BankUnited Capital Caution; Independence in Peril If Funding Effort Fails

By Kuehner-Hebert, Katie | American Banker, December 18, 2008 | Go to article overview

BankUnited Capital Caution; Independence in Peril If Funding Effort Fails


Kuehner-Hebert, Katie, American Banker


Byline: Katie Kuehner-Hebert

BankUnited Financial Corp. in Coral Gables, Fla., told investors it may not be around to ring in the new year if it fails to meet a regulatory requirement to secure additional capital.

The $14.2 billion-asset company has suffered several consecutive quarterly losses as it struggles to overcome exposure to souring option adjustable-rate mortgages.

In September, the Office of Thrift Supervision ordered BankUnited to boost its capital by Dec. 31, but late Tuesday the company said it is struggling to meet the OTS requirement to raise Tier 1 and total risk-based capital ratios to 7% and 14%, respectively. It forecast that it would report a loss of $327 million for its fiscal fourth quarter, which ended Sept. 30, but said it was unable to report fiscal 2008 results by Monday's deadline.

In a regulatory filing, BankUnited said: "We are in negotiations with a fund to raise capital and restructure our balance sheet. We cannot assure you that these negotiations will be successful. If such negotiations are not successful, there is substantial doubt about our ability to continue as a going concern."

BankUnited is not the first banking company to wave such a red flag at investors.

Downey Financial Corp., a Newport Beach, Calif., thrift with similar option ARM exposure, presented investors with an equally grim outlook in early November. The OTS on Sept. 5 had given the company until yearend to raise capital. The regulator seized it Nov. 21 and sold its operations to U.S. Bancorp. of Minneapolis. In November, Team Financial Inc. in Paola, Kan.; Vineyard National Bancorp in Corona, Calif.; and Capital Corp. of the West in Merced, Calif., all warned investors that they might not survive if they did not raise capital quickly. Though none of the three has raised funds, they remain open for business.

BankUnited, meanwhile, warned investors Tuesday that, even if does meet the OTS capital requirements, it might need to raise more. "We cannot assure you, given our current level of losses, that we will not need to raise additional capital in the future," the filing said.

The company also said that it has recently identified proceeds from securities sales in both 2006 and 2007 that should have been reported as operating cash flows instead of investing cash flows. If the discrepancy is material, BankUnited will restate its financial results to include the amended consolidated statement of cash flow.

Michael Rose, an analyst at Raymond James & Associates, said in a research note Wednesday that BankUnited "appears to be in a 'race against the clock' in its efforts to survive. …

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