that fails the QTL
test has not yet requalified and has not converted to a national bank, its new
investments and activities are limited to those permissible for a national bank,
it is immediately ineligible to receive any new FHLB advances, and is subject to
national bank limits for payment of dividends, and it may not establish a branch
office at any location at which a national bank located in the savings
association's home state could not establish a branch.

     LIQUIDITY.  The Bank is required to maintain an average daily balance of
"liquid assets" (cash, certain time deposits, bankers' acceptances, highly
rated corporate debt securities and commercial paper, securities of certain
mutual funds, reserves maintained pursuant to FRB requirements, and specified
government, state, or federal agency obligations) equal to a certain percentage
of net withdrawable deposit accounts and borrowings payable in one year or less.
The liquidity requirement may vary from time to time (between 4% and 10%)
depending upon economic conditions and savings flows of all savings
associations. At September 30, 1998, OTS regulations required a savings
association, such as the Bank, to maintain liquid assets equal to not less than
4% of its net withdrawable deposit accounts and borrowings payable in one year
or less.

    MERGERS AND ACQUISITIONS

     Insured depository institutions are authorized to merge or engage in
purchase and assumption transactions with other insured depository institutions
with the prior approval of the federal banking regulator of the resulting
entity. The Change in Bank Control Act and the savings and loan holding company
provisions of the HOLA, together with the regulations of the OTS under such
Acts, require that the consent of the OTS be obtained prior to any person or
company acquiring control of a savings association or a savings and loan holding
company. Under OTS regulations, "control" is conclusively presumed to exist if
an individual or company acquires more than 25% of any class of voting stock of
a savings association or holding company. There is a rebuttable presumption of
control if a person or company acquires more than 10% of any class of voting
stock (or more than 25% of any class of non-voting stock) and is subject to any
of several "control factors". The control factors relate, among other matters,
to the relative ownership position of a person or company, the percentage of
debt and/or equity of the association or holding company controlled by the
person or company, agreements giving the person or company influence over a
material aspect of the operations of the association or holding company, and the
number of seats on the board of directors thereof held by the person or company,
or his designees. The regulations provide a procedure for challenge of the
rebuttable control presumption. Certain restrictions applicable to the
operations of savings and loan holding companies and certain conditions imposed
by the OTS in connection with its approval of companies to become savings and
loan holding companies may deter companies from seeking to obtain control of the
Bank.

     BRANCHING.  Subject to certain statutory restrictions in the HOLA and the
Federal Deposit Insurance Act (the "FDIA"), the Bank is authorized to branch
on a nationwide basis. Branching by savings associations is also subject to
other regulatory requirements, including compliance with the Community
Reinvestment Act (the "CRA") and its implementing regulations.

                                       23
<PAGE>
     OFFICERS, DIRECTORS, AND CONTROLLING SHAREHOLDERS

     INSIDER LOANS.  Loans to an executive officer or director of a savings
association, or to any person who directly or indirectly, or acting through or
in concert with one or more persons, owns, controls, or has the power to vote
more than 10% of any class of voting securities of such institution ("Principal
Shareholder"); to any related interests of such persons (I.E., any company
controlled by such executive officer, director, or Principal Shareholder); or to
any political or campaign committee, the funds or services of which will benefit
such executive officer, director, or Principal Shareholder, or which is
controlled by such executive officer, director or Principal Shareholder, are
subject to Sections 22(g) and 22(h) of the FRA and the regulations promulgated
thereunder. Among other things, such loans must be made on terms substantially
the same as those prevailing on comparable transactions made to unaffiliated
individuals, and may not involve more than the normal risk of repayment or
present other unfavorable features. Certain extensions of credit to such persons
must first be approved in advance by a disinterested majority of a savings
association's entire board of directors. Section 22(h) of the FRA prohibits
loans to any such individuals where the aggregate amount exceeds an amount equal
to 15% of an insured institution's unimpaired capital and surplus, plus an
additional 10% of unimpaired capital and surplus (as defined) in the case of
loans that are fully secured by readily marketable collateral, or when the
aggregate amount on all such extensions of credit outstanding to all such
persons would exceed the Bank's unimpaired capital and unimpaired surplus.
Section 22(g) establishes additional limitations on loans to executive officers.

     CHANGES IN DIRECTORS AND SENIOR EXECUTIVE OFFICERS.  Section 32 of the
FDIA, as amended by the 1996 Act, requires a depository institution or holding
company thereof to give 30 days prior written notice to its primary federal
regulator of any proposed appointment of a director or senior executive officer
if the institution is not in compliance with the minimum capital requirements or
otherwise is in a troubled condition. The regulator then has the opportunity to
disapprove any such appointment.

     ENFORCEMENT

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

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

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

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

                                       24
<PAGE>
     Significantly or critically undercapitalized institutions and
undercapitalized institutions that have not submitted or complied with
acceptable capital restoration plans are subject to regulatory sanctions. A
forced sale of shares or merger, restrictions on affiliate transactions, and
restrictions on rates paid on deposits are required to be imposed unless the
supervisory agency has determined that such restrictions would not further
capital improvement. The agency may impose other specified regulatory sanctions
at its option. Generally, the appropriate federal banking agency is required to
authorize the appointment of a conservator or receiver within 90 days after an
institution becomes critically undercapitalized.

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

     ADMINISTRATIVE ENFORCEMENT AUTHORITY.  The OTS exercises extensive
enforcement authority over all savings associations and their
"institution-affiliated parties" (I.E., officers, directors, controlling
shareholders, employees, as well as attorneys, appraisers, or accountants if
such consultants or contractors knowingly or recklessly participate in a
wrongful action likely to have adverse effect on an insured institution). This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal and prohibition orders,
and to initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. The OTS may use written agreements to correct compliance deficiencies
with respect to applicable laws and regulations and to ensure safe and sound
practices. Except under certain narrow circumstances, public disclosure of final
enforcement actions by the federal banking agencies, including the OTS, is
required.

     The OTS has the authority, when statutorily prescribed grounds exist, to
appoint a conservator or receiver for a savings association. Grounds for such
appointment include: insolvency; substantial dissipation of assets or earnings;
existence of an unsafe or unsound condition to transact business; likelihood
that the association will be unable to pay its obligations in the normal course
of business; undercapitalization where the association (1) has no reasonable
prospect of becoming adequately capitalized, (2) fails to become adequately
capitalized when required to do so, (3) fails to timely submit an acceptable
capital restoration plan, or (4) materially fails to implement a capital
restoration plan; or where the association is "critically undercapitalized" or
"otherwise has substantially insufficient capital".

     CONSUMER PROTECTION REGULATIONS

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

     THE TRUTH IN LENDING ACT ("TILA").  The TILA, enacted into law in 1968,
is designed to ensure that credit terms are disclosed in a meaningful way so
that consumers may compare credit terms more readily and knowledgeably. As a
result of the TILA, all creditors must use the same credit terminology and
expressions of rates, the annual percentage rate, the finance charge, the amount
financed, the total of payments, and the payment schedule.

     THE FAIR HOUSING ACT ("FH ACT").  The FH Act, enacted into law in 1968,
regulates many practices, including making it unlawful for any lender to
discriminate in its housing-related lending activities against any person
because of race, color, religion, national origin, sex, handicap, or familial
status.

     THE EQUAL CREDIT OPPORTUNITY ACT ("ECOA").  The ECOA, enacted into law in
1974, prohibits discrimination in any credit transaction, whether for consumer
or business purposes, on the basis of race, color, religion, national origin,
sex, marital status, age (except in limited circumstances), receipt of income
from public assistance programs, or good faith exercise of any rights under the
Consumer Credit Protection Act.

     THE REAL ESTATE SETTLEMENT PROCEDURES ACT ("RESPA").  The RESPA, enacted
into law in 1974, requires lenders to provide borrowers with disclosures
regarding the nature and cost of real estate settlements. RESPA is applicable to
all federally related mortgage loans. A "federally related mortgage loan"
includes any loan secured

                                       25
<PAGE>
by a first or subordinate lien on residential real property designed for
occupancy by one to four families, including a refinancing of an existing loan
secured by the same property, if: (1) the loan is made by any lender, the
deposits of which are federally insured or any lender that is regulated by a
federal agency, (2) the loan is insured, guaranteed or supplemented by a federal
agency, (3) the loan is intended to be sold to the FNMA, the GNMA, or the FHLMC,
or (4) the loan is made by any creditor who makes or invests in residential real
estate loans aggregating more than $1 million per year.

     THE HOME MORTGAGE DISCLOSURE ACT ("HMDA").  The HMDA, enacted into law in
1975, is intended to provide public information that can be used to help
determine whether financial institutions are serving the housing credit needs of
the neighborhoods and communities in which they are located and to assist in
identifying possible discriminatory lending patterns.

     THE COMMUNITY REINVESTMENT ACT ("CRA").  The CRA, enacted into law in
1977, is intended to encourage insured depository institutions, while operating
safely and soundly, to help meet the credit needs of their communities. The CRA
specifically directs the federal regulatory agencies, in examining insured
depository institutions, to assess their record of helping to meet the credit
needs of their entire community, including low-and moderate-income
neighborhoods, consistent with safe and sound banking practices. The CRA further
requires the agencies to take a financial institution's record of meeting its
community credit needs into account when evaluating applications for, among
other things, domestic branches, consummating mergers or acquisitions, or
holding company formations. To evaluate most large retail institutions, such as
the Bank, the agencies apply three tests, the lending, investment, and service
tests, to determine an overall CRA rating for the financial institution. The
ratings range from a high of "outstanding" to a low of "substantial
noncompliance".

     The Bank was last examined for CRA compliance by its primary regulator, the
OTS, on December 2, 1996 and received a CRA assessment rating of
"outstanding". The Bank's previous CRA assessment rating, as of October 24,
1994, was also "outstanding".

     THE BANK SECRECY ACT ("BSA") AND MONEY LAUNDERING LAWS.  The BSA, enacted
into law in 1970, requires every financial institution within the United States
to file a Currency Transaction Report with the Internal Revenue Service for each
transaction in currency of more than $10,000 not exempted by the Treasury
Department.

     The Money Laundering Prosecution Improvements Act requires financial
institutions, typically banks, to verify and record the identity of the
purchaser upon the issuance or sale of bank checks or drafts, cashier's checks,
traveler's checks, or money orders involving $3,000 or more in cash.
Institutions must also verify and record the identity of the originator and
beneficiary of certain funds transfers.

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

     THE EXPEDITED FUNDS AVAILABILITY ACT ("EXPEDITED FUNDS ACT").  The
Expedited Funds Act, enacted into law in 1987, seeks to insure prompt
availability of funds deposited into a customer's account and to expedite the
return of checks.

     THE TRUTH IN SAVINGS ACT ("TISA").  The TISA, enacted into law in 1991,
is principally a disclosure law, the purpose of which is to encourage
comparative shopping for deposit products. The common denominator used by the
TISA to facilitate comparison shopping of interest payable on deposit accounts
is the Annual Percentage Yield.

     THE AMERICANS WITH DISABILITIES ACT ("ADA").  The ADA, enacted into law
in 1990, prohibits private employers, state and local governments, employment
agencies, and labor unions from discriminating against qualified individuals
with disabilities in connection with job application procedures, hiring, firing,
advancement, compensation, job training, and other terms, conditions, and
privileges of employment. Section 302 of Title 3 of

                                       26
<PAGE>
the ADA, which covers banks, thrifts, credit unions, and finance companies,
provides that "no individual shall be discriminated against on the basis of
disability in the full and equal enjoyment of the goods, services, or
facilities, privileges, advantages, or accommodations of any place of public
accommodation". An individual with a disability is a person who: (1) has a
physical or mental impairment that substantially limits one or more major life
activities, (2) has a record of such an impairment, or (3) is regarded as having
such an impairment.

     The Bank attempts in good faith to assure compliance with the requirements
of the consumer protection statutes to which it is subject, as well as the
regulations that implement the statutory provisions. The requirements are
complex, however, and even inadvertent non-compliance could result in civil and,
in some cases, criminal liability. During the past several years, numerous
individual claims and purported consumer class action claims have been commenced
against financial institutions, their subsidiaries, and other lending
institutions alleging violations of one or more of the consumer protection
statutes and seeking civil damages, court costs, and attorney's fees. Based on
the Bank's history of claims under the consumer protection statutes and
regulations to which it is subject, management does not believe that claims are
likely to be asserted that will have a material adverse effect on the Bank's or
the Company's financial condition, results of operations, or liquidity.

     LEGISLATION

     Federal legislation and regulation have significantly affected the
operations of federally insured savings associations, such as the Bank, and
other federally regulated financial institutions in the past several years and
have increased competition among savings associations, commercial banks, and
other financial institutions. Congress has been considering legislation in
various forms that would require federal thrifts, such as the Bank, to convert
their charters to national or state bank charters. The Bank cannot determine
whether, or in what form, such legislation may eventually be enacted, and there
can be no assurance of the effect that any legislation that is enacted would
have on the Bank and its affiliates. The operations of regulated depository
institutions will continue to be subject to changes in applicable statutes and
regulations from time to time and could adversely affect the Bank and its
affiliates.

TAXATION

    FEDERAL TAXATION

     The Parent Company, Holdings, and the Bank are subject to the Internal
Revenue Code of 1986, as amended (the "Code"), in the same manner, with
certain exceptions, as other corporations. The Parent Company and its
subsidiaries participate in the filing of a consolidated federal income tax
return with their "affiliated group", as defined by the Code. For financial
reporting purposes, however, each entity computes its tax on a separate-company
basis. In addition to federal income taxes, the Bank is required to make
payments in lieu of federal income taxes. See "-- Federal Financial
Assistance" and Note 13 to the Consolidated Financial Statements.

     FSLIC ASSISTANCE

     The Assistance Agreement required the Bank to pay to the FRF an amount
equal to one-third of the sum of federal and state net tax benefits as defined
by the Assistance Agreement ("Net Tax Benefits"). The Net Tax Benefits are
equal to the excess of any of the federal income tax liability, which would have
been incurred if the tax benefit item had not been deducted or excluded from
income, over the federal income tax liability actually incurred. The Net Tax
Benefits items are the tax savings resulting from (1) the utilization of the
deduction by the Bank of any amount of net operating losses ("NOLs"), capital
loss carryforwards, and certain other carryforwards obtained in the Acquisition,
(2) the exclusion from gross income of certain interest or assistance payments
made to the Bank by the FRF, and (3) the deduction of certain costs, expenses,
or losses incurred by the Bank for which the FRF has made tax-free assistance
payments. These provisions were replaced by similar provisions in the Tax
Benefits Agreement entered into in connection with the termination of the
Assistance Agreement. The obligation to share tax benefit utilization will
continue through September 30, 2003.

                                       27
<PAGE>
     The aforementioned tax relief provided savings on the amount of taxes
required to be paid. The estimated tax savings, by year, were as follows (in
millions):

         FOR THE YEAR ENDED
            SEPTEMBER 30,               SAVINGS
-------------------------------------   -------
     1996............................    $19.8
     1997............................     26.7
     1998............................     38.1

     NET OPERATING LOSS LIMITATIONS

     The Bank succeeded to substantial NOLs as a result of the Acquisition. The
Company's total NOLs at September 30, 1998 were $524 million. In the event of an
Ownership Change ("Ownership Change", as defined below), Section 382 of the
Code imposes an annual limitation on the amount of taxable income a corporation
may offset with NOLs and certain recognized built-in losses. The limitation
imposed by Section 382 of the Code is determined by multiplying the value of the
Company's stock (both common stock and preferred stock) at the time of the
Ownership Change by the applicable long-term tax exempt rate (which was 5.02%
for September 1998). Any unused annual limitation may be carried over to later
years, and the limitation may under certain circumstances be increased by the
built-in gains in assets held by the Company at the time of the change. Under
current conditions, if an Ownership Change were to occur, the Company's annual
NOL utilization would be limited to a maximum of approximately $57 million,
based on the closing market price at September 30, 1998.

     The Company would undergo an Ownership Change if, among other things, the
stockholders who own or have owned (directly or indirectly) 5% or more of the
common stock of the Company or are otherwise treated as 5% stockholders or a
"higher tier entity" under Section 382 of the Code ("5% Stockholders")
increase their aggregate percentage ownership by more than 50% over the lowest
percentage owned at any time during the Testing Period (generally the preceding
three years). In applying Section 382 of the Code, at least a portion of the
stock sold pursuant to the Company's August 1996 public offering is considered
to be acquired by a new 5% Stockholder, even if no person acquiring the stock in
fact owns as much as 5% of the issuer's stock. While the application of Section
382 of the Code is highly complex and uncertain in some respects, the Company
does not believe that its fiscal 1998, 1997 and 1996 capital related
transactions caused an Ownership Change. However, events could occur in future
periods that are beyond the control of the Company, which could result in an
Ownership Change.

     In an effort to protect against a future Ownership Change not initiated by
the Company, the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation") and the By-Laws limit stock transfers that
would either cause a person or entity to become a 5% Stockholder or increase a
5% Stockholder's percentage ownership interest during the three years following
the Company's August 1996 stock offering. Transfers are deemed prohibited by the
Certificate of Incorporation, and the Company is authorized to not recognize any
such transferee as a stockholder to the extent of such transfer. However, these
restrictions may not be entirely effective because the Company may not,
consistent with the requirements of the Nasdaq Stock Market, Inc. ("NASDAQ"),
prevent the settlement of transactions through NASDAQ. Moreover, the Company's
Board of Directors retains the discretion to waive these limitations or to take
certain other actions that could trigger an Ownership Change, including through
the issuance of additional shares of common stock in subsequent public or
private offerings or through subsequent merger or acquisition transactions.

     Because the Company has utilized a substantial portion of its available
ownership limitation in connection with offerings in fiscal 1998, 1997 and 1996,
the Company may not be able to engage in significant transactions that would
create a further shift in ownership within the meaning of Section 382 of the
Code within the following three-year period without triggering an Ownership
Change. There can be no assurance that future actions on the part of the
Company's stockholders or the Company itself will not result in the occurrence
of an Ownership Change.

     Preferred stock that meets the requirements of section 1504(a)(4) of the
Code is not considered stock when calculating an Ownership Change. Management
believes that the Bank's issuance of its preferred stock met the requirements of
Section 1504(a)(4) of the Code and, therefore, did not result in an Ownership
Change.

     If an Ownership Change should occur, the Company's ability to utilize its
NOLs will be limited as described above, and the Company's ability to deduct its
built-in losses, if any, as they are realized will be subject to the

                                       28
<PAGE>
same limitation. Limitation of the utilization of these tax benefits could have
a material impact on the Company's financial condition.

     STATE TAXATION

     The Parent Company, Holdings, and the Bank file unitary and combined state
returns with certain subsidiaries as well as separate state returns. The
location of branches and offices, loan solicitations, or real property securing
loans creates jurisdiction for taxation in certain states, which results in the
filing of state income tax returns. Amounts for state tax liabilities are
included in the Statements of Operations for fiscal 1998, 1997, and 1996. See
Note 13 to the Consolidated Financial Statements.

ITEM 2.  PROPERTIES

     The leases for the Company's headquarters and support facilities in effect
at September 30, 1998 had terms from six months to ten years, with annual rental
payments of $6.3 million. A majority of leases outstanding at September 30, 1998
relate to branches and expire within five years or less. The following table
sets forth the number and location of the community banking, commercial banking,
and wholesale mortgage origination offices of the Company as of September 30,
1998.
<TABLE>
<CAPTION>
                                                             NUMBER OF OFFICES
                                        ------------------------------------------------------------
                                           COMMUNITY
                                            BANKING                            WHOLESALE
                                           BRANCHES          COMMERCIAL         MORTGAGE
                                        ---------------       BANKING         ORIGINATION
LOCATION                                OWNED    LEASED    OFFICES LEASED    OFFICES LEASED    TOTAL
-------------------------------------   -----    ------    --------------    --------------    -----
<S>                                       <C>      <C>            <C>               <C>          <C>
Houston Area.........................     14       29             1                 1            45
Dallas/Ft. Worth Area................     18       19             1             -                38
Other Texas..........................    -          4         -                 -                 4
California...........................    -        -               3                 2             5
Other U.S............................    -        -              16                 5            21
                                                                 --                --
                                        -----    ------                                        -----
     Total...........................     32       52            21                 8           113
                                        =====    ======          ==                ==          =====
</TABLE>
     Net investment in premises and equipment totalled $59.9 million at
September 30, 1998.

ITEM 3.  LEGAL PROCEEDINGS

WINSTAR-BASED CLAIMS

     On July 25, 1995, the Bank, the Parent Company, and Hyperion Partners L.P.
(collectively, the "Plaintiffs") filed suit against the United States of
America in the United States Court of Federal Claims for breach of contract and
other claims. The action arose because the passage of FIRREA and the regulations
adopted by the OTS pursuant to FIRREA deprived Plaintiffs of their contractual
rights.

     In December 1988, the United States, through its agencies, entered into
certain agreements with the Plaintiffs that resulted in contractual obligations
owed to Plaintiffs. Plaintiffs contend that the obligations were undertaken to
induce, and did induce, the Company's acquisition of substantially all of the
assets and the secured, deposit, and certain tax liabilities of United Savings
Association of Texas, an insolvent savings and loan association, thereby
relieving the FSLIC, an agency of the United States government, of the immense
costs and burdens of taking over and managing or liquidating the institution.

     The lawsuit alleges breaches of the United States' contractual obligations
(1) to abide by a capital forbearance, which would have allowed the Bank to
operate for ten years under negotiated capital levels lower than the levels
required by the then existing regulations or successor regulations, (2) to abide
by its commitment to allow the Bank to count $110 million of subordinated debt
as regulatory capital for all purposes, and (3) to abide by an accounting
forbearance, which would have allowed the Bank to count as capital for
regulatory purposes, and to amortize over a period of twenty-five years, the
$30.7 million difference between certain FSLIC payment obligations to the Bank
and the discounted present value of those future FSLIC payments. The lawsuit
seeks monetary relief for the breaches by the United States of its contractual
obligations to Plaintiffs and other relief.

     The lawsuit was stayed from the outset by a judge of the Court of Federal
Claims pending the United States Supreme Court's decision in the UNITED STATES
V. WINSTAR CORP., an action by three other thrifts raising similar

                                       29
<PAGE>
issues (the "WINSTAR cases"). Since the Supreme Court ruling, the Chief Judge
of the Court of Federal Claims has established a case management protocol for
the more than 100 lawsuits on the Court of Federal Claims docket that, like
Plaintiffs' case, involve issues similar to those raised in the WINSTAR cases.
Chief Judge Loren Smith of the United States Court of Federal Claims transferred
all WINSTAR-related cases to his own docket and entered an Omnibus Case
Management Order governing proceedings in such cases, including the Company's
case. Under the Omnibus Case Management Order, Chief Judge Smith serves as the
"Managing Judge" for all WINSTAR-related cases and may assign other judges of
the United States Court of Federal Claims to resolve pre-trial discovery
disputes and common legal issues and to conduct trials. The damage trial of one
of the three WINSTAR cases has been completed, and the other two cases have been
settled. Trials in the remaining cases subject to the Omnibus Case Management
Plan are scheduled to begin in January 1999. The Company's case is one of
thirteen cases that "shall be accorded priority in the scheduling" of the
damages trials under the Omnibus Case Management Order and the Company's case is
currently set to begin on February 1, 1999.

     In December 1996, Chief Judge Smith decided the motion IN LIMINE on damage
theories of Glendale Federal, one of four WINSTAR plaintiffs, and allowed
Glendale Federal to assert several alternative damage theories against the
Government, including claims for lost profits. While the Plaintiffs' damage
model currently projects an ultimate damage claim in excess of $560 million, the
Company is unable to predict the outcome of Plaintiffs' suit against the United
States and the amount of judgment for damages, if any, that may be awarded.
Plaintiffs expect that the Government may argue that no breach by the Government
has occurred and that damages to Plaintiffs, in any event, would approach zero.
The Company, on November 27, 1996, moved for partial summary judgement on
liability, and the Government has opposed the motion. The Government, on
December 8, 1998, moved for partial summary judgment on the issue of lost
profits, seeking a ruling from the Court that Plaintiffs are not entitled to
recover lost profits. Lost profits constitute the largest portion of Plaintiffs'
total damage claim. Plaintiffs have opposed the Government's motion.

     Despite the current trial setting of February 1, 1999 for Plaintiffs' case,
uncertainties remain concerning the administration of the Omnibus Case
Management Order and the future course of the Company's lawsuit pursuant to the
Omnibus Case Management Order. Accordingly, the Company cannot predict the
timing of any resolution of its claims and now expects the trial of its case to
commence during the second or third quarters of calendar 1999. The Company is
also unable to predict the outcome of its suit against the United States and the
amount of judgment for damages, if any, that may be awarded. Consequently, no
assurances can be given as to the results of this suit.

     The Company and the other Plaintiffs participated with the Government in a
non-binding alternative dispute resolution ("ADR") process that culminated in
a settlement conference on October 19, 1998. The Company had not changed its
assessment of the merits of its claims and agreed to participate in the ADR
process solely in an effort to resolve its claims on favorable terms without the
expense and uncertainty of a trial. No settlement was reached, and the Company
is preparing to try the case on the original trial schedule.

     The Company and the Bank have entered into an agreement with Hyperion
Partners L.P. acknowledging the relative value, as among the parties, of their
claims in the pending litigation. The agreement confirms that the Company and
the Bank are entitled to receive 85% of the amount, if any, recovered as a
result of any settlement of or a judgment on such claims, and that Hyperion
Partners L.P. is entitled to receive 15% of such amount. The agreement was
approved by the disinterested directors of the Company. Plaintiffs will continue
to cooperate in good faith and will use their best efforts to maximize the total
amount, if any, that they may recover.

     The Bank is involved in other legal proceedings occurring in the ordinary
course of business that management believes, after consultation with legal
counsel, are not, in the aggregate, material to the financial condition, results
of operations, or liquidity of the Bank or the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                       30
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

     The Company has two classes of common stock, Class A common stock and Class
B common stock. The Class A and Class B common stock have identical dividend and
other rights, except that the Class B common stock is non-voting and is
convertible into Class A common stock upon sale or transfer to unaffiliated
parties or, subject to certain limitations, at the election of the holder. The
Company's Class A common stock is listed on the NASDAQ National Market System
under the symbol "BNKU". At December 15, 1998, there were approximately 80
shareholders of record for the Company's Class A common stock and approximately
3 shareholders of record for the Company's Class B common stock. A majority of
the Company's common stock is held in "street name" by nominees for the
beneficial owners. The Company estimates the actual number of shareholders to be
7,583. The last reported sales price of common stock on December 15, 1998, was
$40.625 per share.

     The high and low common stock prices by quarter for the year ended
September 30 were as follows:

                                            HIGH        LOW
                                          ---------  ---------
1997
     First quarter......................  $  28.750  $  23.375
     Second quarter.....................     33.500     24.250
     Third quarter......................     39.000     28.125
     Fourth quarter.....................     44.500     35.375
1998
     First quarter......................     49.875     40.000
     Second quarter.....................     50.000     37.250
     Third quarter......................     56.500     44.500
     Fourth quarter.....................     49.750     30.000

     The cash dividends paid by quarter were as follows:

1997
     First quarter......................  $    0.14
     Second quarter.....................       0.14
     Third quarter......................       0.14
     Fourth quarter.....................       0.14
1998
     First quarter......................       0.16
     Second quarter.....................       0.16
     Third quarter......................       0.16
     Fourth quarter.....................       0.16

     The Parent Company intends, subject to its financial results, contractual,
legal, and regulatory restrictions, and other factors that its Board of
Directors may deem relevant, to declare and pay a quarterly cash dividend on the
Parent Company's common stock. The principal source of the funds to pay any
dividends on the Parent Company's common stock would be a dividend from the
Bank. OTS regulations impose restrictions on the payment of dividends by savings
institutions. See "Regulation -- Capital Distributions" for a discussion of
these restrictions.

