Disaster At BankUnited

Reuters is reporting BankUnited 4th Quarter Earnings Plummet.

BankUnited Financial Corp (BKUNA) reported a 73 percent fall in fourth-quarter earnings, which was also significantly below analysts' estimate, as loan loss provision quadrupled and non-performing assets rose eight-fold.

The bank holding company posted a profit of $6.4 million, or 17 cents a share for the quarter, compared with $24.2 million, or 63 cents a share, a year ago.

BankUnited's Press Release contains more disasters:

• Option-ARM balances totaled $7.6 billion. Option-ARMs are 70% of the residential loan portfolio and 60% of the total loan portfolio.
• $6.5 billion in Option-ARMs had negative amortization of $270 million
• The growth in negative amortization was $48 million, compared to $46.4 last quarter.
• Total net charge-offs were $5.6 million compared to $1.1 million last quarter.
  
• The provision for loan loss totaled $19.1 million, compared to $4.6 million last quarter.
  
• Real Estate Owned (REOs) rose to $27.7 million from $7.4 million last quarter.
  
• Non-performing assets rose to $208.5 million from $124.4 million last quarter.
  
• Allowance for loan loss was $58.6, compared to $45.1 million last quarter.
  
• Allowance for loan losses as a percentage of total loans rose to 0.46% from 0.36% last quarter.
  
• Allowance for loan losses as a percentage of non-performing loans fell to 32.4% from 38.5%
  

Bank United Residential Loan Portfolio



click on chart for a sharper image

Even ignoring the huge percentage of reduced doc loans, Stated income and no doc loans are 51% of the residential portfolio. Full doc loans are a mere 18% of the portfolio.

$7.6 billion of their portfolio was in option arms. $6.5 Billion of that $7.6 billion is now negatively amortizing. Their total residential loan portfolio is $10.1 billion. Let's do the math. 64% of their residential loan portfolio is negatively amortizing. Here's more math: 51% of their entire loan portfolio is negatively amortizing.

People are clearly struggling to make payments. At the same time property values are falling dramatically. Unless there were re-appraisals (there weren't) the Loan to Value (LTVs) and the potential for losses are both way higher than reported.

Miraculously, in spite of all this, the allowance for loan losses on a percentage basis fell by 6%

The growth in negative amortization was $48 million. Accounting rules being what they are, negative amortization is counted as "noncash interest earned" and immediately falls to the bottom line. It is doubtful that BankUnited collects anywhere close to the full amount.

This company is in serious trouble.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/