BY JIM FREER
Special Correspondent

Federal regulators late Thursday afternoon seized Coral Gables-based BankUnited, FSB, the largest bank based in Florida, and sold it to a newly formed savings bank with the name, BankUnited.

BankUnited’s new ownership is a consortium of investors that includes John Kanas, a veteran New York banker who will head its operations beginning Friday, May 22, and New York-based investment firm WL Ross & Co. The investors are putting $900 million in capital into the bank.

Bank United, FSB, had $12.8 billion in assets and $8.6 billion in deposits as of May 2.

The bank had been suffering heavy losses, stemming mostly from its portfolio of “monthly option” adjustable rate mortgages. South Florida condominium units were prominent among its growing volume of non-current loans and foreclosures.

BankUnited had been under regulators’ orders to find a buyer or raise capital, and regulators had been directing those efforts since late last month. A change in control was widely expected by the end of this week.

The Federal Deposit Insurance Corp. said others in the investment consortium are: Carlyle Investment Management L.L.C.; Blackstone Capital Partners V L.P.; Centerbridge Capital Partners, L.P. LeFrak Organization, Inc; The Wellcome Trust; Greenaap Investments Ltd.; and East Rock Endowment Fund.

The WL Ross-led group was one of several groups that reportedly submitted bids for BankUnited.

BankUnited's 86 branch offices, all in Florida, will be open Friday during normal business hours. All deposits acquired by the new owners will be insured by the FDIC. Customers can continue to use BankUnited, FSB's, checks, ATM cards and debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

On Thursday, The U.S. Office of Thrift Supervision (OTS) acquired the banking operations, including all the non-brokered deposits, of BankUnited in a transaction facilitated by the FDIC. The FDIC, as receiver, then arranged the sale to the group led by Kanas and WL Ross.

Details of the regulators’ takeover are on the FDIC’s Web site.

The FDIC information package includes details for possible claims of creditors and for investors who held shares of BankUnited stock, which traded on Nasdaq under the symbol BKUNA.

The FDIC estimated that the cost to its Deposit Insurance Fund will be $4.9 billion, and said the acquisition by the Kanas-led group was the least costly resolution, compared with alternatives.

The FDIC provided this method of calculating potential losses:

The new BankUnited will assume $12.7 billion in assets and $8.3 billion in nonbrokered deposits.

The FDIC and BankUnited entered into a loss-share transaction and will share in the losses on approximately $10.7 billion in assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the covered assets by keeping them in the private sector.

The FDIC also said it expects the agreement will minimize disruptions for loan customers as they will maintain a banking relationship. BankUnited will not assume the approximately $348 million in brokered deposits.

The FDIC will pay the brokers directly. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

According to its reports to the FDIC, BankUnited reported a net loss of $1.1 billion in 2008.

On May 2, BankUnited said it expected to report a loss of $443 million for the quarter ended March 31. In other recent reports, the bank said its loan losses had placed it in a situation of negative capital.

On Dec. 31, 2008, BankUnited’s ratio of non-current loans to total loans was a whopping 11.02 percent. Non-current loans are 90 or more days delinquent or are no longer accruing interest.

The bank’s problem loans were mostly on its option ARMs to buy single-family homes and condos.

Those loans permitted borrowers to select monthly payments that deferred some interest and principal.

Thus, loan balances grew on many loans. Before the housing market turned downward, many option ARM borrowers expected to sell their homes at profits--and then pay off balances on option ARMs.

When housing prices began falling, many option ARM borrowers were among homeowners who owed more on homes than their market value.

Option ARMs have additional problems. After several years, the starting teaser rates begins rising and borrowers are required to begin repaying deferred interest.

BankUnited was the 34th FDIC-insured bank closed this year, and the third in Florida. The others were Ocala National Bank, which was based in Ocala, and Riverside Bank of the Gulf Coast, which was based in Ocala.

Reporter's Notebook

The Condo Vultures® Foreclosure Database™ of court records shows that through May 21, BankUnited this year has filed 390 foreclosure notices on residential properties in South Florida.

That includes condo units, single family homes and lots on which it had made mortgages that became delinquent. Since the beginning of this year, BankUnited has ranked in the top 15 for foreclosure filings by lenders in the combined Miami-Dade, Broward and Palm Beach market.

BankUnited was on pace to surpass its 485 foreclosure filings for all of 2008.

That was happening even though it was among banks that put moratoriums on foreclosures, beginning in February.

The FDIC news release on its arranged sale of BankUnited did not have information on the new owner’s plans for selling foreclosures, or on any plans for resuming foreclosures on delinquent loans.

Subscribers to the Condo Vultures® Foreclosure Database™ can obtain the addresses, default amounts, valuations and other information on all South Florida residential foreclosures that BankUnited and other lenders have filed since 2007.

Jim Freer is a special correspondent for CondoVultures.com. He is a veteran banking reporter and a consultant to the finance industry in South Florida.