                                       31
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data are derived from the Company's
audited Consolidated Financial Statements. The information set forth below
should be read in conjunction with the Consolidated Financial Statements and the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations". The Consolidated Statements of Financial Condition
as of September 30, 1998 and 1997 and the Consolidated Statements of Operations
for each of the years in the three-year period ended September 30, 1998 and the
report thereon of Deloitte & Touche LLP are included elsewhere in this document.
<TABLE>
<CAPTION>
                                                                 AT SEPTEMBER 30,
                                       --------------------------------------------------------------------
                                           1998          1997          1996          1995          1994
                                       ------------  ------------  ------------  ------------  ------------
                                                                  (IN THOUSANDS)
<S>                                    <C>           <C>           <C>           <C>           <C>         
SUMMARY OF FINANCIAL CONDITION

ASSETS
Cash and cash equivalents............  $    228,674  $    121,000  $    119,523  $    112,931  $     76,938
Securities purchased under agreements
  to resell and federal funds sold...       474,483       349,209       674,249       471,052       358,710
Securities and other investments.....        91,350        77,809        65,693       117,094       115,126
Mortgage-backed securities, net......       932,058     1,569,705     1,657,908     2,398,263     2,828,903
Loans, net
    Single family - held for
      investment.....................     4,686,600     5,795,179     6,113,318     7,000,303     4,144,787
    Single family - held for sale....     2,048,483       697,410       256,656       406,563       253,310
    Commercial.......................     3,472,579     2,201,880       981,001       735,876       546,794
    Consumer.........................       495,556       300,760       168,513       117,498       101,283
Mortgage servicing rights............       410,868       272,214       123,392        75,097        56,677
Other assets.........................       824,341       581,906       552,124       548,857       427,633
                                       ------------  ------------  ------------  ------------  ------------
         Total assets................  $ 13,664,992  $ 11,967,072  $ 10,712,377  $ 11,983,534  $  8,910,161
                                       ============  ============  ============  ============  ============
LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY
Deposits.............................  $  6,320,476  $  5,247,668  $  5,147,945  $  5,182,220  $  4,764,204
Federal Home Loan Bank advances......     4,783,294     3,992,344     3,490,386     4,383,895     2,620,329
Securities sold under agreements to
  repurchase
  and federal funds purchased........       811,742     1,308,600       832,286     1,172,533       553,000
Notes payable........................       219,720       220,199       115,000       115,000       115,000
Other liabilities....................       659,848       414,282       410,217       448,283       320,766
                                       ------------  ------------  ------------  ------------  ------------
         Total liabilities...........    12,795,080    11,183,093     9,995,834    11,301,931     8,373,299
                                       ------------  ------------  ------------  ------------  ------------
Minority interest -- Bank preferred
  stock..............................       185,500       185,500       185,500       185,500        85,500
Stockholders' equity.................       684,412       598,479       531,043       496,103       451,362
                                       ------------  ------------  ------------  ------------  ------------
         Total liabilities, minority
           interest, and
           stockholders' equity......  $ 13,664,992  $ 11,967,072  $ 10,712,377  $ 11,983,534  $  8,910,161
                                       ============  ============  ============  ============  ============
</TABLE>
                                       32
<PAGE>
<TABLE>
<CAPTION>
                                              AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                       -----------------------------------------------------
                                         1998       1997       1996       1995       1994
                                       ---------  ---------  ---------  ---------  ---------
                                           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>        <C>        <C>        <C>        <C>      
SUMMARY OF OPERATIONS
Interest income......................  $ 898,746  $ 810,708  $ 812,312  $ 746,759  $ 494,706
Interest expense.....................    612,665    546,064    584,778    552,760    320,924
                                       ---------  ---------  ---------  ---------  ---------
    Net interest income..............    286,081    264,644    227,534    193,999    173,782
Provision for credit losses..........     20,123     18,107     16,469     24,293      6,997
                                       ---------  ---------  ---------  ---------  ---------
    Net interest income after
      provision for credit losses....    265,958    246,537    211,065    169,706    166,785
Non-interest income
    Net gains (losses)
         Sales of single family
           servicing rights and
           single family loans.......     11,124     21,182     43,074     60,495     63,286
         Securities and
           mortgage-backed
           securities................      2,761      2,841      4,002         26     10,404
         Other loans.................        651      1,128      3,189     (1,210)       163
         Sale of mortgage
           offices(1)................     --          4,748     --         --         --
    Loan servicing, net of related
      amortization...................     35,975     32,381     30,383     32,677     26,813
    Other............................     30,426     21,152     15,541     12,162     13,295
                                       ---------  ---------  ---------  ---------  ---------
    Total non-interest income........     80,937     83,432     96,189    104,150    113,961
                                       ---------  ---------  ---------  ---------  ---------
Non-interest expense
    Compensation and benefits........     86,725     75,016     87,640     83,520     86,504
    SAIF deposit insurance
      premiums.......................      4,160      4,797     45,690     11,428     11,329
    Restructuring charges(1).........     --         --         10,681     --         --
    Other............................     97,657     92,323     95,407     88,797     96,832
                                       ---------  ---------  ---------  ---------  ---------
    Total non-interest expense.......    188,542    172,136    239,418    183,745    194,665
                                       ---------  ---------  ---------  ---------  ---------
    Income before income taxes,
      minority interest, and
      extraordinary loss.............    158,353    157,833     67,836     90,111     86,081
Income tax expense (benefit).........     25,722     60,686    (75,765)    37,415    (31,899)
                                       ---------  ---------  ---------  ---------  ---------
    Income before minority interest
      and extraordinary loss.........    132,631     97,147    143,601     52,696    117,980
Minority interest
    Bank preferred stock dividends...     18,253     18,253     18,253     10,600      8,653
    Payments in lieu of
      dividends(2)...................     --         --          6,413        377        357
                                       ---------  ---------  ---------  ---------  ---------
    Income before extraordinary
      loss...........................    114,378     78,894    118,935     41,719    108,970
Extraordinary loss -- early
  extinguishment of debt(3)..........     --          2,323     --         --         --
                                       ---------  ---------  ---------  ---------  ---------
    Net income.......................  $ 114,378  $  76,571  $ 118,935  $  41,719  $ 108,970
                                       =========  =========  =========  =========  =========
    Net income applicable to diluted
      earnings per common share......  $ 114,378  $  76,571  $ 113,327  $  38,824  $ 102,519
                                       =========  =========  =========  =========  =========
Earnings per common share(4)
    Basic............................  $    3.62  $    2.42  $    4.06  $    1.45  $    3.78
    Diluted..........................       3.54       2.40       3.87       1.35       3.55

CERTAIN RATIOS AND OTHER DATA
Book value per common share..........  $   21.67  $   18.94  $   16.81  $   17.19  $   15.64
Dividends per common share...........       0.64       0.56       3.46     --         --
Average common shares outstanding....     31,595     31,596     29,260     28,863     28,863
Average common shares and equivalents
  outstanding........................     32,337     31,881     29,287     28,863     28,863
Regulatory capital ratios of the Bank
    Tangible capital.................       6.75%      7.72%      6.57%      6.20%      6.01%
    Core capital.....................       6.77       7.77       6.64       6.29       6.17
    Total risk-based capital.........      10.48      13.18      13.09      13.45      14.02
Return on average assets(5)..........       1.04       0.85       1.28       0.50       1.42
Return on average common equity......      17.78      13.50      23.06       8.80      26.32
Stockholders' equity to assets.......       5.01       5.00       4.96       4.14       5.07
Tangible stockholders' equity to
  tangible assets....................       4.59       4.89       4.81       3.93       4.68
Net yield on interest-earning
  assets.............................       2.42       2.52       2.10       1.92       2.20
Interest rate spread.................       2.21       2.26       1.78       1.61       1.95
</TABLE>
                                       33
<PAGE>
<TABLE>
<CAPTION>
                                                      AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                       --------------------------------------------------------------------
                                           1998          1997          1996          1995          1994
                                       ------------  ------------  ------------  ------------  ------------
                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>           <C>           <C>           <C>           <C>         
CERTAIN RATIOS AND OTHER DATA --
  CONTINUED
Average interest-earning assets to
  average interest-bearing
  liabilities........................          1.04          1.05          1.06          1.06          1.06
Single family servicing portfolio....  $ 27,935,300  $ 24,518,396  $ 13,246,848  $ 12,532,472  $  8,920,760
Fundings:
    Single family....................     3,789,389     2,188,273     3,602,009     3,226,324     5,424,550
    Commercial.......................     2,876,328     1,492,931       891,306       547,117       364,604
    Consumer.........................       367,097       152,665       125,596        99,249        94,153
                                       ------------  ------------  ------------  ------------  ------------
Total fundings.......................     7,032,814     3,833,869     4,618,911     3,872,690     5,883,307
                                       ------------  ------------  ------------  ------------  ------------
Loans purchased for held to maturity
  portfolio..........................     1,158,270     1,086,249       148,510     2,658,093     1,406,275
Non-interest expense to average total
  assets.............................          1.48%         1.55%         2.13%         1.76%         2.35%
Net operating expense ratio(6).......          0.84          0.80          1.28          0.76          0.97
Efficiency ratio(7)..................         50.35         49.78         73.87         58.03         65.78
Nonperforming assets to total
  assets.............................          0.59          0.63          1.12          0.84          1.09
Net nonaccrual loans to total
  loans..............................          0.58          0.60          1.19          0.91          1.51
Allowance for credit losses to net
  nonaccrual loans...................         75.91         72.61         44.24         48.74         30.73
Allowance for credit losses to
  nonperforming assets...............         57.84         52.24         32.95         36.65         24.18
Allowance for credit losses to total
  loans..............................          0.44          0.43          0.52          0.44          0.46
Net loan charge-offs to average
  loans..............................          0.13          0.23          0.17          0.16          0.30
Full-time equivalent employees.......         1,927         1,541         2,310         2,663         2,894
Number of community banking
  branches...........................            84            71            70            65            62
Number of commercial banking
  origination offices................            21            11             9             9             5
Number of mortgage origination
  offices(1).........................             8             6            85           122           145

CERTAIN RATIOS AND OTHER DATA --
  EXCLUDING ADJUSTING ITEMS(8)
Net income...........................  $     89,944  $     75,970  $     56,392  $     41,719  $     50,804
Net income applicable to common
  shares.............................        89,944        75,970        53,295        38,824        47,585
Earnings per diluted share...........          2.78          2.38          1.82          1.35          1.65
Return on average assets.............          0.85%         0.85%         0.67%         0.50%         0.72%
Return on average common equity......         14.28         13.41         11.47          8.80         12.27
Efficiency ratio.....................         49.43         49.78         57.06         58.03         65.78
</TABLE>
------------

(1) During fiscal 1997, the Company sold certain of its mortgage origination
    offices. In connection with this sale, the remaining offices were
    restructured or closed. The mortgage origination branches shown at September
    30, 1998 and 1997 are wholesale mortgage origination offices, which are
    currently part of the Financial Markets Group. See Note 17 to the
    Consolidated Financial Statements.

(2) In connection with its Acquisition, the Bank issued to the FDIC-FRF a
    warrant to acquire 158,823 shares of common stock of the Bank. Payments in
    lieu of dividends related to the Warrant, which was redeemed in August 1996.
    See "Business -- Federal Financial Assistance -- Warrant Agreement".

(3) The fiscal 1997 extraordinary loss represents costs and charges associated
    with the repurchase and retirement of a majority of the Company's senior
    notes. See Note 10 to the Consolidated Financial Statements.

(4) Effective October 1, 1997, the Company adopted Statement of Financial
    Accounting Standard ("SFAS") No. 128, "Earnings per Share," which
    establishes standards for computing and presenting earnings per share
    ("EPS"). It requires dual presentation of basic and diluted EPS for
    entities with complex capital structures. All prior period EPS data were
    restated to comply with SFAS No. 128, but are not materially different.

                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)

                                       34
<PAGE>
(5) Return on average assets is net income without deduction of minority
    interest, divided by average total assets.

(6) Net operating expense ratio is total non-interest expense, less total
    non-interest income, as a percentage of average assets for each period.

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

(8) Adjusting items are composed of the following for fiscal 1998, 1997, 1996,
    and 1994:

    -- 1998 (increased EPS $0.76) -- (1) two positive income tax adjustments
       totalling $33.5 million, (2) an increase in the commercial loan allowance
       of $7.8 million ($4.9 million net of tax), and (3) provisions for the
       impact of higher prepayments on the single family loan and servicing
       portfolios totalling $6.7 million ($4.2 million net of tax);

    -- 1997 (increased EPS $0.02) -- (1) the gain on the sale of mortgage
       offices of $4.7 million ($2.9 million net of tax) and (2) an 
       extraordinary loss on extinguishment of debt of $3.6 million ($2.3
       million net of tax);

    -- 1996 (increased EPS $2.05) -- (1) a one-time SAIF assessment charge of
       $33.7 million($20.7 million net of tax), (2) compensation expense of
       $7.8 million ($4.8 million net of tax), (3) charges totalling $12.5
       million ($7.7 million net of tax) related to the restructuring of and
       items associated with the mortgage origination business, (4) a
       contractual payment to previous minority interests of $5.9 million, and
       (5) an income tax benefit of $101.7 million;

    -- 1994 (increased EPS $1.90) -- an income tax benefit of $58.2 million.

                                       35
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

DISCUSSION OF RESULTS OF OPERATIONS

    OVERVIEW

     1998 COMPARED TO 1997.  Net income was $114.4 million ($3.54 per diluted
share) for fiscal 1998, compared to $76.6 million ($2.40 per diluted share) for
fiscal 1997. The increase in net income was primarily caused by two positive
income tax adjustments that were recorded in fiscal 1998, increased net interest
income and increased loan servicing, community banking and commercial banking
related fees. These increases were partially offset by lower gains on sales of
single family loans and higher non-interest expenses.

     1997 COMPARED TO 1996.  Net income was $76.6 million ($2.40 per diluted
share) for fiscal 1997, compared to $118.9 million ($3.87 per diluted share) for
fiscal 1996. The decrease in net income was primarily due to a positive income
tax adjustment recorded during fiscal 1996, an extraordinary loss on the
extinguishment of debt recognized during fiscal 1997, and lower gains on sales
of single family loans. These decreases were partially offset by the gain on
sale of certain mortgage origination offices recognized during fiscal 1997, an
improved interest rate margin, and lower non-interest expenses.

    NET INTEREST INCOME

     Net interest income is based on the levels of interest-earning assets and
interest-bearing liabilities and the spread between the yields earned on assets
and rates paid on liabilities. The net interest-rate spread is affected by
changes in general market interest rates, including changes in the relationship
between short- and long-term interest rates, the effects of periodic caps on the
Company's adjustable-rate loan and MBS portfolios, and the interest rate
sensitivity position or gap. See "Business -- General," "Business -- Market
Risk Analysis," and Note 11 to the Consolidated Financial Statements.

                                       36
<PAGE>
     The Company's average balances, interest, and average yields were as
follows:
<TABLE>
<CAPTION>
                                                                    FOR THE YEAR ENDED SEPTEMBER 30,
                                      ----------------------------------------------------------------------------------------------
                                                   1998                           1997                             1996
                                      -----------------------------  ------------------------------  -------------------------------
                                       AVERAGE               YIELD/   AVERAGE                YIELD/   AVERAGE                 YIELD/
                                       BALANCE    INTEREST    RATE    BALANCE    INTEREST     RATE    BALANCE    INTEREST      RATE 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ------
                                                                    (DOLLARS IN THOUSANDS)                                   
<S>                                   <C>         <C>         <C>    <C>         <C>          <C>    <C>         <C>           <C>  
Interest-earning assets
    Short-term interest-earning
      assets......................... $  515,311  $  37,962   7.37%  $  566,964  $  36,240    6.39%  $  668,657  $  39,302     5.88%
    Securities and other investments.    135,496      9,093   6.71       81,422      5,371    6.60       77,791      3,984     5.12 
    Mortgage-backed securities.......  1,233,707     82,170   6.66    1,548,285    104,891    6.77    1,968,230    128,143     6.51 
    Loans:                                                                                                                          
        Single family - held for                                                                                                    
          investment.................  4,835,796    370,446   7.66    6,108,397    477,332    7.81    6,580,059    508,651     7.73 
        Single family - held for sale  1,667,629    111,143   6.66      325,237     24,782    7.62      376,098     28,189     7.50 
        Commercial...................  2,819,209    242,435   8.60    1,416,693    126,844    8.95      794,529     73,258     9.22 
        Consumer.....................    385,718     32,866   8.52      243,086     23,928    9.84      139,142     17,842    12.82 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
          Total loans................  9,708,352    756,890   7.80    8,093,413    652,886    8.07    7,889,828    627,940     7.96 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
    FHLB stock.......................    210,773     12,631   5.99      191,465     11,320    5.91      213,242     12,943     6.07 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
        Total interest-earning assets 11,803,639    898,746   7.61   10,481,549    810,708    7.73   10,817,748    812,312     7.51 
    Non-interest-earning assets......    956,758                        621,596                         411,683                     
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
        Total assets................. $12,760,397                    $11,103,145                     $11,229,431                    
                                      ==========                     ==========                      ==========                     
Interest-bearing liabilities                                                                                                        
    Deposits                                                                                                                 
        Checking accounts............ $  638,557      2,368   0.37   $  534,820      2,300    0.43   $  470,826      2,593     0.55 
        Money market accounts........  1,898,366    106,432   5.61    1,510,135     83,305    5.52    1,234,299     68,841     5.58 
        Savings accounts.............    127,022      3,710   2.92      127,494      3,345    2.62      138,007      3,857     2.79 
        Certificates of deposit......  3,391,938    188,250   5.55    2,954,743    173,811    5.88    3,222,602    196,929     6.11 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
          Total deposits.............  6,055,883    300,760   4.97    5,127,192    262,761    5.12    5,065,734    272,220     5.37 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
    FHLB advances....................  4,090,359    236,252   5.78    3,705,072    212,558    5.74    4,073,297    247,093     6.07 
    Reverse repurchase agreements and                                                                                               
      federal funds purchased........    971,546     56,082   5.77    1,002,165     57,335    5.72      955,708     55,112     5.77 
    Notes payable....................    220,019     19,571   8.90      157,565     13,410    8.51      115,000     10,353     9.00 
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
        Total interest-bearing                                                                                                      
          liabilities................ 11,337,807    612,665   5.40    9,991,994    546,064    5.47   10,209,739    584,778     5.73 
    Non-interest-bearing liabilities,                                                                                               
      minority interest, and                                                                                                        
      stockholders' equity...........  1,422,590                      1,111,151                       1,019,692                     
                                      ----------  ---------  ------  ----------  ---------   ------  ----------  ---------    ----- 
        Total liabilities, minority                                                                                                 
          interest, and stockholders'                                                                                               
          equity..................... $12,760,397                    $11,103,145                     $11,229,431                    
                                      ==========                     ==========                      ==========                     
Net interest income/interest rate                                                                                            
  spread.............................             $ 286,081   2.21%              $ 264,644    2.26%              $ 227,534     1.78%
                                                  =========  ======              =========   ======              =========    ===== 
Net yield on interest-earning assets.                         2.42%                           2.52%                            2.10%
                                                             ======                          ======                           =====
Ratio of average interest-earning                                                                                            
  assets to average interest-
  bearing liabilities................       1.04                           1.05                            1.06               
                                      ==========                     ==========                      ==========               
</TABLE>
                                       37
<PAGE>
     The following table analyzes net interest income in terms of changes in the
volume of interest-earning assets and interest-bearing liabilities and changes
in yields and rates. The table shows the extent to which changes in the interest
income and interest expense are due to changes in volume (changes in volume
multiplied by prior year rate) and changes in rate (changes in rate multiplied
by prior year volume).
<TABLE>
<CAPTION>
                                                         FOR THE YEAR ENDED SEPTEMBER 30,
                                       ---------------------------------------------------------------------
                                                 1998 VS. 1997                       1997 VS. 1996
                                       ----------------------------------  ---------------------------------
                                         VOLUME       RATE        NET        VOLUME      RATE        NET
                                       ----------  ----------  ----------  ----------  ---------  ----------
                                                                  (IN THOUSANDS)
<S>                                    <C>         <C>         <C>         <C>         <C>        <C>        
INTEREST INCOME
  Short-term interest-earning
     assets..........................  $   (3,500) $    5,222  $    1,722  $   (6,293) $   3,231  $   (3,062)
  Securities and other investments...       3,630          92       3,722         193      1,194       1,387
  Mortgage-backed securities.........     (21,039)     (1,682)    (22,721)    (28,206)     4,954     (23,252)
  Loans..............................     138,671     (34,667)    104,004      16,245      8,701      24,946
  FHLB stock.........................       1,156         155       1,311      (1,290)      (333)     (1,623)
                                       ----------  ----------  ----------  ----------  ---------  ----------
          Total......................     118,918     (30,880)     88,038     (19,351)    17,747      (1,604)
                                       ----------  ----------  ----------  ----------  ---------  ----------
INTEREST EXPENSE
  Deposits...........................      45,949      (7,950)     37,999       3,280    (12,739)     (9,459)
  FHLB advances......................      22,206       1,488      23,694     (21,565)   (12,970)    (34,535)
  Reverse repurchase agreements and
     federal funds purchased.........      (1,753)        500      (1,253)      2,697       (474)      2,223
  Notes payable......................       5,522         639       6,161       3,649       (592)      3,057
                                       ----------  ----------  ----------  ----------  ---------  ----------
          Total......................      71,924      (5,323)     66,601     (11,939)   (26,775)    (38,714)
                                       ----------  ----------  ----------  ----------  ---------  ----------
          Net change in net interest
            income...................  $   46,994  $  (25,557) $   21,437  $   (7,412) $  44,522  $   37,110
                                       ==========  ==========  ==========  ==========  =========  ==========
</TABLE>
     1998 COMPARED TO 1997.  Net interest income was $286.1 million for fiscal
1998, compared to $264.6 million for fiscal 1997, for a $21.5 million, or 8%,
increase. This increase was caused by a $1.3 billion, or 13%, increase in
average interest-earning assets and a change in the composition of assets and
deposits, partially offset by a 10 basis point decrease in the net yield on
interest-earning assets ("net yield").

     The increase in average interest-earning assets came from growth in
originations and purchases of commercial loans. As a result of this growth, the
composition of the Company's assets has changed during the year. During fiscal
1998, commercial loans comprised 24% of average interest-earning assets and
single family loans comprised 55%. During fiscal 1997, commercial loans
comprised 14% and single family loans comprised 61%. Average deposits increased
$928.7 million, or 18%, during fiscal 1998. This increase is primarily due to an
increase in lower costing transaction accounts and CDs.

     The net yield was 2.42% for fiscal 1998, compared to 2.52% for fiscal 1997.
The net yield decreased due to a decline in long-term market interest rates, and
the resulting prepayments of higher yielding single family loans. As new loans
are originated at the lower current market interest rates, they are generally
included in the Company's held for sale portfolio. Excluding the single family
held for sale portfolio, the net yield would have been 2.68% for the year ended
September 30, 1998, compared to 2.55% for the year ended September 30, 1997. The
resulting 13 basis point increase was due to increased levels of higher yielding
commercial loans and lower deposit rates. The decline in deposit rates resulted
from deposits acquired in recent branch acquisitions and maturities of higher
rate brokered deposits.

     1997 COMPARED TO 1996.  Net interest income was $264.6 million for fiscal
1997, compared to $227.5 million for fiscal 1996, for a $37.1 million, or 16%,
increase. This increase was caused by a 42 basis point increase in the net
yield, partially offset by a $336.2 million decrease in average interest-earning
assets.

     The yield on interest-earning assets increased 22 basis points in fiscal
1997, in comparison to the prior year, primarily due to the shift in assets to
higher yielding commercial and consumer loans from the traditionally lower
yielding single family mortgages and to higher rates on adjustable-rate MBS.
Average interest-earning assets decreased primarily due to principal repayments
on MBS.

                                       38
<PAGE>
     The cost of funds decreased 26 basis points during fiscal 1997, in
comparison to the prior year, primarily due to a decrease in FHLB advance rates
and lower deposit rates, caused by an increase in the number of lower cost
transaction accounts.

     PROVISION FOR CREDIT LOSSES

     1998 COMPARED TO 1997.  The provision for credit losses increased $2.0
million, to $20.1 million for fiscal 1998. This increase principally resulted
from an increase in the allowance established for the commercial loan portfolio,
which was partially offset by a reduction in the allowance for the single family
loan held for investment portfolio. The commercial loan portfolio increased $1.3
billion, or 58%, during fiscal 1998. Due to this growth, the Company increased
this portfolio's allowance levels to approximately one percent. The single
family loan held for investment portfolio decreased $1.1 billion, or 19%, during
fiscal 1998. The Company determined that its allowance for single family loans
held for investment could be reduced, based on the portfolio's historical
losses, as well as the reduction in the outstanding portfolio balance.
Accordingly, the allowance for single family loans held for investment was
reduced to approximately 27 basis points. The consumer loan provision decreased
from the year ago period due to the sale of the consumer line of credit
portfolio, totalling $37.6 million, in fiscal 1998. Charge-offs of $4.9 million
related to this sale were recorded during fiscal 1998.

     1997 COMPARED TO 1996.  The provision for credit losses increased $1.6
million during fiscal 1997, compared to the prior year. The primary items
contributing to this increase were charge-offs of $5.0 million recorded in
conjunction with a bulk sale of $31.3 million of nonperforming single family
loans during fiscal 1997, increased commercial and small business portfolios,
and the addition of new product lines, including healthcare loans and commercial
loan syndications. The unsecured consumer line of credit product, which carried
the highest level of reserves in the loan portfolio, experienced a decline in
provisions from fiscal 1996 to 1997, due to a decrease in that product's total
portfolio balance from $51.2 million at September 30, 1996 to $42.1 million at
September 30, 1997.

     See "-- Asset Quality" and Note 5 to the Consolidated Financial
Statements.

    MORTGAGE BANKING RESTRUCTURINGS AND SALE OF OFFICES

     In fiscal 1996, the Company recorded a restructuring charge of $10.7
million before tax, to recognize the costs of closing or consolidating mortgage
origination offices and several regional operation centers and recorded $1.8
million of other expenses related to its mortgage origination business. In
fiscal 1997, the Company sold certain of its mortgage origination offices. In
connection with this sale, the remaining offices were restructured or closed.
The net gain on the sale of these offices, reduced by additional restructuring
costs, was $4.7 million before tax, $2.9 million after tax, or $0.09 per share.
See "Business -- Mortgage Banking Group" and Note 17 to the Consolidated
Financial Statements.

     NON-INTEREST INCOME

     1998 COMPARED TO 1997.  Non-interest income decreased $2.5 million, or 3%,
during fiscal 1998, compared to fiscal 1997. This decrease was largely the
result of lower gains on sales of single family loans, partially offset by
increased loan servicing, community banking and commercial banking related fees.
Fiscal 1997 results include a $4.7 million gain related to the sale of certain
mortgage origination offices.

     Despite an increase in the volume of single family loans sold ($1.9 billion
for fiscal 1998, compared to $1.2 billion for fiscal 1997), gains on sales of
such loans declined $10.1 million, or 47%. Loans sold during fiscal 1998 were
originated through the Company's wholesale network. Loans sold in fiscal 1997
were principally originated through the Company's retail network, which was sold
during the second quarter of fiscal 1997. While loans originated through a
wholesale network typically have a higher cost basis and therefore reduced gains
upon sale, non-interest expenses associated with such loans are generally lower.
Changes in the mix of products sold and, to a lesser extent, competitive market
pressures also contributed to lower gains during the current period.

     Loan servicing income, which consists of loan servicing fee revenue, net of
the amortization of MSRs, increased $3.6 million during fiscal 1998. Loan
servicing income for fiscal 1998 was reduced by a valuation allowance of $4.8
million, which was established due to the effect of a decline in long-term
market interest rates. Excluding this valuation allowance, loan servicing income
increased $8.4 million, or 26%, during fiscal 1998.

                                       39
<PAGE>
Gross servicing fee revenue increased $31.6 million, and the related
amortization of MSRs increased $23.2 million. These increases resulted from a
larger portfolio of single family loans serviced for others, which averaged
$21.4 billion for fiscal 1998, compared to $14.5 billion for fiscal 1997. Gross
servicing fee revenue did not include the full year effect of the servicing
rights purchased during fiscal 1998, as it was reduced by costs incurred to have
the loans subserviced on the Company's behalf until such loans were transferred
to the Company's portfolio.

     Other non-interest income increased $9.3 million, or 44%, during fiscal
1998, due to higher volumes of activity in several areas. Checking account and
ATM fee revenue grew by $3.2 million, stemming from growth in the number of
checking accounts from 163,000 at September 30, 1997 to 176,000 at September 30,
1998, as well as a higher volume of insufficient funds charges. Broker and
annuity fees increased $2.7 million as a result of greater sales volumes, which
increased $21.3 million, or 14%, from the prior year. Debit cards, introduced in
March 1997, had an increase in income of $1.1 million over the prior year.
Commercial banking related fees increased $1.3 million due primarily to growth
in the warehouse line of credit product, which almost doubled from $464.2
million to $787.7 million during fiscal 1998.

     1997 COMPARED TO 1996.  Non-interest income decreased $12.8 million, or
13%, during fiscal 1997 compared to fiscal 1996. This decrease was caused by
lower gains on sales of single family loans due to the sale of certain of the
Company's mortgage origination offices during fiscal 1997, partially offset by
the gain recorded on that sale. See " -- Mortgage Banking Restructurings and
Sale of Offices". Loan servicing income remained relatively unchanged during
fiscal 1997, as compared to the previous year. Gross servicing fee revenue
increased $19.6 million and was partially offset by a $17.6 million increase in
MSR amortization. These increases were caused by a larger average portfolio of
single family loans serviced for others for fiscal 1997, as compared to fiscal
1996 ($14.5 billion versus $8.4 billion), due primarily to purchases of
servicing rights totalling $12.6 billion during fiscal 1997. Gross servicing fee
revenue for fiscal 1997 did not include the full year effect of the servicing
rights purchased during fiscal 1997 as it was reduced by costs incurred to have
the loans subserviced on the Company's behalf until such loans were transferred
to the Company's portfolio. Other non-interest income increased $5.6 million, or
36%, during fiscal 1997, as compared to the prior year, due to an increase in
the number of checking accounts maintained by the Company for which certain fees
are assessed and an increase in annuity sales volume.

     NON-INTEREST EXPENSE

     1998 COMPARED TO 1997.  Non-interest expense was $188.5 million for fiscal
1998, up 9.5% from $172.1 million for fiscal 1997. Despite the increase in
expenses, the ratio of non-interest expense to average total assets decreased
from 1.55% for fiscal 1997 to 1.48% for fiscal 1998, while the efficiency ratio
remained at approximately 50% for both periods. The expense increase was
principally the result of growth in the servicing portfolio, higher levels of
loan activity, and recent branch acquisitions. Start-up costs incurred in
conjunction with the Company's program of offering home equity loans in Texas
also caused an increase in non-interest expenses. Non-interest expenses for
fiscal 1998 included $1.8 million of costs associated with the forbearance
litigation. See "Legal Proceedings." Non-interest expense for fiscal 1997
included costs associated with the retail mortgage origination network, which
was sold in the second quarter of fiscal 1997.

     1997 COMPARED TO 1996.  Total non-interest expense was $172.1 million for
fiscal 1997 and $239.4 million for fiscal 1996. Non-interest expense for fiscal
1996 included several adjusting items, including $7.8 million of compensation
expenses, $33.7 million in SAIF deposit insurance premiums, and a $10.7 million
restructuring charge. See Notes 12, 14, and 17 to the Consolidated Financial
Statements. Excluding these adjusting items, non-interest expense was $172.1
million for fiscal 1997 compared to $187.3 million for fiscal 1996 or 1.55% and
1.67% of average total assets. Expenses were reduced 8% principally due to lower
SAIF premiums and the effect of the sale of certain of the Company's mortgage
origination offices. Effective January 1, 1997, the SAIF deposit insurance
assessment was reduced from 23 to 6.48 basis points, which lowered the amount of
premiums paid in fiscal 1997 by $7.2 million. As a result of the sale of certain
of the Company's mortgage origination offices (down from 85 offices at September
30, 1996 to six at September 30, 1997), decreases in compensation, occupancy,
data processing, furniture and equipment, and other non-interest expenses also
were realized.

                                       40
<PAGE>
Offsetting these declines were increased legal expenses of $2.2 million for
costs associated with the forbearance litigation. See "Legal Proceedings."

     INCOME TAXES

     The provision for income taxes, excluding taxes on the extraordinary loss,
was an expense of $25.7 million for fiscal 1998, an expense of $60.7 million for
fiscal 1997, and a net benefit of $75.8 million for fiscal 1996. During fiscal
1998, the Company successfully resolved an outstanding tax benefit lawsuit with
the FDIC as manager of the FRF, which resulted in a positive income tax
adjustment of approximately $6.0 million. Additionally, the Company recognized a
positive income tax adjustment of $27.5 million resulting from the anticipated
use of additional NOLs against future taxable income.

     In fiscal 1996, the Certificate of Incorporation and By-Laws were restated
with the intent to preserve certain beneficial tax attributes limiting the
disposition of certain common stock and other interests in the Parent Company by
certain of its stockholders. The preservation of these tax attributes allowed
the recognition of tax benefits for the expected utilization of NOLs against
future taxable income. Also in fiscal 1996, the Parent Company and the Bank
entered into a tax sharing agreement resulting in the recognition of a tax
benefit for the expected utilization of the Parent Company's NOLs by the Bank.
As a result of the tax sharing agreement and the restatement of the Certificate
of Incorporation and By-laws, a total tax benefit of $101.7 million was
recognized in fiscal 1996. See "Business -- Taxation" and Note 13 to the
Consolidated Financial Statements.

    MINORITY INTEREST

     Dividends paid on the Bank's preferred stock were $18.3 million for fiscal
1998, 1997, and 1996. These shares are not owned by the Company and,
accordingly, are shown as minority interest in the Consolidated Financial
Statements. Payments in lieu of dividends increased during fiscal 1996 because
of the contractual payment of $5.9 million made to the FDIC-FRF in connection
with the declaration of a $100 million dividend on the common stock of the Bank.
See "Business -- Federal Financial Assistance -- Warrant Agreement" and Note
15 to the Consolidated Financial Statements.

    EXTRAORDINARY LOSS

     In May 1997, the Company issued $220 million of subordinated notes and used
a portion of the net proceeds to retire $114.5 million of the Company's senior
notes. The costs associated with retiring the Senior Notes are shown as an
extraordinary loss of $3.6 million, or $2.3 million after tax ($0.07 per share).
See Note 10 to the Consolidated Financial Statements.

DISCUSSION OF CHANGES IN FINANCIAL CONDITION

     1998 ACTIVITY.  Total assets increased during fiscal 1998 by $1.7 billion,
or 14%, to $13.7 billion. This increase primarily occurred in the loan
portfolio. During the year, the Company acquired 21 branches having deposits
totalling $1.5 billion. The cash acquired in these transactions, along with
principal repayments on loans and MBS, were used to fund the growth in the
Company's loan portfolio.

     Repurchase Agreements and federal funds sold increased $125.3 million
during fiscal 1998. This increase primarily resulted from the Company's ability
to borrow funds and invest those funds at a positive spread on a short-term
basis.

     Securities and other investments increased $13.5 million, or 17%, during
fiscal 1998. During this period, $357.3 million of investments, primarily
commercial paper, were purchased and $344.5 million of commercial paper matured.
Additionally, $506.1 million of securities were created through the
securitization of SBA loans and $494.8 million of these types of securities were
sold. The SBA interest-only strips related to these securitizations
approximating $45.8 million were retained by the Company. See
"Business -- Investment Portfolio."

     MBS declined $637.6 million during fiscal 1998 due to principal repayments
and sales. Principal repayments increased 61%, totalling $539.5 million during
fiscal 1998, compared to $335.0 million for fiscal 1997, as a result of
increased refinancing activity. Sales of MBS totalled $99.5 million during
fiscal 1998, compared to $6.9 million during fiscal 1997.

                                       41
<PAGE>
     The following table shows activity in the loan portfolio.
<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED SEPTEMBER 30,
                                       -------------------------------------------
                                           1998           1997           1996
                                       -------------  -------------  -------------
                                                     (IN THOUSANDS)
<S>                                    <C>            <C>            <C>          
Beginning balance....................  $   8,995,229  $   7,519,488  $   8,260,240
  Fundings
     Single family...................      3,789,389      2,188,273      3,602,009
     Commercial......................      2,876,328      1,492,931        891,306
     Consumer........................        367,097        152,665        125,596
  Purchases
     Single family...................      1,094,729        795,827        226,298
     Commercial......................        653,170        639,852         65,521
     Consumer........................            172         95,613       --
  Net change in mortgage banker
     finance line of credit..........        321,897        324,087         30,481
  Repayments
     Single family...................     (2,662,080)    (1,581,897)    (1,694,676)
     Commercial......................     (2,036,509)      (864,745)      (529,233)
     Consumer........................       (134,550)      (109,256)       (90,587)
  Securitized loans sold or
     transferred.....................     (1,439,138)    (1,290,220)    (2,669,406)
  Sales..............................     (1,078,258)      (319,707)      (646,979)
  Other..............................        (44,258)       (47,682)       (51,082)
                                       -------------  -------------  -------------
Ending balance.......................  $  10,703,218  $   8,995,229  $   7,519,488
                                       =============  =============  =============
</TABLE>
     Total loans increased $1.7 billion, or 19%, during the fiscal 1998, to
$10.7 billion. Additionally, the composition of the loan portfolio changed as
the Company continued to expand its commercial and consumer lending lines of
business. At September 30, 1998, commercial and consumer loans totalled 37% of
the Company's total loan portfolio, compared to 28% at September 30, 1997.

     The commercial loan portfolio increased $1.3 billion, or 58%, since
September 1997, as a result of originations and purchases. Commercial loan
originations, primarily related to residential construction and multi-family
loans, totalled $2.9 billion during fiscal 1998, an increase of $1.4 billion, or
93%, over fiscal 1997. During fiscal 1998, the Company purchased commercial real
estate loans with principal balances totalling $157.8 million. These loans were
primarily secured by apartment buildings, office buildings, and retail centers.
Additionally, $495.4 million of SBA loans were purchased during fiscal 1998, of
which $506.1 million were securitized. During fiscal 1998, the commercial loan
portfolio increased as follows: single family construction ($390.3 million or
100%), multi-family ($100.3 million or 13%), commercial real estate ($307.6
million or 81%), healthcare ($171.8 million or 179%), mortgage banker finance
lines of credit ($323.5 million or 70%), and SBA ($4.9 million or 4%).

     Consumer loans increased $187.9 million, or 62%, to $493.5 million at
September 30, 1998. This increase was due to a 60% increase in the home
improvement loan portfolio and the implementation of the Company's home equity
lending program in Texas. Since the program began in January 1998, following an
amendment to the Texas constitution permitting such lending in the state, the
Company has funded $201.0 million of such loans.

     Total single family loans increased $225.2 million, or 3%, during fiscal
1998. Single family loans held for sale increased $1.3 billion, which was
partially offset by a $1.1 billion decrease in single family loans held for
investment.

     Single family loans held for sale increased as a result of higher
originations despite the sale of certain mortgage origination offices during
fiscal 1997. The Company continues to originate loans through its wholesale
origination network. Single family loan originations increased to $3.8 billion
during fiscal 1998, compared to $2.2 billion during fiscal 1997. The increase in
originations is due to increased refinancing activity resulting from lower
long-term market interest rates. Refinancings approximated $2.5 billion and
$941.0 million, or 67% and 43% of total single family loan originations during
fiscal 1998 and 1997. Sales of single family loans were $1.9 billion for fiscal
1998, compared to $1.2 billion for the prior year.

                                       42
<PAGE>
     During September 1998, the Company purchased $867.8 million of
adjustable-rate single family loans for the held for investment portfolio.
Despite this purchase, the single family loan held for investment portfolio
declined, primarily due to principal repayments. The outstanding balance of this
portfolio decreased as the Company continues to build its commercial and
consumer loan portfolios and designate a greater portion of its single family
originations as held for sale.

     MSRs increased $138.7 million to $410.9 million at September 30, 1998.
During fiscal 1998, the Company purchased servicing rights associated with $8.1
billion in loans increasing the servicing portfolio to $27.9 billion at
September 30, 1998, compared to $24.5 billion at September 30, 1997. In an
effort to mitigate the effect of a decline in the value of the servicing
portfolio that may result from a decline in market interest rates and increased
prepayments, the Company enters into interest rate floor agreements. See
"Business -- Mortgage Servicing Group -- Mortgage Servicing Rights" and Note 11
to the Consolidated Financial Statements. A $4.8 million valuation allowance
related to this portfolio was established due to the effect of a decline in
long-term market interest rates.

     Deposits increased $1.1 billion, or 20%, to $6.3 billion at September 30,
1998. Transaction accounts, including checking, savings, and money market
accounts, increased $568.9 million, or 24%, as a result of successful marketing
efforts. Commercial deposits increased during the year by $169.5 million, or
15%. During fiscal 1998, the Company purchased 21 branches with deposits,
primarily CDs, totalling $1.5 billion and associated goodwill of $51.7 million.
The Company has closed 13 of the 21 branches and has continued to operate the
remaining eight locations. Cash from higher deposit levels provided a majority
of the funds for asset purchases and originations during fiscal 1998.
Historically, the Company has relied more on higher cost FHLB borrowings and
reverse repurchase agreements. In September 1998, the Company signed an
agreement to purchase a commercial bank operating five branches, having assets
of $225 million and deposits of $203 million. Closing of this transaction is
expected early in 1999.

     Increases in other assets and other liabilities were primarily a result of
the growth in the Company's servicing portfolio.

     The Company has entered into other financial instruments for the purposes
of reducing interest rate risk in addition to the interest rate floor agreements
hedging the servicing portfolio. See Note 11 to the Consolidated Financial
Statements.

     1997 ACTIVITY.  Total assets increased during fiscal 1997 by $1.3 billion,
or 12%, to $12.0 billion. This increase was caused by growth in the commercial
and consumer loan portfolios and MSR purchases, funded primarily with FHLB
advances and reverse repurchase agreements. The composition of the Company's
balance sheet at September 30, 1997 showed less reliance on single family
mortgage loans and MBS in favor of higher margin commercial and consumer loans.
The composition of the Company's deposit base also changed during fiscal 1997,
due to an increase in lower cost transaction accounts and a reduction in higher
costing CDs. See "Business -- Deposits."

     Single family loans remained relatively flat during fiscal 1997. Increases
due to purchases and originations of these loans during the year were offset by
principal repayments. Although single family loans were 72% of the Company's
total loan portfolio at September 30, 1997, the Company continued to reduce its
reliance on these loans as evidenced by the sale of certain of its mortgage
origination offices during fiscal 1997. See "Business -- Mortgage Banking
Group." Single family loans held for sale increased $440.8 million during
fiscal 1997, up from $256.6 million at September 30, 1996, to $697.4 million at
September 30, 1997.

     At September 30, 1997, commercial and consumer loans were 28% of the total
loan portfolio, compared to 15% at September 30, 1996. Commercial loans
increased $1.2 billion, or 124%, during fiscal 1997, compared to an increase of
$245.1 million, or 33%, during fiscal 1996, due to higher purchases and
originations. Consumer loans increased $132.2 million, or 78%, during fiscal
1997. This increase was caused by purchases of home equity line of credit loans
outside the state of Texas and increased home improvement loan originations,
offset by a lower consumer line of credit portfolio.

                                       43
<PAGE>
     During fiscal 1997, $406.3 million of SBA loans were purchased and a
portion were pooled into securities totalling $341.5 million. Securities created
from these SBA loans totalling $335.1 million were sold during fiscal 1997.

     MSRs increased $148.8 million, or 121%, during fiscal 1997, as a result of
the purchase of servicing rights associated with $12.6 billion of single family
mortgage loans at a cost of $166.5 million. The single family servicing
portfolio increased to $24.5 billion at September 30, 1997, compared to $13.2
billion at September 30, 1996 ($4.0 billion and $3.7 billion at September 1997
and 1996 were serviced for the Company's own account). At September 30, 1997,
$7.5 billion of recently acquired servicing rights had not yet been transferred
to the Company but were transferred during the first quarter of fiscal 1998.
These acquisitions also contributed to the increase in servicing related
receivables included in other assets.

     Deposits increased $99.7 million, or 2%, during fiscal 1997. Although total
deposits were relatively unchanged, the composition changed. Higher cost
brokered deposits and CDs were allowed to runoff and were replaced with lower
cost transaction accounts. In the aggregate, FHLB advances and reverse
repurchase agreements increased $978.3 million during fiscal 1997, primarily to
fund loan purchases and originations.

     During fiscal 1997, the Company issued $220 million of subordinated notes.
Net proceeds were used to repurchase and retire $114.5 million of the Company's
senior notes, pay the related costs and expenses, and provide additional capital
to the Bank. See Note 10 to the Consolidated Financial Statements.

ASSET QUALITY

     The Company is exposed to certain credit risks related to the value of
collateral that secures loans held in its portfolio and the ability of borrowers
to repay their loans according to the terms thereof. The Company has a Credit
Committee comprised of senior officers that regularly monitors the loan and real
estate owned ("REO") portfolios for potential problems and reports to the
Board of Directors at regularly scheduled meetings. The Company also has an
Asset Review Department, which provides an independent ongoing review and
evaluation of the quality of assets to the Board of Directors. Selected asset
quality ratios were as follows:
<TABLE>
<CAPTION>
                                              AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                       -----------------------------------------------------
                                         1998       1997       1996       1995       1994
                                       ---------  ---------  ---------  ---------  ---------
<S>                                        <C>        <C>        <C>        <C>        <C>   
Allowance for credit losses to net
  nonaccrual loans
     Single family...................      22.36%     47.37%     32.46%     39.74%     22.70%
     Total...........................      75.91      72.61      44.24      48.74      30.73
Allowance for credit losses to
  nonperforming assets...............      57.84      52.24      32.95      36.65      24.18
Allowance for credit losses and
  non-accretable discounts
  to net nonaccrual loans............      75.93      74.13      48.47      60.88      50.89
Allowance for credit losses to total
  loans..............................       0.44       0.43       0.52       0.44       0.46
Nonperforming assets to total
  assets.............................       0.59       0.63       1.12       0.84       1.09
Net nonaccrual loans to total
  loans..............................       0.58       0.60       1.19       0.91       1.51
Nonperforming assets to total loans
  and REO............................       0.75       0.83       1.59       1.21       1.91
Net loan charge-offs to average loans
     Single family...................       0.06       0.18(1)      0.12      0.08      0.04
     Total...........................       0.13(2)    0.23(1)      0.17      0.16      0.30
</TABLE>
------------

(1) Excluding charge-offs totalling $5.0 million related to a nonperforming loan
    sale in fiscal 1997, the single family charge-off ratio would have been
    0.11% and the total charge-off ratio would have been 0.17%.

(2) Excluding charge-offs in fiscal 1998 totalling $4.9 million related to the
    sale of the consumer line of credit portfolio, the total charge-off ratio
    would have been 0.08%.

                                       44
<PAGE>
     NONPERFORMING ASSETS
<TABLE>
<CAPTION>
                                                           AT SEPTEMBER 30,
                                       ---------------------------------------------------------
                                         1998        1997        1996        1995        1994
                                       ---------  ----------  ----------  ----------  ----------
                                                            (IN THOUSANDS)
<S>                                    <C>        <C>         <C>         <C>         <C>       
Nonaccrual loans
     Single family...................  $  55,800  $   51,742  $   92,187  $   83,954  $   85,722
     Commercial......................      5,344       1,995         494         718       6,144
     Consumer........................        688         974       1,039         563         506
                                       ---------  ----------  ----------  ----------  ----------
                                          61,832      54,711      93,720      85,235      92,372
                                       ---------  ----------  ----------  ----------  ----------
Premiums (discounts).................        116        (759)     (4,077)     (9,727)    (16,053)
                                       ---------  ----------  ----------  ----------  ----------
          Net nonaccrual loans.......     61,948      53,952      89,643      75,508      76,319
REO, primarily single family
  properties.........................     19,357      21,038      30,730      24,904      20,684
                                       ---------  ----------  ----------  ----------  ----------
          Total nonperforming
            assets...................  $  81,305  $   74,990  $  120,373  $  100,412  $   97,003
                                       =========  ==========  ==========  ==========  ==========
</TABLE>
     Nonperforming assets have increased 8%, or $6.3 million, during fiscal
1998. This increase is primarily the result of purchases of commercial loans
during fiscal 1998 and a higher rate of single family loans 90 days or more
delinquent. Although the balance of delinquencies has risen, net nonaccrual
loans as a percentage of the total loan balance decreased from 0.60% at
September 30, 1997 to 0.58% at September 30, 1998.

     A loan is generally placed on nonaccrual status when the loan is past due
90 days or more or the ability of a borrower to repay principal and interest is
in doubt. Nonaccrual loans outstanding at September 30, 1998 were primarily
concentrated in California (36.76%) and Texas (14.13%), which is generally
consistent with the geographic makeup of the Company's loan portfolio.

     The Company's nonperforming assets decreased 38% during fiscal 1997. This
decrease was primarily caused by the sale of $31.3 million of nonperforming
single family loans in fiscal 1997 and a higher sales volume of REO properties
in fiscal 1997.

     Nonperforming assets were at their highest level in fiscal 1996, resulting
from significant loan purchases in the fourth quarter of fiscal 1995, that
subsequently produced an increased level of delinquent loans and foreclosures.

     The level of nonperforming assets at September 30, 1995 and 1994 remained
relatively constant at $100.4 million and $97 million.

                                       45
<PAGE>
     ALLOWANCE FOR CREDIT LOSSES

     The allowance for credit losses is established based on management's
periodic evaluation of the loan portfolio and considers such factors as
historical loss experience, delinquency status, identification of adverse
situations that may affect the ability of borrowers to repay, known and inherent
risks in the portfolio, assessment of economic conditions, regulatory policies,
and the estimated value of the underlying collateral, if any. Although the
Company has historically had a very low loss experience, there can be no
assurance that such results will continue in the future. The activity in, and
the allocation of the allowance for, credit losses was as follows:
<TABLE>
<CAPTION>
                                                  AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                          ------------------------------------------------------
                                             1998       1997       1996       1995       1994
                                          ----------  ---------  ---------  ---------  ---------
                                                              (IN THOUSANDS)
<S>                                       <C>         <C>        <C>        <C>        <C>      
ACTIVITY
Beginning balance.......................  $   39,174  $  39,660  $  36,801  $  23,454  $  29,864
     Provision..........................      20,123     18,107     16,469     24,293      6,997
     Charge-offs........................     (12,943)   (19,036)   (13,785)   (11,078)   (13,465)
     Recoveries.........................         673        443        175        132         58
                                          ----------  ---------  ---------  ---------  ---------
Ending balance..........................  $   47,027  $  39,174  $  39,660  $  36,801  $  23,454
                                          ==========  =========  =========  =========  =========
ALLOCATION
Single family...........................  $   12,503  $  24,538  $  28,672  $  29,632  $  15,981
Commercial(1)...........................      32,269      8,766      5,769      3,922      5,651
Consumer................................       2,255      5,870      5,219      3,247      1,822
                                          ----------  ---------  ---------  ---------  ---------
     Total..............................  $   47,027  $  39,174  $  39,660  $  36,801  $  23,454
                                          ==========  =========  =========  =========  =========
</TABLE>
     (1)  Includes $5.0 million, $2.2 million, $925,000, $560,000, and $526,000
          related to construction loans as of September 30, 1998, 1997, 1996,
          1995, and 1994.

     The allowance for credit losses increased $7.9 million during fiscal 1998.
This change resulted from an increase in the allowance established for the
commercial loan portfolio, which was partially offset by a reduction in the
allowance for the single family loan held for investment portfolio. The
commercial loan portfolio increased $1.3 billion, or 58%, during fiscal 1998.
Due to this growth, the Company increased this portfolio's allowance levels to
approximately one percent. The single family loan held for investment portfolio
decreased $1.1 billion, or 19%, during fiscal 1998. The Company determined that
its allowance for single family loans held for investment could be reduced,
based on the portfolio's historical losses, as well as the reduction in the
outstanding portfolio balance. Accordingly, the allowance for single family
loans held for investment was reduced to approximately 27 basis points. The
consumer loan allowance decreased from the year ago period due to the sale of
the consumer line of credit portfolio, totalling $37.6 million, in fiscal 1998.

     The allowance for credit losses remained relatively unchanged during fiscal
1997, however, the composition of the allowance changed. The single family loan
allowance decreased $4.1 million during fiscal 1997, due to the sale of $31.3
million of nonperforming single family loans with related charge-offs of $5.0
million. This decrease was offset by increased reserves in the commercial and
consumer loan portfolios, which were necessitated by growth in those portfolios.

     The allowance for credit losses increased to $39.7 million at September 30,
1996 from $36.8 million at September 30, 1995. The single family loan allowance
decreased during fiscal 1996, due to reduced levels of single family loans
outstanding as repayments exceeded originations. The consumer allowance for
credit losses increased during fiscal 1996 due to increased losses related to
the unsecured line of credit portfolio. The commercial allowance for credit
losses increased during fiscal 1996 primarily from growth in the commercial loan
portfolio.

     The allowance for credit losses increased to $36.8 million at September 30,
1995 from $23.5 million at September 30, 1994. The single family loan allowance
increased during fiscal 1995 because of purchases of $2.7 billion and additional
originations retained for portfolio of $1.0 billion. The consumer allowance for
credit losses increased as a result of increased losses related to the unsecured
consumer line of credit portfolio.

                                       46
<PAGE>
     CHARGE-OFFS

     The Company charges off loans, other than consumer loans, when all attempts
have been exhausted to resolve any outstanding loan or legal issues. Consumer
loans are charged off when the loan becomes contractually 120 days delinquent.
Loan charge-offs and recoveries have been as follows:
<TABLE>
<CAPTION>
                                                    FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------------------------
                                          1998        1997        1996        1995        1994
                                       ----------  ----------  ----------  ----------  ----------
                                                             (IN THOUSANDS)
<S>                                    <C>         <C>         <C>         <C>         <C>        
CHARGE-OFFS
     Single family...................  $   (3,933) $  (11,886) $   (7,751) $   (4,842) $   (1,722)
     Commercial......................        (728)       (570)        (39)     (3,389)    (10,378)
     Consumer........................      (8,282)     (6,580)     (5,995)     (2,847)     (1,365)
                                       ----------  ----------  ----------  ----------  ----------
          Total charge-offs..........     (12,943)    (19,036)    (13,785)    (11,078)    (13,465)
                                       ----------  ----------  ----------  ----------  ----------
RECOVERIES
     Single family...................         241          63          31          36          20
     Commercial......................         126           3      --               2      --
     Consumer........................         306         377         144          94          38
                                       ----------  ----------  ----------  ----------  ----------
          Total recoveries...........         673         443         175         132          58
                                       ----------  ----------  ----------  ----------  ----------
          Total net charge-offs......  $  (12,270) $  (18,593) $  (13,610) $  (10,946) $  (13,407)
                                       ==========  ==========  ==========  ==========  ==========
          Net loan charge-offs to
            average loans............        0.13%       0.23%       0.17%       0.16%       0.30%
</TABLE>
     Net loan charge-offs decreased $6.3 million during fiscal 1998, due
primarily to lower single family charge-offs during fiscal 1998. During fiscal
1997, $5.0 million in charge-offs were recorded in connection with the sale of
$31.3 million of nonperforming loans. Net charge-offs for the consumer loan
portfolio increased during fiscal 1998, primarily due to the fiscal 1998 sale of
the consumer line of credit portfolio. This portfolio totalled $37.6 million and
charge-offs of $4.9 million were recognized at the time of the sale. The Company
had historically experienced high rates of charge-offs related to this product,
which are included in prior period numbers. The ratio of net loan charge-offs to
average total loans decreased from 0.23% for fiscal 1997 to 0.13% for fiscal
1998 due to lower charge-offs combined with a higher average loan balance.
Adjusting for the loan sales in fiscal 1998 and 1997 discussed above, the ratio
of net loan charge-offs to average total loans would have been 0.08% for fiscal
1998 and 0.17% for fiscal 1997.

     Net loan charge-offs increased 37% during fiscal 1997. This increase was
the result of the fiscal 1997 sale of $31.3 nonperforming single family loans
with related charge-offs of $5.0 million. The ratio for net charge-offs as a
percentage of average single family loans includes the increased charge-offs and
was 0.18% for fiscal 1997 versus 0.12% for fiscal 1996. Adjusting for the loan
sale mentioned above, the single family loan charge-off ratio would have been
0.11% and the total charge-off ratio would have been 0.17% for fiscal 1997.

     Net loan charge-offs increased to $13.6 million for fiscal 1996 from $10.9
million for fiscal 1995. Net charge-offs on the single family portfolio
increased to $7.7 million for fiscal 1996, from $4.8 million for fiscal 1995.
This resulted in net charge-offs as a percentage of single family loans on
average of 0.12% and 0.08% for fiscal 1996 and 1995. Net single family REO gains
of $17.6 million exceeded net single family charge-offs of $16.4 million for the
four years ended September 30, 1996. REO gains historically have been
significant because of discounts attributable to the original loan purchases.
Net charge-offs on the consumer loan portfolio increased to $5.9 million for
fiscal 1996 from $2.8 million for fiscal 1995, because of the unsecured consumer
line of credit portfolio.

     Net loan charge-offs decreased to $10.9 million for fiscal 1995, compared
to $13.4 million for fiscal 1994. Net charge-offs on the commercial portfolio
decreased to $3.4 million for fiscal 1995, compared to $10.4 million for fiscal
1994. Commercial charge-offs in fiscal 1995 and 1994 resulted primarily from
charge-offs related to a single commercial real estate loan, which was
ultimately sold. Excluding commercial real estate loan charge-offs,

                                       47
<PAGE>
net charge-offs to average loans outstanding would have been $7.5 million and
$3.3 million, or 0.11% and 0.07%, for fiscal 1995, compared to fiscal 1994. Net
charge-offs on the single family portfolio increased to $4.8 million for fiscal
1995, compared to $1.7 million for fiscal 1994. This resulted in net charge-offs
as a percentage of single family mortgage loans on average of 0.08% and 0.04%
for fiscal 1995, compared to fiscal 1994. Net charge-offs on the consumer loan
portfolio increased to $2.8 million for fiscal 1995, compared to $1.3 million
for fiscal 1994. This increase primarily relates to the unsecured consumer line
of credit portfolio.

CAPITAL RESOURCES AND LIQUIDITY

     Liquidity refers to the ability or the financial flexibility to manage
future cash flows to meet the needs of depositors and borrowers and fund
operations on a timely and cost-effective basis. The Bank is required by the OTS
to maintain a liquidity ratio of 4.00%. The Bank's average daily liquidity ratio
for September 1998 was 5.54%.

     The primary sources of funds consist of deposits, advances from the FHLB,
reverse repurchase agreements, principal repayments on loans and MBS, and
proceeds from the issuance of debt and stock. Liquidity may also be provided
from other sources including investments in short-term, high credit quality
instruments. At September 30, 1998, these instruments generally included
repurchase agreements, federal funds sold, and MBS and securities available for
sale. These instruments totalled $1.1 billion, $1.5 billion, and $1.8 billion at
September 30, 1998, 1997, and 1996. Funding resources are principally used to
meet ongoing commitments to fund deposit withdrawals, repay borrowings, fund
existing and continuing loan commitments, and maintain liquidity. Management
believes that the Bank has adequate resources to fund all of its commitments.

     The Parent Company's and Holdings' ability to pay dividends on their common
stock and to meet their other cash obligations is dependent on the receipt of
dividends from the Bank. The declaration of dividends by the Bank on all classes
of its capital stock is subject to the discretion of the Board of Directors of
the Bank, the terms of the Bank Preferred Stock, and applicable regulatory
requirements.

     Total aggregate annual dividend requirements on the preferred stock of the
Bank are $18.25 million. While the preferred stock of the Bank is noncumulative,
common stock dividends may not be paid by the Bank if full dividends on the
preferred stock of the Bank have not been paid for the four most recent
quarters. While it is the present intention of the Board of Directors of the
Bank to declare dividends in an amount sufficient to provide the cash flow
necessary to meet debt service obligations and to pay dividends to the holders
of the Company's common stock, subject to applicable regulatory restrictions, no
assurance can be given that circumstances that would limit or preclude the
declaration of such dividends will not exist in the future. At September 30,
1998, the Bank had $235.8 million of available capacity for the payment of
dividends on its capital stock without prior approval of the OTS. See
"Regulation -- Capital Distributions" and Notes 14 and 15 to the Consolidated
Financial Statements.

     DEPOSITS

     Deposits have provided the Company with a source of relatively stable and
low cost funds. The Company's strategy is to increase transaction deposit
accounts, which are the core relationships that provide a stable source of
funding for the Company. As a complement to this strategy, the Company offers
traditional deposit products, such as savings accounts and CDs. See
"Business -- Deposits" and Note 7 to the Consolidated Financial Statements."
Average deposits were the primary source of funds for the recent growth in
assets and funded 47% of average total assets for fiscal 1998, 46% of average
total assets for fiscal 1997, and 45% for fiscal 1996. During fiscal 1998, the
Company purchased 21 branches with deposits totalling $1.5 billion. In September
1998, the Company signed an agreement to purchase a commercial bank with five
branches, having assets of $225 million and deposits of $203 million. Closing of
this transaction is expected early in 1999. The Company intends to continue to
pursue additional expansion opportunities, including acquisitions, while
maintaining adequate capitalization.

     BORROWINGS

     The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. Historically, borrowings were the primary source of funds

                                       48
<PAGE>
and accounted for 40% of the funding of average assets for fiscal 1998, 42% for
fiscal 1997, and 45% for fiscal 1996. Fixed and adjustable-rate advances are
obtained from the FHLB Dallas under a security and pledge agreement that
restricts the amount of borrowings to the greater of a percentage of (1) fully
disbursed single family loans, unless assets are physically pledged to the FHLB
Dallas, and (2) total assets. At September 30, 1998, these limitations were 75%
and 45%, respectively. The Company's ability to borrow on reverse repurchase
agreements is limited to the market value of collateral available to
collateralize reverse repurchase agreements. At September 30, 1998, the Company
had $926.9 million in such collateral and $623.6 million was collateralizing
reverse repurchase agreements. See Notes 8 and 9 to the Consolidated Financial
Statements.

     NOTES PAYABLE

     In May 1993, the Company issued $115 million of senior notes at an initial
rate of 8.05% due May 15, 1998 (the "Senior Notes") and repaid long-term debt
and a note payable to a related party. In May 1997, the Company issued $220
million of fixed-rate subordinated notes due 2007 with a stated rate of 8.875%
and an effective rate of 8.896%. A portion of the proceeds were used to retire
$114.5 million of the Company's Senior Notes. The remaining portion of the
Senior Notes matured and was repaid in May 1998. See Note 10 to the Consolidated
Financial Statements.

     COMMITMENTS

     At September 30, 1998, the Company had $2.4 billion of outstanding
commitments to extend credit. Because such commitments may expire without being
drawn upon, the commitments do not necessarily represent future cash
requirements. Scheduled maturities of CDs and borrowings (including advances
from the FHLB and reverse repurchase agreements) during the 12 months following
September 30, 1998, total $2.8 billion and $3.1 billion. At September 30, 1998,
the Company had $16.0 million in outstanding commitments to purchase loans.
Management believes that the Company has adequate resources to fund all of its
commitments. See Note 11 to the Consolidated Financial Statements.

     CAPITAL

     In August 1996, the Company filed a registration statement with the
Securities and Exchange Commission and 12,075,000 shares of the Class A common
stock of the Company were sold to the public. The Company sold 910,694 shares
and Selling Stockholders sold 11,164,306 shares. The net proceeds to the Company
from this offering of $14.0 million were contributed to the capital of the Bank
for general corporate purposes.

     In August 1996, the FDIC surrendered a portion of the Warrant for a cash
payment and exercised the remainder of the Warrant. The FDIC immediately
exchanged the shares of common stock of the Bank it received for 1,503,560
shares of common stock of the Company, which were sold in the offering discussed
above.

     During August 1998, the Company's Board of Directors authorized the
repurchase of up to $50 million of the Company's common stock. The purchases
will be made in the open market or in privately negotiated transactions at
prevailing prices. The timing and volume of purchases under the program will
depend on market conditions. As of September 30, 1998, the Company had
repurchased 14,200 shares under this new program.

     REGULATORY MATTERS

     The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations. The Bank's capital level at September 30, 1998, 1997,
and 1996 qualified it as "well-capitalized", the highest of five tiers under
applicable regulatory definitions.

                                         AT SEPTEMBER 30,
                                       --------------------
                                         1998       1997
                                       ---------  ---------
Tangible capital.....................       6.75%      7.72%
Core capital.........................       6.77       7.77
Tier 1 capital.......................       9.97      12.65
Total risk-based capital.............      10.48      13.18

                                       49
<PAGE>
     The Bank's capital ratios declined during fiscal 1998 due to increased
asset levels, a higher proportion of commercial loans, deposit acquisitions, and
the devaluation of the MSR portfolio for regulatory purposes. See
"Regulation -- Capital Requirements," and Note 14 to the Consolidated
Financial Statements.

CONTINGENCIES AND UNCERTAINTIES
     YEAR 2000

     GENERAL.  This section contains forward-looking statements that have been
prepared on the basis of the Company's best judgments and currently available
information. These forward-looking statements are inherently subject to
significant business, third-party, and regulatory uncertainties and other
contingencies, many of which are beyond the control of the Company. In addition,
these forward-looking statements are based upon the Company's current internal
assessments and remediation plans, incorporating certain representations of
third-party servicers, and are subject to change. Accordingly, there can be no
assurance that the Company's results of operations will not be adversely
affected by difficulties or delays in the Company's or third parties' Year 2000
readiness efforts. See "Risks" below for a discussion of factors that may
cause such forward-looking statements to differ from actual results.

     The Year 2000 problem involves the risk that computer programs and computer
systems may not be able to perform without interruption into the Year 2000. If
computer systems do not correctly recognize the date change from December 31,
1999 to January 1, 2000, computer applications that rely on the date field could
fail or create erroneous results. Such erroneous results could affect interest
payments or due dates and could cause the temporary inability to process
transactions and to engage in ordinary business activities. The failure of the
Company, its suppliers, and its borrowers to address the Year 2000 problem could
have a material adverse effect on the Company's financial condition, results of
operations, or liquidity.

     STATE OF READINESS.  Bank United Corp. has implemented a company-wide
program to renovate, test, and document the readiness ("Year 2000 readiness")
of its electronic systems, programs, processes ("Computer Systems"), and
facilities to properly recognize dates to and through the year 2000 (the "Year
2000 Project"). While the Company is in various stages of modification and
testing of individual Year 2000 Project components, the Year 2000 Project is
proceeding on schedule.

     The Company has assigned its Executive Vice President and Chief Information
Officer to oversee the Year 2000 Project, set up a Year 2000 Project Office,
charged a senior management team representing all significant operational areas
of the Company to act as the Year 2000 Project Team, and established Year 2000
Credit and Legal/Compliance Committees. The Company has dedicated a substantial
amount of management and staff time on the Year 2000 Project. Regular progress
reports have been and will continue to be made to the Company's Board of
Directors. The Board's Audit Committee reviews Year 2000 Project progress on
a regular basis.

     The Company has divided its Year 2000 Project into the following general
phases, consistent with guidance issued by the Federal Financial Institutions
Examinations Council (the "FFIEC"): (1) inventory and assessment; (2)
renovation, which includes repair or replacement; (3) validation, which includes
testing of Computer Systems and the Company's connections with other computer
systems; (4) due diligence of third-party servicers; and (5) development of
contingency plans. The Year 2000 Project is divided into four categories:
mainframe systems, non-mainframe systems, third-party servicers, and facilities.

     The inventory and assessment phases are complete, and each Computer System,
facility, and third party service that has been identified has been assigned a
priority rating corresponding to its significance. The rating has allowed the
Company to direct its attention to those Computer Systems, third-party
servicers, and facilities that it deems more critical to its ongoing business
and the maintenance of good customer relationships.

     The Company is currently in the process of repairing or replacing and
testing the most significant internal components of its Computer Systems and
facilities, and it expects to be substantially complete with this phase by
December 31, 1998. The Company expects to complete testing of third party
servicers Computer Systems by March 31, 1999.

     COSTS TO ADDRESS YEAR 2000 ISSUES.  While the Company does not believe that
the process of making its Computer Systems Year 2000 ready will result in an
adverse material impact on its operations or liquidity, a

                                       50
<PAGE>
substantial amount of management and staff time has been and will continue to be
devoted to the Year 2000 Project. The Company's total Year 2000 project cost
includes estimated costs and time associated with managing the impact of the
Year 2000 issue and the costs of direct internal and external professional
labor. Direct Year 2000 costs have been and will continue to be funded through
operating cash flows and are expensed as incurred. The Company spent a combined
total of $500,000 during fiscal years 1996 and 1997 and approximately $3.0
million during fiscal year 1998 on its Year 2000 Project. The Company currently
expects to spend an additional $2.3 million to complete its Year 2000 Project.
The Company has not accelerated the replacement of any Computer Systems because
of the Year 2000 Project. To date, Year 2000 costs have been within the budget
and have had no unforecasted impact on earnings. The Company did not materially
increase the number of its employees, or incur material professional fees or
costs associated with its Computer Systems to implement the Year 2000 Project.
Instead, certain of the Company's personnel resources were redeployed from other
developmental projects. Upon completion of the Year 2000 project, these
personnel resources will resume working on other developmental projects. For
this reason, a substantial portion of the costs identified as related to the
Year 2000 Project will continue.

     RISKS OF THIRD PARTY YEAR 2000 ISSUES.  The Company continues to assess its
risk from other environmental factors over which it has little direct control,
such as electrical power supply, and voice and data transmission. Because of the
nature of these external factors, however, the Company is not actively engaged
in any repair, replacement, or testing efforts for these services, except for
sharing date format and data transmission protocols. Based on its current
assessments and remediation plans, which are based in part on certain
representations of third-party servicers, the Company does not expect that it
will experience a significant disruption of its operations as a result of the
change to the new millennium. Although the Company has no reason to conclude
that a failure will occur, the most reasonably likely worst-case Year 2000
scenario would entail a disruption or failure of the Company's power suppliers'
or voice and data transmission suppliers' capability to provide power or data
transmission services to a Computer System, a third-party servicer, or a
facility. If such a failure were to occur, the Company would implement a
contingency plan. While it is impossible to quantify the impact of such a
scenario, the most reasonably likely worst-case scenario would entail a
diminishment of service levels, some customer inconvenience, and additional, as
yet undetermined, costs associated with the implementation of the contingency
plan.

     CONTINGENCY PLANS.  For the Computer Systems and facilities that it has
determined to be most critical, the Company expects to complete development,
test, and adopt business contingency plans by June 30, 1999. These plans will
conform to recently issued guidance from the FFIEC on business contingency
planning for Year 2000 readiness. Contingency plans will include, among other
actions, manual workarounds and identification of resource requirements and
alternative solutions for resuming critical business processes in the event of a
year 2000 related failure. While the Company will have contingency plans in
place to address a temporary disruption in these services, there can be no
assurance that any disruption or failure will be only temporary, that the
Company's contingency plans will function as anticipated, or that the results of
operations, financial condition, or liquidity of the Company will not be
adversely affected in the event of a prolonged disruption or failure.

     Additionally, there can be no assurance that the FFIEC or other federal
regulators will not issue new regulatory requirements that require additional
work by the Company and, if issued, that new regulatory requirements will not
increase the cost or delay the completion of Bank United Corp.'s Year 2000
Project.

RECENT ACCOUNTING STANDARDS

     A discussion of recently issued accounting pronouncements and their impact
on the Consolidated Financial Statements is provided in Note 1 to the
Consolidated Financial Statements.

FORWARD-LOOKING INFORMATION

     Statements and financial discussion and analysis by management contained
throughout this Annual Report on Form 10-K that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve a number

                                       51
<PAGE>
of risks and uncertainties. The important factors that could cause actual
results to differ materially from the forward-looking statements include,
without limitation:

  INTEREST RATES AND ECONOMY

   o   changes in interest rates and economic conditions;

   o   changes in the levels of loan prepayments and the resulting effects on
       the value of the loan and servicing portfolios and the related hedging
       instruments;

   o   changes in local economic and business conditions adversely affecting the
       Company's borrowers and their ability to repay their loans according to
       their terms or impacting the value of the related collateral;

   o   changes in local economic and business conditions adversely affecting the
       Company's customers other than borrowers and their ability to transact
       profitable business with the Company;

  COMPETITION AND PRODUCT AVAILABILITY

   o   increased competition for deposits and loans adversely affecting rates
       and terms;

   o   changes in availability of loans originated by other financial
       institutions or the Company's ability to purchase such loans on favorable
       terms;

   o   changes in availability of single family servicing rights in the
       marketplace and the Company's ability to purchase such assets on
       favorable terms;

   o   the Company's ability to make acquisitions of other depository
       institutions, their assets or their liabilities on terms favorable to the
       Company, and the Company's successful integration of any such
       acquisitions;

  CHANGE IN COMPANY'S ASSET MIX

   o   increased credit risk in the Company's assets and increased operating
       risk caused by an increase in commercial and consumer loans and a
       decrease in single family mortgage loans;

  LIQUIDITY AND CAPITAL

   o   changes in availability of funds increasing costs or reducing liquidity;

   o   changes in the ability of the Company to pay dividends on its common
       stock;

   o   increased asset levels and changes in the composition of assets and the
       resulting impact on the Bank's capital levels and regulatory capital
       ratios;

  SYSTEMS

      o   the Company's ability to acquire, operate, and maintain cost effective
          and efficient systems;

      o   the Company's ability to complete its Year 2000 Project on time.

  PERSONNEL

   o   the loss of senior management or operating personnel and the potential
       inability to hire qualified personnel at reasonable compensation levels;

  REGULATORY, COMPLIANCE, AND LEGAL

   o   changes in applicable statutes and government regulations or their
       interpretations;

   o   claims of noncompliance by the Company with statutory and regulatory
       requirements;

   o   claims with respect to representations and warranties made by the Company
       to purchasers and insurers of mortgage loans and to purchasers of MSRs;

   o   changes in the status of litigation to which the Company is a party.

     For further information regarding these factors, see "Risk Factors" in
the prospectus dated April 29, 1997, relating to the public offering of the
Company's subordinated notes due 2007 filed with the SEC (File No. 333-19861),
and in the prospectus dated January 27, 1997, relating to the registration of
10,208,610 shares of the Company's Class A common stock, filed with the SEC
(File No. 333-19237).

                                       52
<PAGE>
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     For information regarding the market risk of the Company's financial
instruments, see "Business -- Market Risk Analysis". The Company's principal
market risk exposure is to interest rates.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See the index included on page 60 and the Consolidated Financial Statements
which begin on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information on directors and executive officers of the Company contained
under the caption "Election of Directors" in the Company's definitive Proxy
Statement relating to the 1998 Annual Meeting of Shareholders, to be filed not
later than 120 days after the close of the Company's fiscal year, is
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     Information concerning executive compensation contained under the caption
"Executive Compensation" in the Company's definitive Proxy Statement relating
to the 1998 Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information on beneficial ownership of the Company's voting securities by
each director and all officers and directors as a group, and by any person known
to beneficially own more than 5% of voting security of the Company contained
under the caption "Security Ownership of Certain Beneficial Owners and
Management" in the Company's definitive Proxy Statement relating to the 1998
Annual Meeting of Shareholders, to be filed not later than 120 days after the
close of the Company's fiscal year, is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information on certain relationships and related transactions contained
under the caption "Certain Relationships and Related Transactions" of the
Company's definitive Proxy Statement relating to the 1998 Annual Meeting of
Shareholders, to be filed not later than 120 days after the close of the
Company's fiscal year, is incorporated herein by reference.

                                       53

<PAGE>
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

EXHIBITS

     Exhibits followed by a parenthetical reference are incorporated by
     reference herein from the document described in such parenthetical
     reference.
<TABLE>
<CAPTION>
      EXHIBIT NO.                                                DESCRIPTION
------------------------  ------------------------------------------------------------------------------------------
<S>                       <C>
           2.1       --   Form of Letter Agreement, by and among the general and limited partners of Hyperion
                          Partners, L.P., dated as of June 17, 1996, relating to certain transactions consumated
                          prior to the Offering. (Incorporated by reference to Exhibit 2.1 to Form S-1, Registration
                          No. 333-06229)
           2.2       --   Merger Agreement, dated as of June 17, 1996, by and between the Company and Hyperion
                          Holdings related to the Merger. (Incorporated by reference to Exhibit 2.2 to Form S-1,
                          Registration No. 333-06229)
           3.1       --   Form of Restated Certificate of Incorporation of the Registrant, as amended. (Incorporat-
                          ed by reference to Exhibit 3.1 to Form S-1, Registration No. 333-06229)
           3.2       --   Form of By-Laws of the Registrant. (Incorporated by reference to Exhibit 3.2 to Form S-1,
                          Registration No. 333-06229)
           4.5       --   Form of Class A common stock Certificate. (Incorporated by reference to Exhibit 4.5 to
                          Form S-1, Registration No. 333-06229)
           4.6       --   Indenture, dated as of May 7, 1997, between the Registrant and The Bank of New York, as
                          Trustee, relating to the Registrant's 8.875% Subordinated Notes due May 1, 2007
                          (Incorporated by reference to Exhibit 4.2 to Form S-1, Registration No. 333-19861)
           4.7       --   Form of 8.875% Subordinated Notes due May 1, 2007 (included in the Indenture filed as
                          Exhibit 4.6 hereto) (Incorporated by reference to Exhibit 4.3 to Form S-1, Registration
                          No. 333-19861)
          10.1       --   Assistance Agreement, dated December 30, 1988, among the Bank, the Registrant, Hyperion
                          Holdings, Hyperion Partners, and the FSLIC. (Incorporated by reference to Exhibit 10.1 to
                          Form S-1, Registration No. 333-06229)
          10.1a      --   Settlement and Termination Agreement, dated as of December 23, 1993, among the Bank, the
                          Registrant, Hyperion Holdings, Hyperion Partners and the FDIC. (Incorporated by reference
                          to Exhibit 10.1a to Form S-1, Registration No. 333-06229)
          10.1b      --   Tax Benefits Agreement, dated December 28, 1993, among the Bank, the Registrant, Hyperion
                          Holdings, Hyperion Partners and the FDIC. (Incorporated by reference to Exhibit 10.1b to
                          Form S-1, Registration No. 333-06229)
          10.2       --   Acquisition Agreement, dated December 30, 1988, between the Bank and the FSLIC.
                          (Incorporated by reference to Exhibit 10.2 to Form S-1, Registration No. 333-06229)
          10.3       --   Warrant Agreement, dated December 30, 1988, between the Bank and the FSLIC. (Incorporated
                          by reference to Exhibit 10.3 to Form S-1, Registration No. 333-06229)
          10.3a      --   Amended and Restated Warrant Agreement dated December 28, 1993, between the Bank and the
                          FDIC. (Incorporated by reference to Exhibit 10.3a to Form S-1, Registration No. 333-06229)
          10.4       --   Regulatory Capital Maintenance Agreement, dated December 30, 1988, among the Bank, the
                          Registrant, Hyperion Holdings, Hyperion Partners, and the FSLIC (terminated). (Exhibit
                          10.4 to Form S-1 filed on June 18, 1996)
          10.5       --   Federal Stock Charter of the Bank and First Amendment to charter approved on August 26,
                          1992. (Incorporated by reference to Exhibit 10.5 to Form S-1, Registration No. 333-06229)
          10.6       --   Amended and Restated Federal Stock Charter of the Bank and Second Amendment approved on
                          October 30, 1992. (Incorporated by reference to Exhibit 10.6 to Form S-1, Registration No.
                          333-06229)
          10.6a      --   Third Amendment to the Federal Stock Charter of the Bank approved on April 23, 1996.
                          (Incorporated by reference to Exhibit 10.6a to Form S-1, Registration No. 333-06229)
</TABLE>
                                       54
<PAGE>
<TABLE>
<CAPTION>

      EXHIBIT NO.                                                DESCRIPTION
------------------------  ------------------------------------------------------------------------------------------
<S>                       <C>
          10.6b      --   Amended and Restated Bylaws of the Bank. (Incorporated by reference to Exhibit 10.6b to
                          Form S-1, Registration No. 333-06229)
          10.7       --   Specimen Preferred Stock, Series A, certificate, $25.00 per share stated value of the
                          Bank. (Incorporated by reference to Exhibit 10.7 to Form S-1, Registration No. 333-06229)
          10.7a      --   Certificate of Designation of Noncumulative Preferred Stock, Series A, of the Bank.
                          (Incorporated by reference to Exhibit 10.7a to Form S-1, Registration No. 333-06229)
          10.7b      --   Specimen Preferred Stock, Series B, certificate, $25.00 per share stated value, of the
                          Bank. (Incorporated by reference to Exhibit 10.7b to Form S-1, Registration No. 333-06229)
          10.7c      --   Certificate of Designation of Noncumulative Preferred Stock, Series B, of the Bank.
                          (Incorporated by reference to Exhibit 10.7c to Form S-1, Registration No. 333-06229)
          10.8       --   Data Processing Agreement, dated January 1, 1992, between the Bank and Systematics
                          Financial Services, Inc., and First Amendment (dated October 28, 1992) and Second
                          Amendment (dated September 1, 1992). (Incorporated by reference to Exhibit 10.8 to Form
                          S-1, Registration No. 333-06229)
          10.8a      --   Third Amendment, dated December 17, 1993, to the Data Processing Agreement, dated January
                          1, 1992, between the Bank and Systematics Financial Services, Inc. (Incorporated by
                          reference to Exhibit 10.8a to Form S-1, Registration No. 333-06229)
          10.8b      --   Fourth Amendment, dated March 28, 1994, to the Data Processing Agreement, dated January 1,
                          1992, between the Bank and Systematics Financial Services, Inc. (Incorporated by reference
                          to Exhibit 10.8b to Form S-1, Registration No. 333-06229)
          10.8c      --   Fifth Amendment, dated April 1, 1994, to the Data Processing Agreement, dated January 1,
                          1992, between the Bank and Systematics Financial Services, Inc. (Incorporated by reference
                          to Exhibit 10.8c to Form S-1, Registration No. 333-06229)
          10.8d      --   Sixth Amendment, dated February 26, 1996, to the Data Processing Agreement, dated January
                          1, 1992, between the Bank and Systematics Financial Services, Inc. (Incorporated by
                          reference to Exhibit 10.8d to Form S-1, Registration No. 333-06229)
          10.9       --   Management and Consulting Services Agreement, dated January 1, 1992, between the Bank and
                          Systematics Financial Services, Inc., and First Amendment (dated March 18, 1992) and
                          Second Amendment (dated September 1, 1992). (Incorporated by reference to Exhibit 10.9 to
                          Form S-1, Registration No. 333-06229)
          10.10      --   Lease Agreement, dated April 1, 1989, between the Bank and Homart Development Co. (Leased
                          premises at 3200 Southwest Freeway) and First Amendment thereto dated January 31, 1990.
                          (Incorporated by reference to Exhibit 10.10 to Form S-1, Registration No. 333-06229)
          10.10a     --   Second Amendment, dated November 14, 1994, to Lease Agreement dated April 1, 1989, between
                          the Bank and Homart Development Co. (assigned to HD Delaware Properties, Inc.).
                          (Incorporated by reference to Exhibit 10.10a to Form S-1, Registration No. 333-06229)
          10.10b     --   Third Amendment, dated January 8, 1996, to Lease Agreement dated April 1, 1989, between
                          the Bank and Homart Development Co. (predecessor in interest of HMS Office, L.P.).
                          (Incorporated by reference to Exhibit 10.10b to Form S-1, Registration No. 333-06229)
          10.11      --   Lease Agreement, dated November 20, 1990, between the Bank and Greenway Plaza, LTD.
                          (Leased premises at 3800 Buffalo Speedway). (Incorporated by reference to Exhibit 10.11 to
                          Form S-1, Registration No. 333-06229)
          10.12      --   Employment Agreement, dated March 18, 1991, between the Bank and Barry C. Burkholder.
                          (Incorporated by reference to Exhibit 10.12 to Form S-1, Registration No. 333-06229)
          10.12a     --   Amendment, dated April 10, 1996, to the Employment Agreement between the Bank and Barry C.
                          Burkholder. (Incorporated by reference to Exhibit 10.12a to Form S-1, Registration No.
                          333-06229)
</TABLE>
                                       55
<PAGE>
<TABLE>
<CAPTION>
      EXHIBIT NO.                                                DESCRIPTION
------------------------  ------------------------------------------------------------------------------------------
<S>                       <C>
          10.13      --   Letter Agreement Related to Employment, dated April 4, 1990, between the Bank and Anthony
                          J. Nocella. (Incorporated by reference to Exhibit 10.13 to Form S-1, Registration No.
                          333-06229)
          10.15      --   Letter Agreement Related to Employment, dated April 6, 1990, between the Bank and Jonathon
                          K. Heffron. (Incorporated by reference to Exhibit 10.15 to Form S-1, Registration No.
                          333-06229)
          10.17      --   Management Incentive Plan, dated April 20, 1992. (Incorporated by reference to Exhibit
                          10.17 to Form S-1, Registration No. 333-06229)
          10.18      --   Letter Agreement, dated January 5, 1990, between Hyperion Partners and certain
                          shareholders of the Registrant with respect to the provision of managerial assistance to
                          the Registrant. (Incorporated by reference to Exhibit 10.18 to Form S-1, Registration No.
                          333-06229)
          10.22      --   Supplemental Executive Savings Plan of the Bank. (Incorporated by reference to Exhibit
                          10.22 to Form S-1, Registration No. 333-06229)
          10.23      --   Directors Supplemental Savings Plan of the Bank. (Incorporated by reference to Exhibit
                          10.23 to Form S-1, Registration No. 333-06229)
          10.24      --   Warrant Purchase and Exchange Agreement, dated July 23, 1996, by and among the Company,
                          the Bank and the FDIC. (Exhibit 10.24 to Form S-1 filed on July 25, 1996)
          10.25      --   Tax Sharing Agreement dated as of May 1, 1996, by and between the Company and the Bank.
                          (Incorporated by reference to Exhibit 10.25 to Form 10-K for the fiscal year ended
                          September 30, 1996)
          10.26      --   Form of the Company's 1996 Stock Incentive Plan. (Incorporated by reference to Exhibit
                          10.26 to Form S-1, Registration No. 333-06229)
          10.27      --   Form of the Company's Director Stock Plan. (Incorporated by reference to Exhibit 10.27 to
                          Form S-1, Registration No. 333-06229)
          10.28      --   Employment Agreement, dated August 1, 1996, between the Company and Barry C. Burkholder.
                          (Incorporated by reference to Exhibit 10.28 to Form 10-K for the fiscal year ended
                          September 30, 1996)
          10.29      --   Employment Agreement, dated August 1, 1996, between the Company and Anthony J. Nocella.
                          (Incorporated by reference to Exhibit 10.29 to Form 10-K for the fiscal year ended
                          September 30, 1996)
          10.30      --   Employment Agreement, dated August 1, 1996, between the Company and Jonathon K. Heffron.
                          (Incorporated by reference to Exhibit 10.30 to Form 10-K for the fiscal year ended
                          September 30, 1996)
          10.31      --   Employment Agreement, dated August 1, 1996, between the Company and Ronald D. Coben.
                          (Incorporated by reference to Exhibit 10.31 to Form 10-K for the fiscal year ended
                          September 30, 1996)
          10.32      --   Form of Nontransferable Stock Agreement. (Incorporated by reference to Exhibit 10.32 to
                          Form S-1, Registration No. 333-06229)
          10.33      --   Form of Stock Option Agreement. (Incorporated by reference to Exhibit 10.33 to Form S-1,
                          Registration No. 333-06229)
          10.34      --   Consulting Agreement. (Incorporated by reference to Exhibit 10.23 to Form 10-K for the
                          fiscal year ended September 30, 1996)
          10.35      --   Recovery Agreement. (Incorporated by reference to Exhibit 10.24 to Form 10-K for the
                          fiscal year ended September 30, 1996)
          10.36      --   Stock Purchase Agreement, dated January 15, 1993, between Hyperion Partners and Hyperion
                          Holdings. (Incorporated by reference to Exhibit 10.36 to Form S-1, Registration No.
                          333-06229)
          10.37      --   Asset Purchase and Sale Agreement, dated January 17, 1997, between the Bank and National
                          City Mortgage Co. (Incorporated by reference to Exhibit 10.38 to Form 10-Q for the quarter
                          ended December 31, 1996)
          10.38      --   Lease Agreement, dated November 21, 1997, between the Bank and Utah State Retirement Fund.
                          (Leased premises at 3200 Southwest Freeway). (Incorporated by reference to Exhibit 10.38
                          to Form 10-K for the fiscal year ended September 30, 1997)
</TABLE>
                                       56
<PAGE>
<TABLE>
<CAPTION>
      EXHIBIT NO.                                                DESCRIPTION
------------------------  ------------------------------------------------------------------------------------------
<S>                       <C>
         *10.39      --   First Amendment, dated June 30, 1998, to Lease Agreement dated November 21, 1997, between
                          the Bank and Utah State Retirement Fund. (Leased premises at 3200 Southwest Freeway.)
         *21         --   Subsidiaries of the Registrant.
         *23.1       --   Consent of Deloitte & Touche LLP, independent auditors.
         *24         --   Power of Attorney.
         *27         --   Financial Data Schedule.
</TABLE>
------------

* Filed herewith.

     CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

     See Index to the Consolidated Financial Statements on page 60. All
supplemental schedules are omitted as inapplicable or because the required
information is included in the Consolidated Financial Statements or Notes
thereto.

     REPORTS ON FORM 8-K

     The Company filed no reports on Form 8-K during the last quarter of fiscal
1998.

                                       57
<PAGE>
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECTION 13, OR 15(D) OF THE SECURITIES
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN HOUSTON, STATE OF
TEXAS, ON DECEMBER 18, 1998.

                                          BANK UNITED CORP.
                                          By: /s/ BARRY C. BURKHOLDER
                                                    PRESIDENT AND
                                               CHIEF EXECUTIVE OFFICER

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN
THE CAPACITIES AND ON THE DATES INDICATED BELOW.
<TABLE>
<CAPTION>
                      SIGNATURES                                      TITLE                        DATE
------------------------------------------------------  ---------------------------------   -------------------
<S>                                                     <C>                                 <C> 
(1) Principal Executive Officer:

                /s/BARRY C. BURKHOLDER                            President and              December 18, 1998
                 BARRY C. BURKHOLDER                         Chief Executive Officer

(2) Principal Financial and Accounting Officer:

                /s/ANTHONY J. NOCELLA                           Vice Chairman and            December 18, 1998
                  ANTHONY J. NOCELLA                         Chief Financial Officer

(3) Directors:

                          *                                   Chairman and Director          December 18, 1998
                   LEWIS S. RANIERI

                /s/BARRY C. BURKHOLDER                              Director                 December 18, 1998
                 BARRY C. BURKHOLDER

                          *                                         Director                 December 18, 1998
              LAWRENCE CHIMERINE, PH.D.

                          *                                         Director                 December 18, 1998
                   DAVID M. GOLUSH

                          *                                         Director                 December 18, 1998
                PAUL M. HORVITZ, PH.D.

                          *                                         Director                 December 18, 1998
                    ALAN E. MASTER

                /s/ANTHONY J. NOCELLA                               Director                 December 18, 1998
                  ANTHONY J. NOCELLA
</TABLE>
                                       58
<PAGE>
<TABLE>
<CAPTION>
                      SIGNATURES                                      TITLE                        DATE
------------------------------------------------------  ---------------------------------   -------------------
<S>                                                     <C>                                 <C> 
                          *                                         Director                 December 18, 1998
                 SALVATORE A. RANIERI

                          *                                         Director                 December 18, 1998
                    SCOTT A. SHAY

                          *                                         Director                 December 18, 1998
                  PATRICIA A. SLOAN

                          *                                         Director                 December 18, 1998
                  MICHAEL S. STEVENS

                          *                                         Director                 December 18, 1998
                KENDRICK R. WILSON III

              /s/JONATHON K. HEFFRON
                 JONATHON K. HEFFRON
                   ATTORNEY-IN-FACT
</TABLE>
------------

* Signed through Power of Attorney
  granted to Jonathon K. Heffron,
  Attorney-in-Fact.

                                       59
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                        PAGE
                                        ----

Independent Auditors' Report.........   F-1

Consolidated Statements of Financial
  Condition as of September 30, 1998
  and 1997...........................   F-2

Consolidated Statements of Operations
  for the Year Ended September 30,
  1998, 1997, and 1996...............   F-3

Consolidated Statements of
  Stockholders' Equity for the Year
  Ended September 30, 1998, 1997, and
  1996...............................   F-4

Consolidated Statements of Cash Flows
  for the Year Ended September 30,
  1998, 1997, and 1996...............   F-5

Notes to Consolidated Financial
  Statements.........................   F-7

                                       60

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

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

     We have audited the accompanying consolidated statements of financial
condition of Bank United Corp. and its subsidiaries (collectively known as the
"Company") as of September 30, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of
September 30, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1998 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Houston, Texas
October 21, 1998

                                      F-1
<PAGE>
                               BANK UNITED CORP.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                           AT SEPTEMBER 30,
                                                     ----------------------------
                                          NOTES          1998           1997
                                       -----------   -------------  -------------
<S>                                         <C>      <C>            <C>          
ASSETS
Cash and cash equivalents............       1        $     228,674  $     121,000
Securities purchased under agreements
  to resell and federal funds sold...       2              474,483        349,209
Securities and other investments.....     3, 4              91,350         77,809
Mortgage-backed securities                4, 9
     Held to maturity, at amortized
      cost (fair value of $438.7
      million in 1998 and $528.9
      million in 1997)...............                      443,886        543,361
     Available for sale, at fair
      value..........................                      488,172      1,026,344
Loans                                   5, 8, 11
     Held for investment (net of the
      allowance for credit losses of
      $47.0 million in 1998 and $39.2
      million in 1997)...............                    8,566,712      8,221,626
     Held for sale...................                    2,136,506        773,603
Federal Home Loan Bank stock.........                      242,883        205,011
Mortgage servicing rights............     6, 11            410,868        272,214
Deferred tax asset...................      13              113,581        120,936
Premises and equipment...............                       59,889         46,921
Intangible assets....................                       59,591         13,605
Real estate owned....................                       18,790         19,833
Other assets.........................                      329,607        175,600
                                                     -------------  -------------
TOTAL ASSETS.........................                $  13,664,992  $  11,967,072
                                                     =============  =============
LIABILITIES, MINORITY INTEREST, AND
  STOCKHOLDERS' EQUITY
LIABILITIES
Deposits.............................       7        $   6,320,476  $   5,247,668
Federal Home Loan Bank advances......   5, 8, 11         4,783,294      3,992,344
Securities sold under agreements to
  repurchase and federal funds
  purchased..........................     4, 9             811,742      1,308,600
Notes payable........................      10              219,720        220,199
Advances from borrowers for taxes and
  insurance..........................                      270,135        173,294
Other liabilities....................                      389,713        240,988
                                                     -------------  -------------
          Total liabilities..........                   12,795,080     11,183,093
                                                     -------------  -------------
MINORITY INTEREST
Preferred stock issued by
  consolidated subsidiary............      15              185,500        185,500
                                                     -------------  -------------
STOCKHOLDERS' EQUITY                     14, 15
Common stock.........................                          316            316
Paid-in capital......................                      129,343        129,286
Retained earnings....................                      556,708        462,551
Accumulated other comprehensive
  income -- unrealized gains (losses)
  on securities available for sale,
  net of tax.........................                       (1,454)         6,326
Treasury stock, at cost..............                         (501)      --
                                                     -------------  -------------
          Total stockholders'
            equity...................                      684,412        598,479
                                                     -------------  -------------
TOTAL LIABILITIES, MINORITY INTEREST,
  AND
  STOCKHOLDERS' EQUITY...............                $  13,664,992  $  11,967,072
                                                     =============  =============
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.

                                      F-2
<PAGE>
                               BANK UNITED CORP.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                 FOR THE YEAR ENDED SEPTEMBER 30,
                                                ----------------------------------
                                        NOTES      1998        1997        1996
                                       -------  ----------  ----------  ----------
<S>                                    <C>      <C>         <C>         <C>       
INTEREST INCOME
Short-term interest-earning assets...           $   37,962  $   36,240  $   39,302
Securities and other investments.....                9,093       5,371       3,984
Mortgage-backed securities...........               82,170     104,891     128,143
Loans................................              756,890     652,886     627,940
Federal Home Loan Bank stock.........               12,631      11,320      12,943
                                                ----------  ----------  ----------
          Total interest income......              898,746     810,708     812,312
                                                ----------  ----------  ----------
INTEREST EXPENSE
Deposits.............................              300,760     262,761     272,220
Federal Home Loan Bank advances......              236,252     212,558     247,093
Securities sold under agreements to
  repurchase and federal funds
  purchased..........................               56,082      57,335      55,112
Notes payable........................               19,571      13,410      10,353
                                                ----------  ----------  ----------
          Total interest expense.....              612,665     546,064     584,778
                                                ----------  ----------  ----------
          Net interest income........              286,081     264,644     227,534
PROVISION FOR CREDIT LOSSES..........     5         20,123      18,107      16,469
                                                ----------  ----------  ----------
          Net interest income after
            provision for credit
            losses...................              265,958     246,537     211,065
                                                ----------  ----------  ----------
NON-INTEREST INCOME
Net gains (losses)
     Sales of single family loans....               11,124      21,182      43,074
     Securities and mortgage-backed
       securities....................                2,761       2,841       4,002
     Other loans.....................                  651       1,128       3,189
     Sale of mortgage offices........    17         --           4,748      --
Loan servicing, net of related
  amortization.......................               35,975      32,381      30,383
Other................................               30,426      21,152      15,541
                                                ----------  ----------  ----------
          Total non-interest
            income...................               80,937      83,432      96,189
                                                ----------  ----------  ----------
NON-INTEREST EXPENSE
Compensation and benefits............    12         86,725      75,016      87,640
Occupancy............................               15,497      14,943      18,415
Data processing......................               16,591      13,712      16,196
Advertising and marketing............                8,299       7,147       8,025
Amortization of intangibles..........                5,864       4,118       6,585
SAIF deposit insurance premiums......    14          4,160       4,797      45,690
Furniture and equipment..............                3,686       4,074       6,121
Restructuring charges................    17         --          --          10,681
Other................................               47,720      48,329      40,065
                                                ----------  ----------  ----------
          Total non-interest
            expense..................              188,542     172,136     239,418
                                                ----------  ----------  ----------
          Income before income taxes,
            minority interest,
            and extraordinary loss...              158,353     157,833      67,836
INCOME TAX EXPENSE (BENEFIT).........    13         25,722      60,686     (75,765)
                                                ----------  ----------  ----------
          Income before minority
            interest and
            extraordinary loss.......              132,631      97,147     143,601
MINORITY INTEREST                        15
     Subsidiary preferred stock
       dividends.....................               18,253      18,253      18,253
     Payments in lieu of dividends...               --          --           6,413
                                                ----------  ----------  ----------
          Income before extraordinary
            loss.....................              114,378      78,894     118,935
EXTRAORDINARY LOSS -- early
  extinguishment of debt.............    10         --           2,323      --
                                                ----------  ----------  ----------
          NET INCOME.................           $  114,378  $   76,571  $  118,935
                                                ==========  ==========  ==========
EARNINGS PER COMMON SHARE                15
     Basic...........................           $     3.62  $     2.42  $     4.06
     Diluted.........................                 3.54        2.40        3.87
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>
                               BANK UNITED CORP.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                     ---------------------------------------------------------
                                          CLASS A             CLASS B             CLASS C
                                     -----------------   -----------------   -----------------    PAID-IN   RETAINED
                                      SHARES    AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT    CAPITAL   EARNINGS
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
<S>                                  <C>         <C>     <C>         <C>     <C>         <C>     <C>        <C>      
BALANCE AT SEPTEMBER 30, 1995......  23,828,400  $239       --       $--     5,034,600   $ 50    $ 117,722  $ 384,739
    Net income.....................     --       --         --       --         --       --         --        118,935
    Change in unrealized gains
      (losses), net of tax expense
      of $2.7 million..............     --       --         --       --         --       --         --         --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
        Total comprehensive
          income...................     --       --         --       --         --       --         --        118,935
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
    Dividends declared: common
      stock ($3.46 per share)......     --       --         --       --         --       --         --       (100,000)
    Restricted stock issued (Note
      12)..........................     --       --        318,342      3       --       --          3,706     --
    Conversion of warrant (Note
      15)..........................     --       --      1,503,560     15       --       --         (6,099)    --
    Conversion of common stock.....  2,996,840     29    2,037,760     21    (5,034,600)   (50)     --         --
    Common stock offering (Note
      15)..........................    910,694      9       --       --         --       --         13,957     --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
BALANCE AT SEPTEMBER 30, 1996......  27,735,934   277    3,859,662     39       --       --        129,286    403,674
    Net income.....................     --       --         --       --         --       --         --         76,571
    Change in unrealized gains
      (losses), net of tax expense
      of $5.1 million..............     --       --         --       --         --       --         --         --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
        Total comprehensive
          income...................     --       --         --       --         --       --         --         76,571
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
    Dividends declared: common
      stock ($0.56 per share)......     --       --         --       --         --       --         --        (17,694)
    Conversion of common stock.....    618,342      7     (618,342)    (7)      --       --         --         --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
BALANCE AT SEPTEMBER 30, 1997......  28,354,276   284    3,241,320     32       --       --        129,286    462,551
    Net income.....................     --       --         --       --         --       --         --        114,378
    Change in unrealized gains
      (losses), net of tax benefit
      of $4.7 million..............     --       --         --       --         --       --         --         --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
      Total comprehensive income...     --       --         --       --         --       --         --        114,378
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
    Dividends declared: common
      stock ($0.64 per share)......     --       --         --       --         --       --         --        (20,221)
    Stock options exercised........      1,500   --         --       --         --       --             57     --
    Stock repurchased..............     --       --         --       --         --       --         --         --
                                     ---------  ------   ---------  ------   ---------  ------   ---------  ---------
BALANCE AT SEPTEMBER 30, 1998......  28,355,776  $284    3,241,320   $ 32       --       --      $ 129,343  $ 556,708
                                     =========  ======   =========  ======   =========  ======   =========  =========
<CAPTION>
                                      ACCUMULATED
                                         OTHER
                                     COMPREHENSIVE
                                       INCOME --
                                      UNREALIZED       TREASURY STOCK          TOTAL
                                         GAINS       -------------------   STOCKHOLDERS'
                                       (LOSSES)       SHARES     AMOUNT       EQUITY
                                     -------------   ---------   -------   -------------
<S>                                    <C>           <C>         <C>         <C>      
BALANCE AT SEPTEMBER 30, 1995......    $  (6,647)       --       $ --        $ 496,103
    Net income.....................      --             --         --          118,935
    Change in unrealized gains
      (losses), net of tax expense
      of $2.7 million..............        4,414        --         --            4,414
                                     -------------   ---------   -------   -------------
        Total comprehensive
          income...................        4,414        --         --          123,349
                                     -------------   ---------   -------   -------------
    Dividends declared: common
      stock ($3.46 per share)......      --             --         --         (100,000)
    Restricted stock issued (Note
      12)..........................      --             --         --            3,709
    Conversion of warrant (Note
      15)..........................      --             --         --           (6,084)
    Conversion of common stock.....      --             --         --          --
    Common stock offering (Note
      15)..........................      --             --         --           13,966
                                     -------------   ---------   -------   -------------
BALANCE AT SEPTEMBER 30, 1996......       (2,233)       --         --          531,043
    Net income.....................      --             --         --           76,571
    Change in unrealized gains
      (losses), net of tax expense
      of $5.1 million..............        8,559                                 8,559
                                     -------------   ---------   -------   -------------
        Total comprehensive
          income...................        8,559        --         --           85,130
                                     -------------   ---------   -------   -------------
    Dividends declared: common
      stock ($0.56 per share)......      --             --         --          (17,694)
    Conversion of common stock.....      --             --         --          --
                                     -------------   ---------   -------   -------------
BALANCE AT SEPTEMBER 30, 1997......        6,326        --         --          598,479
    Net income.....................      --             --         --          114,378
    Change in unrealized gains
      (losses), net of tax benefit
      of $4.7 million..............       (7,780)       --         --           (7,780)
                                     -------------   ---------   -------   -------------
      Total comprehensive income...       (7,780)       --         --          106,598
                                     -------------   ---------   -------   -------------
    Dividends declared: common
      stock ($0.64 per share)......      --             --         --          (20,221)
    Stock options exercised........      --             --         --               57
    Stock repurchased..............      --            (14,200)    (501 )         (501)
                                     -------------   ---------   -------   -------------
BALANCE AT SEPTEMBER 30, 1998......    $  (1,454)      (14,200)  $ (501 )    $ 684,412
                                     =============   =========   =======   =============
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>
                               BANK UNITED CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                               FOR THE YEAR ENDED SEPTEMBER 30,
                                          -------------------------------------------
                                              1998           1997           1996
                                          -------------  -------------  -------------
<S>                                       <C>            <C>            <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..............................  $     114,378  $      76,571  $     118,935
Adjustments to reconcile net income to
  net cash (used) provided by operating
  activities:
     Provision for credit losses and
       mortgage servicing rights
       valuation allowance..............         24,890         18,107         16,469
     Deferred tax expense (benefit).....         12,023         42,251        (93,402)
     Net gains on sales of assets.......        (19,753)       (30,631)       (53,491)
     Depreciation and amortization......         80,127         41,303          8,338
     Federal Home Loan Bank stock
       dividends........................        (12,631)       (11,320)       (12,943)
     Fundings and purchases of loans
       held for sale....................     (3,768,039)    (1,995,816)    (3,015,616)
     Proceeds from the sale of loans
       held for sale....................      1,903,991      1,198,295      3,321,599
     Change in loans held for sale......        670,197         32,638         17,991
     Change in interest receivable......         (4,748)        (9,052)        25,957
     Change in other assets.............       (139,506)       (64,632)        18,866
     Change in other liabilities........        130,921        (22,284)        (3,274)
     Management restricted stock
       award............................       --             --                3,709
                                          -------------  -------------  -------------
          Net cash (used) provided by
            operating activities........     (1,008,150)      (724,570)       353,138
                                          -------------  -------------  -------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase price of acquisitions.....        (51,850)      --             --
     Net change in securities purchased
       under agreements to resell and
       federal funds sold...............       (125,274)       325,040       (203,197)
     Fundings of loans held for
       investment.......................     (3,854,576)    (2,283,096)    (1,746,604)
     Proceeds from principal repayments
       and maturities of
          Loans held for investment.....      4,162,942      2,517,782      2,298,915
          Securities held to maturity...       --             --                7,715
          Securities available for
            sale........................        345,215        134,165            395
          Mortgage-backed securities
            held to maturity............         98,488         80,657        178,926
          Mortgage-backed securities
            available for sale..........        465,195        263,659        272,059
     Proceeds from the sale of
          Securities available for
            sale........................        497,053        337,848         96,815
          Mortgage-backed securities
            available for sale..........         93,131          6,965        295,702
          Mortgage servicing rights.....       --                7,982         33,187
          Federal Home Loan Bank
            stock.......................         64,325         18,160         59,252
          Real estate owned acquired
            through foreclosure.........         37,031         59,010         42,741
     Purchases of
          Loans held for investment.....     (1,158,270)    (1,086,249)      (148,510)
          Securities held to maturity...         (2,213)      --               (6,327)
          Securities available for
            sale........................       (355,112)      (131,296)       (16,029)
          Mortgage-backed securities
            held to maturity............       --               (2,134)        (3,841)
          Mortgage-backed securities
            available for sale..........        (21,084)      (246,363)      --
          Mortgage servicing rights.....       (177,201)      (166,494)       (23,535)
          Federal Home Loan Bank
            stock.......................        (89,565)       (32,208)      --
     Other changes in loans held for
       investment.......................       (234,899)      (237,312)       (39,068)
     Other changes in mortgage servicing
       rights...........................          6,093        (13,790)       (38,607)
     Net purchases of premises and
       equipment........................        (26,181)       (14,419)        (9,394)
                                          -------------  -------------  -------------
          Net cash (used) provided by
            investing activities........       (326,752)      (462,093)     1,050,595
                                          -------------  -------------  -------------
</TABLE>
                                                   (CONTINUED ON FOLLOWING PAGE)

                                      F-5
<PAGE>
                               BANK UNITED CORP.
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED SEPTEMBER 30,
                                        -----------------------------------------
                                           1998           1997           1996
                                        -----------    -----------    -----------
<S>                                     <C>            <C>            <C>         
CASH FLOWS FROM FINANCING ACTIVITIES
     Net change in deposits..........   $  (436,880)   $    99,723    $   (34,378)
     Proceeds from deposits
       purchased.....................     1,509,688        --             --
     Proceeds from Federal Home Loan
       Bank advances.................     3,130,583      3,296,067      1,498,700
     Repayment of Federal Home Loan
       Bank advances.................    (2,339,633)    (2,794,109)    (2,391,764)
     Net change in securities sold
       under agreements to repurchase
       and federal funds purchased...      (496,858)       476,314       (340,247)
     Net change in advances from
       borrowers for taxes and
       insurance.....................        96,841         26,660        (37,334)
     Proceeds from issuance of common
       stock.........................       --             --              13,966
     Cost of converting Bank common
       stock warrant.................       --             --              (6,084)
     Payment of common stock
       dividends.....................       (20,221)       (17,694)      (100,000)
     Stock repurchased...............          (501)       --             --
     Stock options exercised.........            57        --             --
     Repayment of Senior Notes.......          (500)      (114,500)       --
     Proceeds from issuance of
       Subordinated Notes............       --             219,691        --
     Payment of issuance costs of
       Subordinated Notes............       --              (4,012)       --
                                        -----------    -----------    -----------
          Net cash provided (used) by
            financing activities.....     1,442,576      1,188,140     (1,397,141)
                                        -----------    -----------    -----------
NET INCREASE IN CASH AND CASH
  EQUIVALENTS........................       107,674          1,477          6,592
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR..................       121,000        119,523        112,931
                                        -----------    -----------    -----------
CASH AND CASH EQUIVALENTS AT END OF
  YEAR...............................   $   228,674    $   121,000    $   119,523
                                        ===========    ===========    ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION
     Cash paid for interest..........   $   612,297    $   537,216    $   606,911
     Cash paid for income taxes......        20,061          9,634          3,953
     Cash paid in lieu of taxes......       --             --              12,096
NONCASH INVESTING ACTIVITIES
     Real estate owned acquired
       through foreclosure...........        34,738         61,889         70,843
     Sales of real estate owned
       financed by the Bank..........           553         20,117            452
     Securitization of loans.........       506,110        346,401         33,167
     Net transfer of loans from held
       for investment to available
       for sale......................       671,704         43,412        104,235
     Transfer of mortgage-backed
       securities from held to
       maturity to available for
       sale..........................       --               6,843      1,244,945
     Change in unrealized gains
       (losses) on securities
       available for sale, net of
       tax...........................         7,780          8,559          4,414
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>
                               BANK UNITED CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

     Bank United Corp. (the "Parent Company") became the holding company for
Bank United, a federal savings bank (the "Bank"), upon the Bank's formation in
December 1988. In December 1996, the Parent Company formed a wholly owned
Delaware subsidiary, BNKU Holdings, Inc. ("Holdings"), which is now the parent
company of the Bank.

     The accompanying Consolidated Financial Statements include the accounts of
the Parent Company, Holdings, the Bank, and the Bank's wholly owned subsidiaries
(collectively known as the "Company"). All significant intercompany accounts
and transactions have been eliminated in consolidation. The Parent Company has
no significant assets other than the equity interest in Holdings, and Holdings
has no significant assets other than the equity interest in the Bank.
Substantially all of the Company's consolidated revenues are derived from the
operations of the Bank.

     The Company is a broad-based financial services provider to consumers and
businesses in Texas and selected markets throughout the United States. At
September 30, 1998, the Company operated an 84-branch community banking network
serving approximately 265,000 households, 21 commercial banking offices in 18
states and eight wholesale mortgage origination offices in seven states.

     Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes have been reclassified to conform to the current
presentation. Such reclassifications had no effect on previously presented net
income or retained earnings.

USE OF ESTIMATES

     The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements.
Actual results could differ from these estimates and assumptions.

SHORT-TERM INTEREST-EARNING ASSETS

     Short-term interest-earning assets are comprised of cash, cash equivalents,
securities purchased under agreements to resell ("repurchase agreements"), and
federal funds sold. Short-term instruments with original maturities of three
months or less (measured from their acquisition date) and highly liquid
instruments readily convertible to cash are generally considered to be cash
equivalents. Cash and cash equivalents consist of interest-earning and
non-interest-earning deposits in other banks.

     The regulations of the Federal Reserve Board require average cash reserve
balances based on deposit liabilities to be maintained by the Bank at the
Federal Reserve Bank. The required reserve balance totalled $94.3 million for
the period including September 30, 1998. The Bank was in compliance with these
requirements.

SECURITIES

     Debt and equity securities, including mortgage-backed securities ("MBS"),
are classified into one of three categories: held to maturity, available for
sale, or trading. Securities that the Company has the positive intent and
ability to hold to maturity are classified as held to maturity and carried at
amortized cost, adjusted for the amortization of premiums and the accretion of
discounts. Under certain circumstances (including the deterioration of the
issuer's creditworthiness or a change in tax law, statutory requirements, or
regulatory requirements), securities held to maturity may be sold or transferred
to another portfolio. Securities that the Company intends to hold for indefinite
periods of time are classified as available for sale and are recorded at fair
value. Any unrealized gains or losses are excluded from earnings and reported
net of tax as other comprehensive income in stockholders' equity until realized.
Trading account assets are carried at fair value with any realized or unrealized
gains and losses recognized in current operations. Trading account assets are
generally comprised of assets that

                                      F-7
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

are actively and frequently bought and sold with the objective of generating
income on short-term changes in price. The Company held no trading account
assets at September 30, 1998 or 1997.

     The overall return or yield earned on MBS depends on the amount of interest
collected over the life of the security and the amortization of any premium or
discount. Premiums and discounts are recognized in income using the level-yield
method over the assets' remaining lives (adjusted for anticipated prepayments).
The actual yields and maturities of MBS depend on the timing of the payment of
the underlying mortgage principal and interest. Accordingly, changes in interest
rates and prepayments can have a significant impact on the yields of MBS.

     If the fair value of a security declines for reasons other than temporary
market conditions, the carrying value will be written down to current fair value
by a charge to operations.

     Net gains or losses on sales of securities are computed on the specific
identification method.

LOANS

     Loans that the Company has the intent and ability to hold for the
foreseeable future are classified as held for investment and are carried at
unpaid principal balance, adjusted for unamortized purchase premiums or
discounts, the allowance for credit losses, and any deferred loan origination
fees or costs ("Book Value"). Loans held for sale are carried at the lower of
Book Value or fair value. Fair value is determined based on quoted market prices
and considers the fair value of the related financial instruments utilized as
hedges. Any net unrealized losses on loans held for sale are charged to current
operations and a valuation allowance established.

     Interest income on loans is recognized principally using the level-yield
method. Based on management's periodic evaluation or at the time a loan is 90
days past due, the related accrued interest is generally reversed by a charge to
operations and the loan is simultaneously placed on nonaccrual. Once a loan
becomes current and the borrower demonstrates the ability to repay the loan, the
loan is returned to accrual status.

     Premiums, discounts, and loan fees (net of certain direct loan origination
costs) on loans held for sale are recognized in income when the related loans
are sold or repaid. Premiums, discounts, and loan fees (net of certain direct
loan origination costs) associated with loans held for investment, for which
collection is probable and estimable, are recognized in income over the loans'
estimated remaining lives using the level-yield method or when such loans are
sold.

ALLOWANCE FOR CREDIT LOSSES

     The allowance for credit losses is maintained at levels management deems
adequate to cover probable losses on loans. The adequacy of the allowance is
based on management's periodic evaluation of the loan portfolio and considers
such factors as historical loss experience, delinquency status, identification
of adverse situations that may affect the ability of obligors to repay, known
and inherent risks in the portfolio, assessment of economic conditions,
regulatory policies, and the estimated value of the underlying collateral, if
any. Losses are charged to the allowance for credit losses when the loss
actually occurs or when a determination is made that a loss is probable to
occur. Cash recoveries are credited to the allowance for credit losses.

MORTGAGE SERVICING RIGHTS ("MSRS")

     MSRs are periodically evaluated for impairment based on the fair value of
these rights. The fair value of MSRs is determined by discounting the estimated
future cash flows using a discount rate commensurate with the risks involved and
considers the fair value of the related financial instruments utilized as
hedges. This method of valuation incorporates assumptions that market
participants would use in their estimates of future servicing income and
expense, including assumptions about prepayment, default, and interest rates.
The fair value of the MSRs at September 30, 1998 was determined using discount
rates ranging from 9% to 10.5% and an annual constant prepayment rate of 21%.
For purposes of measuring impairment, the loans underlying the MSRs are
stratified on the basis of interest rate and type (conventional or government).
Impairment is measured by the

                                      F-8
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amount the book value of the MSRs, exceeds the fair value of the MSRs.
Impairment, if any, is recognized through a valuation allowance and a charge to
current operations.

     MSRs, net of valuation allowances, are amortized in proportion to, and over
the period of, the estimated net servicing revenue of the underlying mortgages,
which are collateralized by single family properties. The amortization expense
is deducted from the related servicing fee revenue in the Consolidated
Statements of Operations.

SALES OF SINGLE FAMILY LOANS AND SERVICING RIGHTS

     Gains or losses on loan sales and servicing rights are recognized at the
time of sale and determined using the specific identification method. Certain
loans and servicing rights are sold with general representations and warranties
included in the sales agreement. Repurchases of these assets may be required
when a loan fails to meet certain conditions specified in the sales agreement
that are covered by the general representations and warranties. An accrual is
determined for the probable future costs of such obligations and is maintained
at a level management believes is adequate to cover probable losses. This
accrual is included in other liabilities on the Consolidated Statements of
Financial Condition, and the related expense is included in non-interest expense
in the Consolidated Statements of Operations.

PREMISES AND EQUIPMENT

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

INTANGIBLE ASSETS

     Intangible assets consist of the excess cost over fair value of net assets
acquired and debt issuance costs. The excess of cost over fair value of net
assets acquired is comprised of core deposit premiums paid and goodwill. The
core deposit premiums are amortized on an accelerated basis over the estimated
lives of the deposit relationships acquired. Goodwill is amortized on a
straight-line basis over 15 years. Debt issuance costs are amortized over the
life of the notes on a straight-line basis. These assets are evaluated
periodically to determine whether events and circumstances have developed that
warrant revision of the estimated lives of the related assets or their
write-off.

REAL ESTATE OWNED ("REO")

     At the time of foreclosure, REO is recorded at fair value reduced by
estimated costs to sell. The resulting loss, if any, is charged to the allowance
for credit losses. Declines in a property's fair value subsequent to foreclosure
are charged to current operations. Revenues, expenses, gains or losses on sales,
and increases or decreases in the allowance for REO losses are charged to
operations as incurred and included in non-interest expense on the Consolidated
Statement of Operations. The Company's REO is primarily comprised of single
family properties held by the Banking Segment. The historical average holding
period for REO is seven months.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     The Company enters into traditional off-balance-sheet financial instruments
such as interest rate exchange agreements ("swaps"), interest rate caps,
locks, and floors, and forward delivery contracts in the normal course of
business in an effort to reduce its exposure to changes in interest rates. The
Company does not utilize instruments such as leveraged derivatives or structured
notes. The off-balance-sheet financial instruments utilized by the Company are
typically classified as hedges of existing assets, liabilities, or anticipated
transactions. Criteria for these methods follows:

Hedge of an Existing Asset or Liability: the hedged asset or liability must be
interest rate sensitive and the off-balance-sheet financial instrument must be
designated and be effective as a hedge of the asset or liability.

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

Hedge of Anticipated Transactions: the transaction to be hedged must be interest
rate sensitive, the off-balance-sheet financial instrument must be designated
and be effective as a hedge of the transaction, significant characteristics and
terms of the transaction must be identified, and it must be probable the
transaction will occur.

     Gains or losses on early termination of financial contracts, if any, are
amortized over the remaining terms of the hedged items. Generally, the Company
terminates the off-balance-sheet financial instrument when the hedged asset or
liability is sold or if the anticipated transaction is not likely to occur. In
these instances, the gain or loss on the financial contract is recognized in
income.

     Off-balance-sheet financial instruments that do not satisfy the criteria
for classification as hedges above, including those used for trading activities,
are carried at market value. Changes in market value are recognized in
non-interest income.

     INTEREST RATE SWAPS, CAPS, AND FLOORS.  Amounts receivable and payable on
these contracts are offset against income or expense on the hedged items. Fees
paid to enter into the financial contracts are capitalized and amortized over
the lives of the contracts as a component of the income or expense on the asset
or liability hedged.

     FORWARD DELIVERY CONTRACTS AND INTEREST RATE LOCKS.  Changes in the market
value of these types of instruments are included in the valuation of the items
being hedged to determine if a lower of cost or market valuation allowance is
required. Fees paid for commitments to deliver loans are charged to non-interest
expense if the likelihood that the commitment will be exercised is remote or the
fees are offset against the related net gains as the commitment is filled.

     OTHER OFF-BALANCE-SHEET INSTRUMENTS.  The Company has entered into other
off-balance-sheet financial instruments consisting of commitments to extend
credit or to purchase loans. Such financial instruments are recorded in the
financial statements when they are funded or purchased.

FEDERAL INCOME TAXES

     The Parent Company and its subsidiaries file a consolidated tax return.
Each entity within the consolidated group computes its tax on a separate-company
basis, and the results are combined for purposes of preparing the Consolidated
Financial Statements. Deferred tax assets and liabilities are recognized for the
estimated tax consequences due to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

EARNINGS PER COMMON SHARE

     Effective October 1, 1997, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings per Share," which
establishes standards for computing and presenting earnings per share ("EPS").
It requires dual presentation of basic and diluted EPS for entities with complex
capital structures. Basic EPS is computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
during the period. Diluted EPS is computed by dividing net income available to
common stockholders, less income due to outstanding Bank warrants, by the
weighted-average number of common shares and equivalents outstanding during the
period. Common stock equivalents are computed using the treasury stock method.
All prior period EPS data were restated to comply with SFAS No. 128, but are not
materially different.

RECENT ACCOUNTING STANDARDS

     As of October 1, 1997, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires that all components of comprehensive
income and total comprehensive income be reported on one of the following: the
statement of operations, the statement of stockholders' equity, or a separate
statement of comprehensive income. The Company is disclosing this information on
its statement of stockholders' equity. The components of comprehensive income
are net income and all changes to stockholders' equity, except those due to
investments by owners (changes in paid-in capital) and distributions to owners
(dividends). This statement did

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

not change the current accounting treatment for components of comprehensive
income (i.e. changes in unrealized gains or losses on securities and MBS
available for sale).

     SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," requires public companies to report certain information about
their operating segments in their annual financial statements and quarterly
reports issued to shareholders. It also requires public companies to report
certain information about their products and services, the geographic areas in
which they operate, and their major customers. SFAS No. 131, which the Company
plans to implement effective October 1, 1998, should have no material effect on
the Consolidated Financial Statements.

     SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities," requires companies to recognize all derivatives as either assets
or liabililties in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 requires that changes in fair value of a
derivative be recognized currently in earnings unless specific hedge accounting
criteria are met. Upon implementation of SFAS No. 133, hedging relationships may
be redesignated and securities held to maturity may be transferred to available
for sale or trading. This statement is effective for fiscal years beginning
after June 15, 1999. The Company is evaluating the impact, if any, this
statement may have on its future Consolidated Financial Statements.

2.  SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND
    FEDERAL FUNDS SOLD

                                        FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------
                                          1998        1997        1996
                                       ----------  ----------  ----------
                                             (DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS
     Balance outstanding at
       period-end....................  $  414,483  $  301,209  $  649,249
     Fair value of collateral at
       period-end....................     423,772     310,066     693,306
     Maximum outstanding at any
       month-end.....................     819,604     582,336     785,178
     Daily average balance...........     446,913     512,957     608,102
     Average interest rate...........       6.14%       5.92%       5.83%

FEDERAL FUNDS SOLD
     Balance outstanding at
       period-end....................  $   60,000  $   48,000  $   25,000
     Maximum outstanding at any
       month-end.....................     200,000      85,000     110,000
     Daily average balance...........      53,227      44,661      50,418
     Average interest rate...........       5.49%       5.34%       5.36%

     The repurchase agreements outstanding at September 30, 1998, were
collateralized by single family, multi-family and commercial real estate loans,
and MBS, pledged by others. These loans and MBS were held by the counterparty in
safekeeping for the account of the Company or by a third-party custodian for the
benefit of the Company. The repurchase agreements and federal funds sold
outstanding at September 30, 1998, matured during October 1998. The repurchase
agreements provide for the same loans and MBS to be resold at maturity. At
September 30, 1998, $114.0 million and $112.8 million in repurchase agreements
and federal funds sold were held by PaineWebber, Inc., and Lehman Brothers as
counterparties.

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

3.  SECURITIES AND OTHER INVESTMENTS
<TABLE>
<CAPTION>
                                                              AT SEPTEMBER 30,
                                        ------------------------------------------------------------
                                                       GROSS         GROSS
                                        AMORTIZED    UNREALIZED    UNREALIZED     FAIR     CARRYING
                                          COST         GAINS         LOSSES       VALUE      VALUE
                                        ---------    ----------    ----------   ---------  ---------
                                                               (IN THOUSANDS)
<S>                                      <C>           <C>           <C>        <C>        <C>      
1998
HELD TO MATURITY
     U.S. government and agency
       securities....................    $ 2,412       $    2        $--        $   2,414  $   2,412
                                                     ==========    ==========
AVAILABLE FOR SALE
     U.S. government and agency
       securities....................     15,930       $   83        $--           16,013
     Corporate securities............      1,365        --                1         1,364
     SBA interest-only strips........     73,802        --            2,241        71,561
                                        ---------    ----------    ----------   ---------
                                          91,097       $   83        $2,242        88,938     88,938
                                                     ==========    ==========
                                                                                ---------  ---------
                                        ---------
          Total......................    $93,509                                $  91,352  $  91,350
                                        =========                               =========  =========
1997
HELD TO MATURITY
     U.S. government and agency
       securities....................    $   160       $    5        $--        $     165  $     160
                                                     ==========    ==========
AVAILABLE FOR SALE
     U.S. government and agency
       securities....................     28,640       $  285        $--           28,925
     Corporate securities............      9,987        --                2         9,985
     SBA interest-only strips........     37,218          293         --           37,511
     Other securities................      1,229        --                1         1,228
                                        ---------    ----------    ----------   ---------
                                          77,074       $  578        $    3        77,649     77,649
                                                     ==========    ==========
                                                                                ---------  ---------
                                        ---------
          Total......................    $77,234                                $  77,814  $  77,809
                                        =========                               =========  =========
</TABLE>
     Small Business Administration ("SBA") interest-only strips were created
in connection with the Company's securitization of SBA loans and represent the
contractual right to receive a portion of the interest on the underlying SBA
loans.

     Securities outstanding at September 30, 1998, were scheduled to mature as
follows:
<TABLE>
<CAPTION>
                                                    HELD TO MATURITY             AVAILABLE FOR SALE
                                                 ----------------------        ----------------------
                                                 AMORTIZED      FAIR           AMORTIZED      FAIR
                                                    COST        VALUE             COST        VALUE
                                                 ----------   ---------        ----------   ---------
                                                                    (IN THOUSANDS)
<S>                                                <C>        <C>               <C>         <C>      
Due in one year or less.......................     $2,260     $   2,260         $  1,365    $   1,364
Due in one to five years......................        152           154           --           --
Due in more than ten years....................      --           --               89,732       87,574
                                                 ----------   ---------        ----------   ---------
                                                   $2,412     $   2,414         $ 91,097    $  88,938
                                                 ==========   =========        ==========   =========
</TABLE>
                                      F-12
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  MORTGAGE-BACKED SECURITIES

     The MBS portfolio includes securities issued by U.S. government
corporations and agencies ("agency securities"), privately issued and
credit-enhanced MBS ("non-agency securities"), and collateralized mortgage
obligations ("CMOs").
<TABLE>
<CAPTION>
                                                                AT SEPTEMBER 30,
                                       -------------------------------------------------------------------
                                                        GROSS        GROSS
                                        AMORTIZED     UNREALIZED   UNREALIZED       FAIR        CARRYING
                                           COST         GAINS        LOSSES        VALUE         VALUE
                                       ------------   ----------   ----------   ------------  ------------
                                                                 (IN THOUSANDS)
<S>                                    <C>             <C>          <C>         <C>           <C>
1998
HELD TO MATURITY
     Agency
       Fixed-rate....................  $      2,106    $ --         $ --        $      2,106
     Non-agency
       Adjustable-rate...............       351,237       1,970        6,410         346,797
       CMOs -- fixed-rate............        87,639         235        1,051          86,823
     Other...........................         2,904          50       --               2,954
                                       ------------   ----------   ----------   ------------
          Held to maturity...........       443,886    $  2,255     $  7,461         438,680  $    443,886
                                       ------------   ==========   ==========   ------------  ============
AVAILABLE FOR SALE
     Agency
       Fixed-rate....................        19,417    $    150     $ --              19,567
       Adjustable-rate...............        42,924         365       --              43,289
       CMOs -- fixed-rate............        14,323          34           55          14,302
       CMOs -- adjustable-rate.......       197,455       1,277           21         198,711
     Non-agency
       Fixed-rate....................        19,703         591       --              20,294
       Adjustable-rate...............       146,274         189        1,123         145,340
       CMOs -- fixed-rate............         8,348       3,145          334          11,159
       CMOs -- adjustable-rate.......        34,837         412          145          35,104
     Other...........................           406      --           --                 406
                                       ------------   ----------   ----------   ------------
          Available for sale.........       483,687    $  6,163     $  1,678         488,172  $    488,172
                                       ------------   ==========   ==========   ------------  ============
          Total mortgage-backed
            securities...............  $    927,573                             $    926,852
                                       ============                             ============
1997
HELD TO MATURITY
     Agency
       Fixed-rate....................  $      2,123    $ --         $ --        $      2,123
     Non-agency
       Adjustable-rate...............       447,718         824       13,937         434,605
       CMOs -- fixed-rate............        93,349      --            1,436          91,913
     Other...........................           171          53       --                 224
                                       ------------   ----------   ----------   ------------
          Held to maturity...........       543,361    $    877     $ 15,373         528,865  $    543,361
                                       ------------   ==========   ==========   ------------  ============
AVAILABLE FOR SALE
     Agency
       Adjustable-rate...............       232,542    $  3,556     $ --             236,098
       CMOs -- fixed-rate............        41,964          61           12          42,013
       CMOs -- adjustable-rate.......       369,424       1,976          342         371,058
     Non-agency
       Fixed-rate....................        43,243       1,347       --              44,590
       Adjustable-rate...............       276,901       2,282          397         278,786
       CMOs -- fixed-rate............        10,642       6,413          108          16,947
       CMOs -- adjustable-rate.......        35,058         363       --              35,421
     Other...........................         1,184         247       --               1,431
                                       ------------   ----------   ----------   ------------
          Available for sale.........     1,010,958    $ 16,245     $    859       1,026,344  $  1,026,344
                                       ------------   ==========   ==========   ------------  ============
          Total mortgage-backed
            securities...............  $  1,554,319                             $  1,555,209
                                       ============                             ============
</TABLE>
                                      F-13
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At September 30, 1998, MBS with carrying values totalling $623.6 million
and fair values totalling $617.0 million were used to collateralize securities
sold under agreements to repurchase ("reverse repurchase agreements").

5.  LOANS

                                            AT SEPTEMBER 30,
                                       ---------------------------
                                           1998           1997
                                       -------------  ------------
                                             (IN THOUSANDS)
HELD FOR INVESTMENT
     Single family...................  $   4,694,628  $  5,820,495
     Commercial......................      3,428,133     2,141,498
     Consumer........................        493,457       305,545
                                       -------------  ------------
                                           8,616,218     8,267,538
     Allowance for credit losses.....        (47,027)      (39,172)
     Net deferred loan fees,
      premiums, and discounts........         (2,479)       (6,740)
                                       -------------  ------------
                                           8,566,712     8,221,626
                                       -------------  ------------
HELD FOR SALE
     Single family...................      2,048,483       697,410
     Commercial......................         88,023        76,193
                                       -------------  ------------
                                           2,136,506       773,603
                                       -------------  ------------
          Total loans................  $  10,703,218  $  8,995,229
                                       =============  ============

     The following table sets forth the geographic distribution of loans by
state at September 30, 1998.
<TABLE>
<CAPTION>
                                                                                  TOTAL       NON-REAL
                                        SINGLE                                 REAL ESTATE     ESTATE                  % OF
                STATE                   FAMILY      COMMERCIAL     CONSUMER       LOANS        LOANS       TOTAL       TOTAL
-------------------------------------  ---------   ------------    --------    -----------    --------   ----------  ---------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                    <C>          <C>            <C>         <C>            <C>        <C>             <C>   
California...........................  $3,479,617   $  405,828     $   792     $3,886,237     $    56    $3,886,293      36.23%
Texas................................    765,287     1,037,969     358,819      2,162,075      60,618     2,222,693      20.72
Florida..............................    279,880       206,491       4,744        491,115          65       491,180       4.58
Other................................  2,194,401     1,863,286      67,564      4,125,251       1,129     4,126,380      38.47
                                       ---------   ------------    --------    -----------    --------   ----------  ---------
  Total..............................  $6,719,185   $3,513,574     $431,919    $10,664,678    $61,868    $10,726,546    100.00%
                                       =========   ============    ========    ===========    ========   ==========  =========
</TABLE>
     Loans held for investment at September 30, 1998, mature in years ended
September 30 as follows:
<TABLE>
<CAPTION>
                                           1999       2000-2003     THEREAFTER      TOTAL
                                       ------------  ------------  ------------  ------------
                                                           (IN THOUSANDS)
<S>                                    <C>           <C>           <C>           <C>         
TYPE OF LOAN
Single family........................  $    112,008  $    463,651  $  4,118,969  $  4,694,628
Commercial...........................     1,929,411       891,657       607,065     3,428,133
Consumer.............................        48,941       133,493       311,023       493,457
                                       ------------  ------------  ------------  ------------
     Total...........................  $  2,090,360  $  1,488,801  $  5,037,057  $  8,616,218
                                       ============  ============  ============  ============
TYPE OF INTEREST
Fixed-rate...........................  $    127,826  $    523,331  $  1,437,954  $  2,089,111
Adjustable-rate......................     1,962,534       965,470     3,599,103     6,527,107
                                       ------------  ------------  ------------  ------------
     Total...........................  $  2,090,360  $  1,488,801  $  5,037,057  $  8,616,218
                                       ============  ============  ============  ============
</TABLE>
     At September 30, 1998, the performing single family loans were pledged,
under a blanket lien, as collateral securing advances from the Federal Home Loan
Bank ("FHLB").

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

     The activity in the allowance for credit losses was as follows:

                                           FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------
                                          1998        1997            1996
                                       ----------  ----------    --------------
                                                    (IN THOUSANDS)
Beginning balance....................  $   39,174  $   39,660       $ 36,801
     Provision.......................      20,123      18,107         16,469
     Charge-offs.....................     (12,943)    (19,036)       (13,785)
     Recoveries......................         673         443            175
                                       ----------  ----------    --------------
Ending balance.......................  $   47,027  $   39,174       $ 39,660
                                       ==========  ==========    ==============

     Nonaccrual loans, net of related premiums and discounts, totalled $61.9
million and $54.0 million at September 30, 1998 and 1997. If the nonaccrual
loans as of September 30, 1998, had been performing in accordance with their
original terms throughout fiscal 1998, interest income recognized would have
been $5.3 million. The actual interest income recognized on these loans for
fiscal 1998, was $1.7 million. No commitments exist to lend additional funds to
borrowers whose loans were on nonaccrual status at September 30, 1998.

     Impaired loans as defined in SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," totalled $3.6 million at both September 30, 1998 and
1997. The average outstanding balance of impaired loans for both fiscal 1998 and
1997, was $3.6 million. No allowance for credit losses determined in accordance
with SFAS No. 114 was required on these impaired loans because the measured
values of the loans exceeded the recorded investments in the loans. Interest
income of $320,000 and $324,000 was recognized on impaired loans during fiscal
1998 and 1997, of which $317,000 and $280,000 was collected in cash.

6.  MORTGAGE SERVICING RIGHTS

     The activity in the Company's MSRs was as follows:
<TABLE>
<CAPTION>
                                            FOR THE YEAR ENDED SEPTEMBER 30,
                                       -------------------------------------------
                                           1998           1997           1996
                                       -------------  -------------  -------------
                                                     (IN THOUSANDS)
<S>                                    <C>            <C>            <C>          
Balance at beginning of period.......  $     272,214  $     123,392  $      75,097
     Additions.......................        199,513        173,395         69,746
     Amortization....................        (49,999)       (29,165)       (14,218)
     Sales...........................       --                  (52)        (7,665)
     Deferred hedging gains..........         (8,828)        (1,351)        (2,140)
     Other hedging activity..........          2,735          5,995          2,572
     Valuation allowance.............         (4,767)      --             --
                                       -------------  -------------  -------------
Balance at end of period.............  $     410,868  $     272,214  $     123,392
                                       =============  =============  =============
Loan servicing portfolio.............  $  27,935,300  $  24,518,396  $  13,246,848
Loans serviced for others............     23,491,960     20,521,294      9,494,788
</TABLE>
     During fiscal 1998, the Company established a valuation allowance for its
MSRs totalling $4.8 million.

                                      F-15

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

7.  DEPOSITS
<TABLE>
<CAPTION>
                                                        AT SEPTEMBER 30,
                                       ---------------------------------------------------
                                                 1998                       1997
                                       ------------------------   ------------------------
                                                      WEIGHTED-                  WEIGHTED-
                                                       AVERAGE                    AVERAGE
                                          AMOUNT        RATE         AMOUNT        RATE
                                       ------------   ---------   ------------   ---------
                                                     (DOLLARS IN THOUSANDS)
<S>                                    <C>                        <C>                    
NON-INTEREST BEARING DEPOSITS........  $    268,797     --   %    $    357,988     --   %
INTEREST-BEARING DEPOSITS
     Checking accounts...............       405,058      1.42          200,485      1.05
     Money market accounts...........     2,140,605      5.03        1,687,567      4.98
     Savings accounts................       123,134      2.08          122,676      2.33
     Certificates of deposit.........     3,382,882      5.56        2,878,952      5.81
                                       ------------   ---------   ------------   ---------
          Total interest-bearing
            deposits.................     6,051,679      5.02        4,889,680      5.24
                                       ------------   ---------   ------------   ---------
          Total deposits.............  $  6,320,476      4.81%    $  5,247,668      4.88%
                                       ============   =========   ============   =========
</TABLE>
     Scheduled maturities of certificates of deposit ("CDs") outstanding at
September 30, 1998, were as follows:

YEARS ENDING SEPTEMBER 30,
-------------------------------------
                                        (IN THOUSANDS)
                                        ---------------
     1999............................      $2,812,563
     2000............................        305,634
     2001............................        105,025
     2002............................        111,324
     2003 and thereafter.............         48,336
                                        ---------------
                                           $3,382,882
                                        ===============

     Scheduled maturities of CDs of $100,000 or more outstanding at September
30, 1998, were as follows:

                                        NUMBER OF    DEPOSIT
                                        ACCOUNTS      AMOUNT
                                        ---------    --------
                                             (DOLLARS IN
                                             THOUSANDS)
Three months or less.................      1,286     $138,006
Over three to six months.............      1,306      139,220
Over six to twelve months............      2,116      223,968
Over twelve months...................        987      106,671
                                        ---------    --------
          Total......................      5,695     $607,865
                                        =========    ========

     In September 1998, the Company signed an agreement to purchase Midland
American Bank, a commercial bank with five branches in Midland, Texas, having
assets of $225 million and deposits of $203 million. Closing of this transaction
is expected early in 1999. In January 1998, the Company purchased 18 branches
and related deposits from Guardian Savings and Loan Association. The branches,
six in the Houston area and 12 in the Dallas/Ft. Worth Metroplex, had combined
deposits of $1.44 billion. In December 1997, the Company purchased three
branches in the Dallas area having $66 million in deposits, from California
Federal Savings Bank, FSB. These transactions were accounted for or will be
accounted for in accordance with the purchase method of accounting.

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

8.  FEDERAL HOME LOAN BANK ADVANCES

                                           FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                (DOLLARS IN THOUSANDS)
Maximum outstanding at any
  month-end..........................  $  4,783,294  $  3,992,344  $  4,384,798
Daily average balance................     4,090,359     3,705,072     4,073,297
Average interest rate................          5.78%         5.74%         6.07%

     Scheduled maturities for FHLB advances outstanding at September 30, 1998,
were as follows:

                                                      WEIGHTED-
                                                       AVERAGE
                                          AMOUNT        RATE
                                       ------------   ---------
                                        (DOLLARS IN THOUSANDS)
1999.................................  $  2,303,256      5.46%
2000.................................     1,689,693      5.63
2001.................................       281,645      5.65
2002.................................       443,200      5.57
2003 and thereafter..................        65,500      5.57
                                       ------------   ---------
          Total......................  $  4,783,294      5.54%
                                       ============   =========

9.  SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FEDERAL FUNDS PURCHASED

                                           FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------------
                                           1998          1997          1996
                                       ------------  ------------  ------------
                                                (DOLLARS IN THOUSANDS)
REVERSE REPURCHASE AGREEMENTS
     Balance outstanding at
       period-end....................  $    586,742  $  1,308,600  $    832,286
     Maximum outstanding at any
       month-end.....................     1,222,267     1,308,600     1,096,508
     Daily average balance...........       886,765     1,002,165       955,708
     Average interest rate...........          5.78%         5.72%         5.77%
FEDERAL FUNDS PURCHASED
     Balance outstanding at
       period-end....................  $    225,000  $    --       $    --
     Maximum outstanding at any
       month-end.....................       225,000       --            --
     Daily average balance...........        84,781         1,025            27
     Average interest rate...........          5.66%         5.85%         6.02%

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

     Reverse repurchase agreements and federal funds purchased outstanding at
September 30, 1998, matured during October 1998.

     The counterparties to all reverse repurchase agreements at September 30,
1998, have agreed to resell the same securities upon maturity of such
agreements. The securities collateralizing the reverse repurchase agreements
have been delivered to the counterparty or its agent. At September 30, 1998, the
reverse repurchase agreements were outstanding with the following
counterparties:

                                        CARRYING VALUE
                                        --------------
                                        (IN THOUSANDS)
Credit Suisse First Boston
  Corporation........................     $  300,550
PaineWebber, Inc.....................        184,691
Bear Stearns & Co. Inc. .............         58,599
Morgan Stanley & Co. Incorporated....         35,863
Goldman, Sachs & Co..................          7,039
                                        --------------
                                          $  586,742
                                        ==============

10.  NOTES PAYABLE

     In May 1993, the Parent Company issued $115 million of 8.05% senior notes
due May 15, 1998 ("Senior Notes"). In May 1997, the Company issued $220
million of fixed-rate subordinated notes due May 2007, with a stated rate of
8.875% and an effective rate of 8.896% ("Subordinated Notes"). Net proceeds
from the issuance of the Subordinated Notes were used to repurchase and retire
$114.5 million of the Company's Senior Notes, pay the related costs and
expenses, and provide additional capital to the Bank. The costs of issuing the
Subordinated Notes totalled $4.0 million. The costs associated with retiring the
Senior Notes are shown as an extraordinary loss of $3.6 million, or $2.3 million
after tax, in fiscal 1997. The Subordinated Notes are subordinate to all
liabilities of the Company's subsidiaries, including preferred stock and deposit
liabilities. The remaining portion of the Senior Notes matured and was repaid in
May 1998.

11.  FINANCIAL INSTRUMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires the disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. The fair
value estimates presented are based on relevant information available to
management as of September 30, 1998 and 1997. Management is not aware of any
factors that would significantly affect these estimated fair value amounts.
Since the reporting requirements exclude certain financial instruments and all
non-financial instruments, the aggregate fair value amounts presented do not
represent management's estimate of the underlying value of the Company. The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument for which it is practicable to estimate that
value:

     SHORT-TERM INTEREST-EARNING ASSETS.  The carrying amount approximates fair
value due to the short-term nature of such assets.

     SECURITIES, OTHER INVESTMENTS, AND MORTGAGE-BACKED SECURITIES.  The fair
values of securities, other investments, and MBS are estimated based on
published bid prices or bid quotations received from securities dealers.

     LOANS.  Fair values are estimated for portfolios of loans with similar
characteristics and include the value of related servicing rights, if
appropriate. Loans are segregated by type, by rate, and by performing and
nonperforming categories. The fair values of loans held for sale are based on
quoted market prices. The fair values of loans held for investment are based on
contractual cash flows discounted at secondary market rates, adjusted for

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

prepayments. The fair values of loans held for investment at September 30, 1998
were determined using discount rates ranging from 6.34% to 7.55%, annual
constant prepayment rates ranging from 12% to 38% for single family loans, and 
an annual constant prepayment rate of 6% for consumer loans. No prepayments were
assumed for commerical loans due to prepayment penalties associated with these
loans. For adjustable-rate commercial and consumer loans held for investment
that reprice frequently, fair values are based on carrying values. The fair
value of nonperforming loans is estimated using the Book Value, which is net of
any related allowance for credit losses.

     FHLB STOCK.  The carrying amount approximates fair value because it is
redeemable at its par value.

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

     DEPOSITS.  The estimated fair value of deposits with no stated maturity,
which includes demand deposits, money market, and other savings accounts, is
equal to the amount payable on demand or the carrying value. Although market
premiums paid for depository institutions include an additional value for these
deposits, SFAS No. 107 prohibits adjusting fair value for any value expected to
be derived from retaining those deposits for a future period of time or from the
benefit that results from the ability to fund interest-earning assets with these
deposit liabilities. The SFAS No. 107 fair value of fixed-maturity deposits is
estimated using a discounted cash flow model with rates currently offered by the
Company for deposits of similar remaining maturities. The SFAS No. 107 fair
value of fixed maturity deposits at September 30, 1998 was determined using
discount rates ranging from 2.97% to 5.05%.

     FHLB ADVANCES, REVERSE REPURCHASE AGREEMENTS, FEDERAL FUNDS PURCHASED, AND
NOTES PAYABLE.  Fair values are estimated based on the discounted value of
contractual cash flows using rates currently available to the Company for
borrowings with similar terms and remaining maturities. The fair values at
September 30, 1998 were determined using discount rates ranging from 4.85% to
6.86%.

     OTHER ASSETS AND LIABILITIES.  The carrying amount of financial instruments
in these classifications is considered a reasonable estimate of their fair value
due to the short-term nature of the instruments.

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

                                      F-19
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                            SFAS NO. 107 FAIR VALUES
<TABLE>
<CAPTION>
                                                      AT SEPTEMBER 30,
                                       -----------------------------------------------
                                                1998                     1997
                                       ----------------------   ----------------------
                                        CARRYING    SFAS NO.     CARRYING    SFAS NO.
                                         VALUE      107 VALUE     VALUE      107 VALUE
                                       ----------   ---------   ----------   ---------
                                                       (IN THOUSANDS)
<S>                                    <C>          <C>         <C>          <C>      
FINANCIAL ASSETS

    Short-term interest-earning
      assets.........................  $  703,157   $ 703,157   $  470,209   $ 470,209

    Securities and other
      investments....................      91,350      91,352       77,809      77,814

    Mortgage-backed securities.......     932,058     926,852    1,569,705   1,555,209

    Loans............................  10,703,218   10,897,121   8,995,229   9,147,333

    FHLB stock.......................     242,883     242,883      205,011     205,011

    Other assets.....................     324,904     324,904      169,711     169,711

NON-FINANCIAL ASSETS

    Mortgage servicing rights........     410,868     367,487      272,214     304,024

    Other............................     256,554         N/A      207,184         N/A
                                       ----------   =========   ----------   =========
        Total assets.................  $13,664,992              $11,967,072
                                       ==========               ==========

FINANCIAL LIABILITIES

    Deposits.........................  $6,320,476   $6,345,916  $5,247,668   $5,264,137

    FHLB advances....................   4,783,294   4,790,008    3,992,344   3,986,627

    Reverse repurchase agreements and
      federal funds purchased........     811,742     811,910    1,308,600   1,308,643

    Notes payable....................     219,720     248,478      220,199     230,242

    Other liabilities................     142,940     142,940      118,702     118,702

NON-FINANCIAL LIABILITIES, MINORITY
  INTEREST, AND STOCKHOLDERS' 
  EQUITY.............................   1,386,820      N/A       1,079,559         N/A
                                       ----------   =========   ----------   =========
        Total liabilities, minority
          interest, and stockholders'
          equity.....................  $13,664,992              $11,967,072
                                       ==========               ==========

OTHER FINANCIAL INSTRUMENTS FAIR VALUES

      Interest rate swaps............               $  (5,998)               $    (437)

      Interest rate caps.............                       1                      165

      Interest rate floors...........                  54,287                   11,043

      Interest rate locks............                  (2,126)                  --

      Forward delivery contracts.....                  (2,133)                    (474)

      Commitments to extend credit...                   7,787                    1,493
</TABLE>
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     The Company manages its exposure to changes in interest rates by entering
into certain financial instruments with on and off-balance-sheet risk in the
ordinary course of business. A hedge is an attempt to reduce risk by creating a
relationship whereby any losses on the hedged asset or liability are expected to
be offset in whole or part by gains on the hedging financial instrument. Thus,
market risk resulting from a particular off-balance-sheet instrument is normally
offset by other on or off-balance-sheet transactions. The Company seeks to
manage credit risk by limiting the total amount of arrangements outstanding,
both by counterparty and in the aggregate, by monitoring the size and maturity
structure of the financial instruments, by assessing the creditworthiness of the
counterparty, and by applying uniform credit standards for all activities with
credit risk.

                                      F-20
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Notional principal amounts indicated in the following table do not
represent the Company's exposure to credit loss, but represent the extent of the
Company's involvement in particular classes of financial instruments and
generally exceed the expected future cash requirements relating to the
instruments. Financial instruments with off-balance-sheet risk outstanding at
September 30, 1998, were scheduled to mature as follows:
<TABLE>
<CAPTION>
                                             MATURING IN THE YEAR ENDING SEPTEMBER 30,              AT SEPTEMBER 30,
                                       ------------------------------------------------------  --------------------------
                                           1999          2000          2001       THEREAFTER       1998          1997
                                       ------------  ------------  ------------  ------------  ------------  ------------
                                                                         (IN THOUSANDS)
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>         
Interest rate swaps..................  $    166,000  $    275,500  $    --       $     35,500  $    477,000  $    261,000
Interest rate caps...................        58,000       243,000       --            --            301,000       722,000
Interest rate floors.................       802,000       958,500       596,000       942,500     3,299,000     2,578,500
Interest rate locks..................        24,450       --            --            --             24,450       --
Forward delivery contracts...........       611,412       --            --            --            611,412        96,000
Commitments to extend credit.........     1,671,640       229,165       180,893       301,308     2,383,006     1,671,973
Commitments to purchase loans........        16,004       --            --            --             16,004        21,965
                                       ------------  ------------  ------------  ------------  ------------  ------------
          Total......................  $  3,349,506  $  1,706,165  $    776,893  $  1,279,308  $  7,111,872  $  5,351,438
                                       ============  ============  ============  ============  ============  ============
</TABLE>
     INTEREST RATE SWAPS.  The Company entered into interest rate swaps in an
effort to match the repricing of its liabilities with its assets. Swaps
totalling $216 million were entered into during fiscal 1998. During fiscal 1997,
interest rate swap contracts of $50.0 million expired.
<TABLE>
<CAPTION>
                                                    AVERAGE    AVERAGE
                                        NOTIONAL     FIXED    FLOATING           HEDGED
                                         AMOUNT      RATE      RATE(1)            ITEM
                                       ----------   -------   ---------    ------------------
                                                       (DOLLARS IN THOUSANDS)
<S>                                    <C>            <C>        <C>                    
AT SEPTEMBER 30, 1998
Receive Floating/Pay Fixed...........  $  477,000     5.98%      5.63%     FHLB advances
AT SEPTEMBER 30, 1997
Receive Floating/Pay Fixed...........  $  261,000     6.18%      5.72%     FHLB advances
</TABLE>
(1) Based on the one or three month London InterBank Offered Rate ("LIBOR").

     INTEREST RATE CAPS.  During fiscal 1996 and 1997, interest rate caps with
notional principal amounts totalling $350.0 million were entered into in an
effort to hedge FHLB advances. These contracts matured during fiscal 1998.
Amortizing interest rate caps were entered into in an effort to hedge certain
adjustable-rate single family loans that are subject to certain limitations
related to the amount that their interest rate can increase at each reset date.
These amortizing caps totalled $301.0 million and $372.0 million at September
30, 1998 and 1997.
<TABLE>
<CAPTION>
                                                                             AVERAGE
                                                NOTIONAL       INDEX        CONTRACTED
                                                 AMOUNT       RATE(1)          RATE
                                                --------      -------       ----------
                                                        (DOLLARS IN THOUSANDS)
<S>                                             <C>             <C>            <C>  
AT SEPTEMBER 30, 1998................  buy      $301,000        5.75%          7.86%
                                       sell      301,000        5.75           8.57

AT SEPTEMBER 30, 1997................  buy       372,000        5.84           7.86
                                                 350,000        5.72           6.30
                                       sell      372,000        5.84           8.57
</TABLE>
(1) Based on the three or six month LIBOR.

                                      F-21
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     INTEREST RATE FLOORS.  Floor contracts were entered into in an effort to
hedge MSRs against declines in value as a result of increased prepayments and to
hedge certain fixed-rate commercial loans available for sale against declines in
value due to changes in market interest rates.
<TABLE>
<CAPTION>
                                                      AVERAGE        AVERAGE
                                        NOTIONAL       INDEX          FLOOR
                                         AMOUNT       RATE(1)         RATE             HEDGED ITEM
                                        ---------    ---------       -------       -------------------
                                                            (DOLLARS IN THOUSANDS)
<S>                                     <C>             <C>            <C>                    
AT SEPTEMBER 30, 1998................   $3,189,000      4.82%          5.50%              MSRs
                                          110,000       5.03           4.75         Commercial loans
                                                                                      held for sale

AT SEPTEMBER 30, 1997................   $2,578,500      6.27           5.69               MSRs
</TABLE>
(1) Based on the five or ten year Constant Maturity Treasury index.

     During fiscal 1998 and 1997, $1.8 billion and $2.0 billion of floors were
purchased and $250 million and $60.0 million matured. Also during fiscal 1998,
$858 million of floors were sold prior to their original maturity, resulting in
a gain of $3.2 million. Costs to enter the floor contracts and the gain on sale
were included as components of the MSR basis. During fiscal 1998 and 1997,
interest received on interest rate floor agreements totalled $5.5 million and
$1.3 million. At September 30, 1998 and 1997, the unamortized deferred gain and
interest received was $17.2 million and $8.4 million. The unamortized costs to
enter the floor agreements were $10.7 million and $7.7 million at September 30,
1998 and 1997.

     INTEREST RATE LOCKS.  During fiscal 1998, $35.2 million of interest rate
lock contracts were entered into in an effort to manage the risk that a change
in interest rates would decrease the value of certain commercial loans prior to
their sale or commitments to originate such loans. During the year, $9.5 million
of the rate locks were closed as the loans being hedged were transferred to the
held for investment portfolio. The resulting $653,000 loss was deferred and
included in the commercial loan basis.

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

                                           AT SEPTEMBER 30,
                                       ------------------------
                                           1998         1997
                                       ------------  ----------
                                            (IN THOUSANDS)
FIXED-RATE FORWARD DELIVERY
  CONTRACTS..........................  $    611,412  $   96,000
                                       ============  ==========
LOANS AVAILABLE TO FILL COMMITMENTS
Single family........................  $  2,024,535  $  149,128
Mortgage pipeline (estimated)........       477,106     116,322
                                       ------------  ----------
          Total......................  $  2,501,641  $  265,450
                                       ============  ==========

     SHORT SALES.  During fiscal 1998, the Company sold $139.6 million of
Federal National Mortgage Association notes short in an effort to manage the
risk that a change in market interest rates would decrease the value of certain
single family loans prior to their sale. These loans were later sold for a gain
of $1.4 million, which was recognized in current operations. Upon sale of the
loans, the short positions were closed out at a loss of $701,000, which was
recorded as a realized loss on trading account assets.

     COMMITMENTS TO EXTEND CREDIT.  The Company's exposure to credit loss for
commitments to extend credit is represented by the contractual amount of these
agreements. The Company uses the same credit policies in making funding
commitments as it does for on-balance-sheet instruments. These commitments
generally have fixed expiration dates or other termination clauses and may
require the payment of a fee to the Company.

                                      F-22
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Because commitments may expire without being drawn upon, the total contract
amounts do not necessarily represent future cash requirements. Commitments to
extend credit outstanding at September 30, 1998 and 1997 were $2.4 billion and
$1.7 billion. Included in these commitments are $908.2 million and $373.7
million representing the undisbursed portion of loans in process and letters of
credit totalling $54.6 million and $37.0 million as of September 30, 1998 and
1997.

     COMMITMENTS TO PURCHASE LOANS.  The Company's outstanding commitments to
purchase loans at September 30, 1998 and 1997, were $16.0 million and $22.0
million.

     RECOURSE OBLIGATIONS.  The Company serviced loans totalling approximately
$66.6 million and $34.2 million at September 30, 1998 and 1997, for which
certain recourse obligations apply. Management believes that it has adequately
provided reserves for its recourse obligations related to this servicing.

12.  EMPLOYEE BENEFITS

SAVINGS PLAN

     The Company has an employee tax-deferred savings plan available to all
eligible employees, which qualifies as a 401(k) plan. The Company currently
contributes fifty cents for every dollar contributed up to 2% of the
participant's earnings, and dollar for dollar for contributions between 2% and
4% of the participant's earnings. The maximum employee contribution percentage
is 15% of an employee's earnings, subject to Internal Revenue Service maximum
contributions limitations. The Company's contributions to the plan were
approximately $1.1 million, $1.1 million, and $1.5 million for fiscal 1998,
1997, and 1996.

1996 STOCK INCENTIVE PLAN

     In fiscal 1998 and 1997, the Company granted 539,700 and 490,250 options to
purchase shares of its common stock to certain employees of the Bank under the
Bank United 1996 Stock Incentive Plan. Compensation expense was not recognized
for the stock options because the options had an exercise price equal to the
fair value of the Company's common stock at the date of grant. These options
will vest over three years, with 147,500 options expiring if not exercised
within ten years of the date of grant and the remaining 882,450 options expiring
if not exercised within five years of the date of grant. At September 30, 1998,
there were 977,200 options outstanding under this plan. The maximum number of
options available for grant under this plan is 1,600,000.

     In fiscal 1998, the Company's Board of Directors granted performance units
to executive officers and other key officers and employees under the 1996 Stock
Incentive Plan. These units, which equate to shares of the Company's common
stock on a one-for-one basis, will be earned based on the achievement of certain
corporate performance goals over a performance period beginning October 1, 1997,
and ending September 30, 2000. Upon completion of the performance period, the
Company's Compensation Committee will determine the number of units that have
been earned based on the Company's performance. Cash will be distributed to the
participants equal to the number of performance units multiplied by the fair
value of the Company's common stock as of September 30, 2000. The maximum number
of performance units is 201,000 in the aggregate. Compensation expense totalling
$731,000 was recorded in fiscal 1998 relating to these units.

MANAGEMENT COMPENSATION PROGRAM

     In connection with the Company's initial public offering in August 1996
(see Note 15), the Bank's and the Company's Boards of Directors approved a
management compensation program for the Bank's executive officers, other key
officers and employees, and certain directors containing the following
provisions: (1) a cash bonus of $4.0 million, (2) an award of 318,342 shares of
Company Class B common stock (which had a fair value of $11.65 per share, and
restrictions on transferability for a period of three years from issuance), and
(3) the issuance of 1,154,520 options to purchase shares of Company common stock
(such options vest ratably from the date of grant through June 26, 1999, and may
not be exercised prior to the third anniversary of the date of grant).

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

The options will expire if not exercised within ten years of the date of the
grant. Compensation expense totalling $7.8 million, $4.8 million net of tax, was
recognized in fiscal 1996, for the cash bonus and the restricted stock award.
Compensation expense was not recognized for the stock options because the
options had an exercise price equal to the fair value of the Company's common
stock at the date of grant. No further grants or compensation awards may be made
or awarded under this program.

DIRECTOR STOCK COMPENSATION PLAN

     In fiscal 1996, the Company's Board of Directors approved a director stock
plan for each member of the Company's Board who is not an employee. Each
eligible director is granted stock options to purchase 1,000 shares of the
Company's common stock when first elected to the Company's Board of Directors
and following each annual stockholders' meeting thereafter. The exercise price
of the options is 115% of the fair value of the Company's common stock at the
date of grant. The Company granted 10,000 options under the director stock plan
during fiscal 1998, 1997, and 1996. These options vest and become exercisable if
and when the fair value of the Company's common stock equals or exceeds the
exercise price of the option on any day during the 30-day period commencing on
the first anniversary of the date of the grant. If these stock options do not
vest during the this 30-day period, they will be cancelled. The options issued
to directors in fiscal 1997 and 1996 became fully vested and exercisable during
1998 and 1997. Vested options will expire if not exercised within ten years of
the date of grant. The maximum number of options available for grant under this
plan is 250,000.

SUMMARY OF STOCK-BASED COMPENSATION

     Stock option activity was as follows:
<TABLE>
<CAPTION>
                                                                  FOR THE YEAR ENDED SEPTEMBER 30,
                                          ---------------------------------------------------------------------------------
                                                    1998                        1997                        1996
                                          -------------------------   -------------------------   -------------------------
                                           NUMBER      WEIGHTED-       NUMBER      WEIGHTED-       NUMBER      WEIGHTED-
                                             OF         AVERAGE          OF         AVERAGE          OF         AVERAGE
                                           OPTIONS   EXERCISE PRICE    OPTIONS   EXERCISE PRICE    OPTIONS   EXERCISE PRICE
                                          ---------  --------------   ---------  --------------   ---------  --------------
<S>                                       <C>            <C>          <C>            <C>                         <C>
Outstanding at beginning of year........  1,653,020      $24.49       1,164,520      $20.15          --          $--
    Granted.............................    549,700       44.67         500,250       34.72       1,164,520       20.15
    Exercised...........................     (1,500)      38.06          --          --              --          --
    Forfeited...........................    (39,500)      35.28         (11,750)      30.92          --          --
    Expired.............................     --          --              --          --              --          --
                                          ---------  --------------   ---------  --------------   ---------  --------------
Outstanding at end of year..............  2,161,720      $29.41       1,653,020      $24.49       1,164,520      $20.15
                                          =========  ==============   =========  ==============   =========  ==============
Vested at end of year...................    828,096      $20.67         417,819      $20.23          --          $--
                                          =========  ==============   =========  ==============   =========  ==============
</TABLE>
     The weighted-average grant date fair value of stock options granted during
fiscal 1998, 1997, and 1996, was $14.86, $11.31, and $6.46. The fair value of
each stock option was estimated using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in fiscal 1998,
1997, and 1996: estimated volatility of 35.80%, 27.78%, and 27.00%; risk-free
interest rate of 5.50%, 6.75%, and 6.55%; dividend yield of 1.40%, 1.68%, and
3.00%; and an expected life of 5.1 years for the options issued in fiscal 1998,
6.6 years for the options issued in fiscal 1997, and 10.0 years for the options
issued in fiscal 1996.

                                      F-24
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock options outstanding and exercisable, by range of exercise price, were
as follows:
<TABLE>
<CAPTION>
                                                                                             OPTIONS EXERCISABLE AT
                                             OPTIONS OUTSTANDING AT SEPTEMBER 30, 1998         SEPTEMBER 30, 1998
                                          -----------------------------------------------   -------------------------
                                            NUMBER      WEIGHTED-       WEIGHTED-AVERAGE    NUMBER       WEIGHTED-
                RANGE OF                      OF         AVERAGE           REMAINING          OF          AVERAGE
            EXERCISE PRICES                OPTIONS    EXERCISE PRICE    CONTRACTUAL LIFE    OPTIONS   EXERCISE PRICE
              ------------                ----------  --------------   ------------------   -------   ---------------
<S>                                        <C>            <C>                 <C>            <C>          <C>    
$20.00-$25.00...........................   1,163,520      $20.15              7.75 year      9,000        $ 23.00
$25.01-$30.00...........................     128,500       26.85              3.13           3,500          27.02
$35.01-$40.00...........................     326,750       38.00              3.45          20,000          37.18
$40.01-$45.00...........................     519,450       44.37              4.83            --          --
$45.01-$50.00...........................      13,500       49.14              4.51            --          --
$55.01-$60.00...........................      10,000       56.35              9.47            --          --
                                          ----------  --------------         -----          -------   ---------------
                                           2,161,720      $29.41              6.11          32,500        $ 32.16
                                          ==========  ==============         =====          =======   ===============
</TABLE>
     The Company accounts for its stock-based employee compensation plans in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Under this method, no compensation expense is
recognized for stock options when the exercise price equals fair value at the
date of grant. If compensation expense had been recorded in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net income
would have been $111.5 million, $73.5 million, and $118.3 million and diluted
EPS would have been $3.45, $2.31, and $3.85 for fiscal 1998, 1997, and 1996.

13.  INCOME TAXES

                                        FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------
                                          1998       1997        1996
                                       ----------  ---------  -----------
                                                 (IN THOUSANDS)
CURRENT TAX EXPENSE
     Federal and state...............  $    7,216  $   6,091  $     6,109
     Payments due in lieu of taxes...       6,483     12,344       11,528
DEFERRED TAX EXPENSE (BENEFIT)
     Federal and state...............      39,523     42,251       10,298
     Change in valuation
       allowance -- utilization and
       reduction of NOLs.............     (27,500)    --         (103,700)
                                       ----------  ---------  -----------
          Total income tax expense
            (benefit) before
            extraordinary loss.......  $   25,722  $  60,686  $   (75,765)
                                       ==========  =========  ===========

     During fiscal 1998, the Company successfully resolved an outstanding tax
benefit lawsuit with the Federal Deposit Insurance Corporation ("FDIC") as
manager of the FSLIC Resolution Fund ("FRF"), which resulted in a positive
income tax adjustment of approximately $6.0 million. Additionally, the Company
recognized a positive income tax adjustment of $27.5 million resulting from the
anticipated use of additional net operating losses ("NOLs") against future
taxable income.

     In connection with the Company's initial public offering in August 1996,
the Parent Company's certificate of incorporation and bylaws were restated with
the intent to preserve certain beneficial tax attributes limiting the
disposition of certain common stock and other interests in the Parent Company by
certain of its stockholders. The preservation of these tax attributes allowed
the recognition of tax benefits of $85.2 million by the Bank in fiscal 1996, for
the expected utilization of $365 million of NOLs against future taxable income.
Also in fiscal 1996, the Parent Company and the Bank entered into a tax-sharing
agreement resulting in the recognition of a tax benefit of

                                      F-25
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$16.5 million by the Parent Company for the expected utilization of its NOLs by
the Bank. Tax NOLs outstanding at September 30, 1998, were as follows:

                                                       ALTERNATIVE    EXPIRATION
           YEAR GENERATED               REGULAR TAX    MINIMUM TAX       DATE
-------------------------------------   -----------    -----------    ----------
                                                     (IN MILLIONS)
September 30, 1989...................      $  69          $  --          2004
September 30, 1990...................        296             83          2005
September 30, 1991...................        119             56          2006
September 30, 1992...................         33              7          2007
September 30, 1994...................          7             --          2009

     The Parent Company and its subsidiaries are subject to regular income tax
and alternative minimum tax ("AMT"). For fiscal 1998, 1997, and 1996, the
current federal tax expense was the result of AMT. Even though the Parent
Company and the Bank have AMT net operating loss carryforwards, utilization of
AMT NOLs is limited to 90% of alternative minimum taxable income.

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

                                        FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------
                                          1998       1997        1996
                                       ----------  ---------  -----------
                                                 (IN THOUSANDS)
TAXES, CALCULATED BEFORE
  EXTRAORDINARY LOSS.................  $   55,424  $  55,242  $    23,743
INCREASE (DECREASE) FROM
     Reduction in valuation allowance
       for the utilization and
       reduction of NOLs.............     (27,500)    --         (103,700)
     State income tax -- current.....       3,949      3,791        3,097
     Tax benefit lawsuit
       resolution....................      (6,020)    --          --
     Other...........................        (131)     1,653        1,095
                                       ----------  ---------  -----------
          Income tax expense
            (benefit)................  $   25,722  $  60,686  $   (75,765)
                                       ==========  =========  ===========

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

     The deferred tax assets and liabilities outstanding at September 30, 1998
and 1997, were as follows:

                                          AT SEPTEMBER 30,
                                       ----------------------
                                          1998        1997
                                       ----------  ----------
                                           (IN THOUSANDS)
DEFERRED TAX ASSETS
     Net operating losses............  $  122,453  $  169,492
     Tax mark to market..............      12,658       5,209
     AMT credit......................      10,033       6,464
     Purchase accounting.............       3,393       5,391
     Depreciation -- premises and
      equipment......................       3,327       3,340
     Real estate mortgage investment
      conduits.......................       2,696       3,006
     Other...........................      21,893      13,291
                                       ----------  ----------
          Total deferred tax
            assets...................     176,453     206,193
                                       ----------  ----------
DEFERRED TAX LIABILITIES
     Originated mortgage servicing
      rights.........................      31,121      24,229
     FHLB stock......................      19,935      16,159
     Bad debt reserve................       3,694      10,931
     Other...........................       8,122       6,438
                                       ----------  ----------
          Total deferred tax
            liabilities..............      62,872      57,757
                                       ----------  ----------
     Net deferred tax asset before
      valuation allowance............     113,581     148,436
     Valuation allowance.............      --         (27,500)
                                       ----------  ----------
          Net deferred tax assets....  $  113,581  $  120,936
                                       ==========  ==========

     As of September 30, 1998, future taxable income of $487 million would fully
utilize the net deferred tax assets.

     The Bank is permitted to deduct an annual addition to a reserve for bad
debts in determining taxable income, subject to certain limitations. In prior
years, this addition differs from the provision for credit losses for financial
reporting purposes. Due to legislation enacted in fiscal 1996, the Bank's
post-1987 tax bad debt reserve, is being recaptured over a six-taxable-year
period. At September 30, 1998, the Bank had approximately $60 million of
post-1987 tax bad debt reserves remaining. There will be no financial statement
impact from this recapture because a deferred tax liability has already been
provided on the Bank's post-1987 tax bad debt reserves. The current tax
liability resulting from recapture of these reserves will be reduced by NOLs
available to offset this income.

     No deferred taxes have been provided on approximately $52 million of
pre-1988 tax bad debt reserves. This tax reserve for bad debts is included in
taxable income in later years if certain circumstances occur, such as, a
distribution in redemption of stock of the Bank (with certain exceptions for
preferred stock); partial or complete liquidation of the Bank following a merger
or liquidation; or a dividend distribution in excess of certain earnings and
profits. However, if a thrift with a pre-1988 reserve is merged, liquidated on a
tax-free basis, or acquired by another depository institution, the remaining
institution will inherit the thrift's pre-1988 reserve and post-1951 earnings
and profits. Because management believes the circumstances requiring recapture
of the reserve are not likely to occur, deferred income taxes of approximately
$18 million have not been provided.

     Concurrent with the Bank's incorporation in December 1988, the Parent
Company, the Bank, and certain related entities entered into an agreement with
the Federal Savings and Loan Insurance Corporation ("FSLIC") providing
financial assistance to the Bank, among other things, (the "Assistance
Agreement"). In December 1993, the Assistance Agreement was terminated. As part
of the termination, the Bank agreed to pay the FRF one-third of certain tax
benefits that are utilized by the Bank through September 30, 2003. Amounts
reflected as

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

payments due in lieu of taxes are based on estimated tax benefits utilized by
the Bank and may vary from amounts paid due to the actual utilization of tax
benefits reported in the federal income tax return.

14.  REGULATORY MATTERS

     The Bank is subject to regulatory capital requirements of the Office of
Thrift Supervision ("OTS"). Any savings association that fails these capital
requirements is subject to enforcement actions by the OTS, which could have a
material effect on its financial statements. To meet the capital adequacy
requirements, the Bank must maintain minimum amounts and ratios of tangible
capital, core capital, and total risk-based capital. As of September 30, 1998
and 1997, the Bank met all capital adequacy requirements.

     As of September 30, 1998 and 1997, the most recent notification from the
OTS categorized the Bank as well-capitalized, the highest of five tiers under
the prompt corrective action provisions. To be categorized as well-capitalized,
the Bank must maintain minimum amounts and ratios of core capital, tier 1
capital, and total risk-based capital. There have been no conditions or events
since September 30, 1998, that management believes would change the
institution's category.

     The following tables show the Bank's compliance with the regulatory capital
requirements:
<TABLE>
<CAPTION>
                                                                            AT SEPTEMBER 30,
                                                    -----------------------------------------------------------------
                                                                              CAPITAL ADEQUACY     WELL-CAPITALIZED
                                                            ACTUAL              REQUIREMENTS         REQUIREMENTS
                                                    ----------------------    -----------------  --------------------
                                                      RATIO      AMOUNT       RATIO    AMOUNT      RATIO     AMOUNT
                                                    ---------  -----------    -----   ---------  ---------  ---------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                     <C>    <C>            <C>       <C>          <C>      <C>    
1998
Stockholders' equity of the Bank..................             $ 1,059,287
    Add:  Net unrealized losses...................                   1,454
    Less: Intangible assets of the Bank...........                 (56,144)
          Non-qualifying deferred tax assets......                 (18,387)
          Non-qualifying MSRs.....................                 (76,594)
                                                               -----------
TANGIBLE CAPITAL..................................       6.75%     909,616    1.50 %  $ 202,268     --         --
    Add:  Core deposit intangibles................                   3,498
                                                               -----------
CORE CAPITAL......................................       6.77% $   913,114    3.00 %    404,641       5.00% $ 674,401
                                                               ===========
TIER 1 CAPITAL....................................       9.97% $   913,114     --        --           6.00%   549,477
    Add:  Allowance for loan and MBS credit
            losses................................                  47,076
                                                               -----------
TOTAL RISK-BASED CAPITAL..........................      10.48% $   960,190    8.00 %    732,636      10.00%   915,794
                                                               ===========

1997
Stockholders' equity of the Bank..................             $   981,466
    Less: Net unrealized gains....................                  (6,326)
          Intangible assets of the Bank...........                  (9,757)
          Non-qualifying deferred tax assets......                 (40,484)
          Non-qualifying MSRs.....................                  (7,880)
                                                               -----------
TANGIBLE CAPITAL..................................       7.72%     917,019    1.50 %  $ 178,143     --         --
    Add:  Core deposit intangibles................                   6,043
                                                               -----------
CORE CAPITAL......................................       7.77% $   923,062    3.00 %    356,468       5.00% $ 594,114
                                                               ===========
TIER 1 CAPITAL....................................      12.65% $   923,062     --        --           6.00%   437,963
    Add:  Allowance for loan and MBS credit
            losses................................                  39,227
                                                               -----------
TOTAL RISK-BASED CAPITAL..........................      13.18% $   962,289    8.00 %    583,951      10.00%   729,939
                                                               ===========
</TABLE>
                                      F-28
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bank meets its capital adequacy requirements. OTS regulations generally
allow dividends to be paid without prior OTS approval provided that the level of
regulatory capital, following the payment of such dividends, meets the capital
adequacy requirements. At September 30, 1998, there was an aggregate of
approximately $235.8 million available for the payment of dividends under these
requirements.

     The Bank's net income and stockholders' equity figures, as presented in the
Consolidated Statements of Financial Condition and Operations in the Bank's
Annual Report on Form 10-K, agree with the information included in the Bank's
Thrift Financial Report filed with the OTS as of September 30, 1998.

FORBEARANCE

     Notwithstanding the above capital requirements, the Bank's capital
requirements were established pursuant to the forbearance letter (a
"Forbearance Agreement") issued simultaneously with the Assistance Agreement.
The OTS has taken the position, with which the Bank disagrees, that the capital
forbearances are no longer available because of the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Despite
the OTS position, management believes that all significant waivers, approvals,
and forbearances related to the Bank's acquisition, including the capital
forbearances, remain in full force and effect following the enactment of FIRREA.
Pursuant to the Settlement Agreement, the Bank has retained all claims relating
to the forbearances against the United States of America, and on July 25, 1995,
the Bank, the Parent Company, and Hyperion Partners L.P. (collectively, the
"Plaintiffs") filed suit against the United States of America in the United
States Court of Federal Claims for alleged failures of the United States (1) to
abide by a capital forbearance which would have allowed the Bank to operate for
ten years under negotiated capital levels lower than the levels required by the
then existing regulations or successor regulations, (2) to abide by its
commitment to allow the Bank to count $110 million of subordinated debt as
regulatory capital for all purposes and (3) to abide by an accounting
forbearance, which would have allowed the Bank to count as capital for
regulatory purposes, and to amortize over a period of twenty-five years, the
$30.7 million difference between certain FSLIC payment obligations to the Bank
and the discounted present value of those future FSLIC payments. The lawsuit was
stayed from the outset by a judge of the Court of Federal Claims pending the
United States Supreme Court's decision in UNITED STATES V. WINSTAR CORP., an
action by three other thrifts raising similar issues (the "WINSTAR cases").
Since the Supreme Court ruling, the Chief Judge of the Court of Federal Claims
has established a case management protocol for the more than 100 lawsuits on the
Court of Federal Claims docket, that, like Plaintiffs case, involve issues
similar to those raised in the WINSTAR case.

     Chief Judge Loren Smith of the United States Court of Federal Claims
transferred all WINSTAR-related cases to his own docket and entered an Omnibus
Case Management Order governing proceedings in such cases, including the
Company's case. Under the Omnibus Case Management Order, Chief Judge Smith
serves as the "Managing Judge" for all WINSTAR-related cases and may assign
other judges of the United States Court of Federal Claims to resolve pre-trial
discovery disputes and common legal issues and to conduct trials. The damage
trial of one of the three WINSTAR cases has been completed, and the other two
cases have been settled. Trials in the remaining cases subject to the Omnibus
Case Management Plan are scheduled to begin in December 1998. The Company's case
is one of thirteen cases that "shall be accorded priority in the scheduling"
of the damages trials under the Omnibus Case Management Order and the Company's
case is currently set to begin on February 1, 1999.

     In December 1996, Chief Judge Smith decided the motion IN LIMINE on damage
theories of Glendale Federal, one of four WINSTAR plaintiffs, and allowed
Glendale Federal to assert several alternative damage theories against the
Government including claims for lost profits. While Plaintiffs' damage model
currently projects an ultimate damage claim in excess of $560 million, the
Company is unable to predict the outcome of Plaintiffs' suit against the United
States and the amount of judgment for damages, if any, that may be awarded.
Plantiffs expect that the Government may argue that no breach by the Government
has occurred and that damages to Plaintiffs, in any event, would approach zero.
The Company, on November 27, 1996, moved for partial summary judgment on

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

liability, and the Government opposed the motion. The Government, on December 8,
1998, moved for partial summary judgment on the issue of lost profits, seeking a
ruling from the Court that Plaintiffs are not entitled to recover lost profits.
Lost profits constitute the largest portion of Plaintiffs total damage claim.
Plaintiffs have opposed the Government's motion.

     Despite the current trial setting of February 1, 1998, for Plaintiffs case,
uncertainties remain concerning the administration of the Omnibus Case
Management Order and the future course of the Company's lawsuit pursuant to the
Omnibus Case Management Order. Accordingly, the Company cannot predict the
timing of any resolution of its claims and now expects the trial of its case to
commence during the second or third quarters of fiscal 1999. The Company is
unable to predict the outcome of its suit against the United States and the
amount of judgment for damages, if any, that may be awarded. Consequently, no
assurances can be given as to the results of this suit.

     The Company and the other Plaintiffs participated with the Government in a
non-binding alternative dispute resolution ("ADR") process that culminated in
a settlement conference on October 19, 1998. The Company had not changed its
assessment of the merits of its claims and agreed to participate in the ADR
process solely in an effort to resolve its claims on favorable terms without the
expense and uncertainty of a trial. No settlement was reached, and the Company
is preparing to try the case on the original trial schedule.

     The Parent Company and the Bank have entered into an agreement with
Hyperion Partners L.P. acknowledging the relative value, as among the parties,
of their claims in the pending litigation. The agreement confirms that the
Parent Company and the Bank are entitled to receive 85% of the amount, if any,
recovered as a result of any settlement of or a judgment on such claims, and
that Hyperion Partners L.P. is entitled to receive 15% of such amount. The
agreement was approved by the disinterested directors of the Company. Plaintiffs
will continue to cooperate in good faith and will use their best efforts to
maximize the total amount, if any, that they may recover.

SAIF ASSESSMENT

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

15.  MINORITY INTEREST AND STOCKHOLDERS' EQUITY

MINORITY INTEREST

     The Bank is authorized to issue a total of 10,000,000 shares of preferred
stock. In fiscal 1995, the Bank publicly issued 4,000,000 shares, $25
liquidation preference per share, of 9.60% noncumulative preferred stock (par
value $0.01) (the "Preferred Stock, Series B"). In fiscal 1993, the Bank
publicly issued 3,420,000 shares, $25 liquidation preference per share, of
10.12% noncumulative preferred stock (par value $0.01) (the "Preferred Stock,
Series A"). These shares are not owned by the Company.

                                      F-30
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The shares of Series A and Series B Preferred Stock are redeemable at the
option of the Bank, in whole or in part, at any time on or after December 31,
1997 or September 30, 2000, at the redemption prices set forth in the table
below:
<TABLE>
<CAPTION>
       SERIES A                    SERIES B                                 DOLLAR EQUIVALENT
BEGINNING DECEMBER 31,     BEGINNING SEPTEMBER 30,     REDEMPTION PRICE         PER SHARE
-----------------------    ------------------------    ----------------     -----------------
<S>                                  <C>                      <C>                <C>    
         1997                        2000                     105%               $ 26.25
         1998                        2001                     104                  26.00
         1999                        2002                     103                  25.75
         2000                        2003                     102                  25.50
         2001                        2004                     101                  25.25
  2002 and thereafter        2005 and thereafter              100                  25.00
</TABLE>
WARRANT

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

     In connection with the termination of the Assistance Agreement, the Bank
agreed to make payments to the FDIC in lieu of dividends on the common stock of
the Bank from December 1993 through August 1996, when the warrant was no longer
outstanding.

CAPITAL STOCK

     In August 1996, the Company filed a registration statement with the
Securities and Exchange Commission and 12,075,000 shares of the Company Class A
common stock were sold to the public. The Company sold 910,694 shares and
certain stockholders sold 11,164,306 shares. The net proceeds to the Company
from this offering of $14.0 million were contributed to the capital of the Bank
in the first quarter of fiscal 1997, for general corporate purposes.

     The authorized stock of the Company consists of the following (par value
$0.01): Class A common stock (voting) -- 40,000,000 shares, Class B common stock
(nonvoting) -- 40,000,000 shares, and preferred stock -- 10,000,000 shares.
Class B common stock may be converted to Class A common stock subject to certain
restrictions.

TREASURY STOCK

     During August 1998, the Company's Board of Directors authorized the
repurchase of up to $50 million of the Company's common stock. The purchases
will be made in the open market or in privately negotiated transactions at
prevailing market prices. The timing and volume of purchases under the program
will depend on market conditions. As of September 30, 1998, the Company had
repurchased 14,200 shares under this new program.

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

EARNINGS PER COMMON SHARE

     The dilutive effect of the Bank warrant has been considered in computing
EPS for periods prior to its redemption in August 1996. Average shares and per
share results for fiscal 1996 were restated for an 1,800-to-one stock conversion
in June 1996.

                                       FOR THE YEAR ENDED SEPTEMBER 30,
                                       ---------------------------------
                                          1998       1997        1996
                                       ----------  ---------  ----------
                                        (IN THOUSANDS, EXCEPT PER SHARE
                                                     DATA)
INCOME
Net income applicable to basic EPS
  before extraordinary loss..........  $  114,378  $  78,894  $  118,935
Less: Bank's net income attributable
  to common stock equivalents on its
  warrant............................      --         --           5,608
                                       ----------  ---------  ----------
Net income applicable to diluted EPS
  before extraordinary loss..........     114,378     78,894     113,327
Extraordinary loss...................      --          2,323      --
                                       ----------  ---------  ----------
Net income applicable to diluted
  EPS................................  $  114,378  $  76,571  $  113,327
                                       ==========  =========  ==========
SHARES
Average common shares outstanding....      31,595     31,596      29,260
Potential dilutive common shares from
  options............................         742        285          27
                                       ----------  ---------  ----------
Average common shares and equivalents
  outstanding........................      32,337     31,881      29,287
                                       ==========  =========  ==========
BASIC
Income before extraordinary loss.....  $     3.62  $    2.49  $     4.06
Extraordinary loss...................      --           0.07      --
                                       ----------  ---------  ----------
Net income...........................  $     3.62  $    2.42  $     4.06
                                       ==========  =========  ==========
DILUTED
Income before extraordinary loss.....  $     3.54  $    2.47  $     3.87
Extraordinary loss...................      --           0.07      --
                                       ----------  ---------  ----------
Net income...........................  $     3.54  $    2.40  $     3.87
                                       ==========  =========  ==========

                                      F-32
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

     The Bank is involved in legal proceedings occurring in the ordinary course
of business that management believes, after consultation with legal counsel, are
not, in the aggregate, material to the financial condition, results of
operations, or liquidity of the Bank or the Company.

FACILITIES OPERATIONS

     Total data processing and rental expense for fiscal 1998, 1997, and 1996,
after consideration of certain credits and rental income, was $16.1 million,
$20.7 million, and $22.4 million. Future minimum commitments on data processing
agreements and significant operating leases in effect at September 30, 1998,
were as follows:

            YEARS ENDING
            SEPTEMBER 30,                   AMOUNT
-------------------------------------   --------------
                                        (IN THOUSANDS)
   1999..............................      $ 17,673
   2000..............................        10,287
   2001..............................         9,762
   2002..............................         9,204
   2003..............................         8,471
   Thereafter........................        35,088

17.  FINANCIAL HIGHLIGHTS BY PRINCIPAL BUSINESS OPERATION

     The Company conducts its business through the Commercial Banking, Financial
Markets, and Community Banking Groups, which comprise the Banking Segment, and
the Mortgage Servicing Segment. Summarized financial information by business
segment and for the Parent Company and Holdings for the periods indicated, was
as follows:
<TABLE>
<CAPTION>
                                                              FOR THE YEAR ENDED SEPTEMBER 30,
                                          -------------------------------------------------------------------------
                                                                           PARENT
                                                           MORTGAGE       COMPANY
                                             BANKING     SERVICING(1)   AND HOLDINGS   ELIMINATIONS     COMBINED
                                          -------------  ------------   ------------   ------------   -------------
                                                                       (IN THOUSANDS)
<S>                                       <C>              <C>            <C>           <C>           <C>          
1998
Revenues................................  $     335,689    $ 50,886       $ 22,450      $  (42,007)   $     367,018
Income before income taxes, minority
  interest, and extraordinary loss......        163,415      16,070         20,875         (42,007)         158,353
Depreciation and amortization of
  intangibles...........................         13,513         591            401         --                14,505
Capital expenditures....................         25,380         938         --             --                26,318
Average identifiable assets.............     12,247,264     484,865        865,779        (837,511)      12,760,397
Servicing (expense) revenue on Banking
  Segment's loans.......................         (9,063)      9,063         --             --              --
</TABLE>
                                      F-33
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
                                                              FOR THE YEAR ENDED SEPTEMBER 30,
                                          -------------------------------------------------------------------------
                                                                           PARENT
                                                           MORTGAGE       COMPANY
                                             BANKING     SERVICING(1)   AND HOLDINGS   ELIMINATIONS     COMBINED
                                          -------------  ------------   ------------   ------------   -------------
                                                                       (IN THOUSANDS)
<S>                                       <C>             <C>             <C>           <C>           <C>          
1997
Revenues................................  $     301,327   $    60,159     $  4,628      $  (18,038)   $     348,076
Income before income taxes, minority
  interest, and extraordinary loss......        154,967        19,087        1,817         (18,038)         157,833
Depreciation and amortization of
  intangibles...........................          9,084         1,446          902         --                11,432
Capital expenditures....................         16,080           412       --             --                16,492
Average identifiable assets.............     10,742,500       423,589      680,156        (743,100)      11,103,145
Loan transfers to (from)................        200,133      (200,133)      --             --              --
Interest income (expense) on single
  family loan balances..................          5,104        (5,104)      --             --              --
Servicing (expense) revenue on Banking
  Segment's loans.......................         (7,008)        7,008       --             --              --

1996
Revenues................................  $     248,814   $    85,206     $ 98,714      $ (109,011)   $     323,723
Income (loss) before income taxes,
  minority interest, and extraordinary
  loss..................................         82,449        (3,120)      97,518        (109,011)          67,836
Depreciation and amortization of
  intangibles...........................          9,060         5,200        1,000         --                15,260
Capital expenditures....................          8,951           443       --             --                 9,394
Average identifiable assets.............     10,947,844       640,780      633,473        (992,666)      11,229,431
Loan transfers to (from)................        818,563      (818,563)      --             --              --
Interest income (expense) on single
  family loan balances..................         21,878       (21,878)      --             --              --
Servicing (expense) revenue on Banking
  Segment's loans.......................         (9,461)        9,461       --             --              --
</TABLE>
------------

(1) Included activity associated with the Company's mortgage origination
    business prior to the sale of certain retail and wholesale mortgage
    origination offices effective February 1, 1997, and the related gain on the
    disposition of those offices. Revenues for the Mortgage Servicing Segment
    for fiscal 1997 included $18.6 million related to the mortgage origination
    business. Income before income taxes, minority interest, and extraordinary
    loss for the same period included $2.6 million related to the mortgage
    origination business.

     Revenues were comprised of net interest income (before the provision for
credit losses), non-interest income and dividends received from the Bank and
Holdings. Interest costs incurred by the Parent Company and Holdings were
deducted from its revenues since they related to long-term debt and were not
directly related to a specific segment. Non-interest expenses of the Bank were
fully allocated to each segment of the Bank. Non-interest expenses incurred by
support departments that were directly related to a segment were charged to that
segment. General corporate overhead expenses not specifically identified to an
individual segment, but necessary for the maintenance of the Bank as a going
concern, were also allocated to the two segments. Parent Company and Holdings
expenses were not allocated to the Bank's business segments. The elimination
amounts were for dividends received by the Parent Company and Holdings from the
Bank and single family loans funded by the Banking Segment.

     For segment reporting purposes, the value of servicing related to loans
purchased from third parties by the Banking Segment was segregated from the
original loan basis and was allocated to the Mortgage Servicing Segment. The
amortization of this capitalized amount approximated $890,000 for the four
months ended January 31, 1997, and $2.3 million for fiscal 1996.

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

     For loans transferred from the Mortgage Servicing Segment to the Banking
Segment, the difference, if any, between the Banking Segment's "purchase
price" and the actual Book Value of the loans was retained by the Mortgage
Servicing Segment at the time of transfer. The amount retained was amortized to
operations of the Mortgage Servicing Segment and approximated $1.9 million for
the four months ended January 31, 1997, and $1.9 million for fiscal 1996.

MORTGAGE BANKING RESTRUCTURINGS AND SALE OF OFFICES

     In fiscal 1996, the Company recorded a restructuring charge of $10.7
million before tax, to recognize the costs of closing or consolidating certain
mortgage origination offices and several regional operation centers and recorded
$1.8 million of other expenses related to its mortgage origination business.

     In fiscal 1997, the Company sold certain of its mortgage origination
offices. In connection with this sale, the remaining offices were restructured
or closed. The net gain on the sale of these offices, reduced by additional
restructuring costs, was $4.7 million before tax, $2.9 million after tax, or
$0.09 per share. At September 30, 1998, the unpaid liability relating to the
sale, the two restructurings, and the branch closures was estimated to be $1.4
million, and is expected to be paid in full by the end of fiscal 1999. The
Company has maintained its mortgage servicing business, its retail mortgage
origination capability in Texas through its community banking branches, and its
wholesale and other mortgage origination capabilities through its Financial
Markets Group.

     Activity associated with the Company's mortgage origination business prior
to its sale and the costs associated with restructuring or closing of the
remaining offices have been included with the Mortgage Servicing Segment
activity for fiscal 1997. The wholesale mortgage origination offices and other
mortgage origination activities that were retained have been integrated into the
existing Financial Markets Group and, therefore, the Banking Segment, as of the
same date. Prior period segment information has not been restated.

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

18.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table represents summarized data for each of the quarters in
fiscal 1998 and 1997.
<TABLE>
<CAPTION>
                                                          1998                                        1997
                                       ------------------------------------------  ------------------------------------------
                                        FOURTH      THIRD     SECOND      FIRST     FOURTH      THIRD     SECOND      FIRST
                                        QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                             (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>      
Interest income......................  $ 227,805  $ 228,360  $ 223,216  $ 219,365  $ 210,774  $ 202,903  $ 197,928  $ 199,103
Interest expense.....................    156,313    153,173    151,835    151,344    145,039    136,283    131,424    133,318
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
    Net interest income..............     71,492     75,187     71,381     68,021     65,735     66,620     66,504     65,785
Provision for credit losses..........      3,346      1,814     11,524      3,439      3,463      3,425      4,305      6,914
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net interest income after provision
  for credit losses..................     68,146     73,373     59,857     64,582     62,272     63,195     62,199     58,871
Non-interest income..................     26,827     22,653     14,858     16,599     17,130     17,314     23,831     25,157
Non-interest expense.................     49,759     50,536     47,057     41,190     39,726     41,257     42,584     48,569
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income before income taxes, minority
  interest, and extraordinary loss...     45,214     45,490     27,658     39,991     39,676     39,252     43,446     35,459
Income tax expense (benefit).........     16,917     17,014    (23,207)    14,998     15,187     15,086     16,780     13,633
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income before minority interest and
  extraordinary loss.................     28,297     28,476     50,865     24,993     24,489     24,166     26,666     21,826
Minority interest -- subsidiary
  preferred stock dividends..........      4,564      4,563      4,563      4,563      4,564      4,563      4,563      4,563
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Income before extraordinary loss.....     23,733     23,913     46,302     20,430     19,925     19,603     22,103     17,263
Extraordinary loss...................     --         --         --         --         --          2,323     --         --
                                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
    Net income.......................  $  23,733  $  23,913  $  46,302  $  20,430  $  19,925  $  17,280  $  22,103  $  17,263
                                       =========  =========  =========  =========  =========  =========  =========  =========

Earnings per common share
    Basic............................  $    0.75  $    0.76  $    1.47  $    0.65  $    0.63  $    0.55  $    0.70  $    0.55
    Diluted..........................       0.74       0.74       1.43       0.63       0.62       0.54       0.69       0.54

Average common shares outstanding....     31,595     31,596     31,596     31,596     31,596     31,596     31,596     31,596
Average common shares and equivalents
  outstanding........................     32,252     32,442     32,317     32,325     32,168     32,081     31,960     31,820
</TABLE>
                                      F-36
<PAGE>
                               BANK UNITED CORP.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19.  CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

                                 PARENT COMPANY
                  CONDENSED STATEMENTS OF FINANCIAL CONDITION
                                 (IN THOUSANDS)

                                          AT SEPTEMBER 30,
                                       ----------------------
                                          1998        1997
                                       ----------  ----------
ASSETS
Cash and cash equivalents............  $    3,144  $    1,789
Investment in subsidiaries...........     877,357     798,174
Intangible assets....................       3,447       3,848
Deferred tax asset...................      26,755      22,589
Other assets.........................       2,200          70
                                       ----------  ----------
TOTAL ASSETS.........................  $  912,903  $  826,470
                                       ==========  ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable........................  $  219,720  $  219,699
Other liabilities....................       8,771       8,292
                                       ----------  ----------
          Total liabilities..........     228,491     227,991
                                       ----------  ----------
STOCKHOLDERS' EQUITY
Common stock.........................         316         316
Paid-in capital......................     129,343     129,286
Retained earnings....................     556,708     462,551
Accumulated other comprehensive
  income --unrealized gains (losses)
  on subsidiary's securities
  available for sale, net of tax.....      (1,454)      6,326
Treasury stock, at cost..............        (501)     --
                                       ----------  ----------
          Total stockholders'
           equity....................     684,412     598,479
                                       ----------  ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY.............................  $  912,903  $  826,470
                                       ==========  ==========

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

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

                                 PARENT COMPANY
                       CONDENSED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)

                                       FOR THE YEAR ENDED SEPTEMBER 30,
                                       ---------------------------------
                                          1998       1997        1996
                                       ----------  ---------  ----------
INCOME
Dividends from subsidiary............  $   41,355  $  17,993  $  109,011
Other................................      --         --              56
                                       ----------  ---------  ----------
          Total income...............      41,355     17,993     109,067
                                       ----------  ---------  ----------
EXPENSE
Interest expense -- notes payable....      19,546      9,731      10,353
Amortization of intangibles..........         401        426       1,000
Other................................       1,126      1,892         196
                                       ----------  ---------  ----------
          Total expense..............      21,073     12,049      11,549
                                       ----------  ---------  ----------
INCOME BEFORE UNDISTRIBUTED INCOME OF
  SUBSIDIARY AND INCOME TAXES........      20,282      5,944      97,518
Equity in undistributed income of
  subsidiary.........................      86,213     65,955         519
                                       ----------  ---------  ----------
INCOME BEFORE INCOME TAXES...........     106,495     71,899      98,037
Income tax benefit...................      (7,883)    (4,672)    (20,898)
                                       ----------  ---------  ----------
NET INCOME...........................  $  114,378  $  76,571  $  118,935
                                       ==========  =========  ==========

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

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

                                 PARENT COMPANY
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                        FOR THE YEAR ENDED SEPTEMBER 30,
                                       ----------------------------------
                                          1998        1997        1996
                                       ----------  ----------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...........................  $  114,378  $   76,571  $  118,935
Adjustments to reconcile net income
  to net cash provided by operating
  activities:
     Equity in undistributed income
       of subsidiary.................     (86,213)    (65,955)       (519)
     Deferred tax benefit............      (4,166)     (3,062)    (19,527)
     Amortization of intangibles.....         422         434       1,000
     Change in other assets..........      (2,130)      5,206      (4,486)
     Change in other liabilities.....         479      (5,246)      3,590
     Management Restricted Stock
       award.........................      --          --           3,709
                                       ----------  ----------  ----------
          Net cash provided by
            operating activities.....      22,770       7,948     102,702
                                       ----------  ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in securities
       purchased under agreements to
       resell........................      --          --           2,121
     Capital contributions to
       subsidiary....................        (750)   (108,434)     --
                                       ----------  ----------  ----------
          Net cash (used) provided by
            investing activities.....        (750)   (108,434)      2,121
                                       ----------  ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common
       stock.........................      --          --          13,966
     Repayment of Senior Notes.......      --        (114,500)     --
     Proceeds from issuance of
       Subordinated Notes............      --         219,691      --
     Payment of issuance costs of
       Subordinated Notes............      --          (4,012)     --
     Payment of common stock
       dividends.....................     (20,221)    (17,694)   (100,000)
     Stock repurchased...............        (501)     --          --
     Stock options exercised.........          57      --          --
                                       ----------  ----------  ----------
          Net cash provided (used) by
            financing activities.....     (20,665)     83,485     (86,034)
                                       ----------  ----------  ----------
NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS...................       1,355     (17,001)     18,789
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR..................       1,789      18,790           1
                                       ----------  ----------  ----------
CASH AND CASH EQUIVALENTS AT END OF
  YEAR...............................  $    3,144  $    1,789  $   18,790
                                       ==========  ==========  ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION
  Cash paid for interest.............      19,200       9,436      10,409
NONCASH INVESTING ACTIVITIES
  Net transfer of investment in Bank
     and Senior Notes to Holdings....      --         525,751      --
  Capital contributed to Holdings....      --         121,186      --

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

                                      F-39