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." Though the company said in its filing that it had sufficient liquid assets at Sept. 30 to service its debt obligations for about 16 months, Mr. Rose wrote that BankUnited's only source of income — dividend payments from its bank — was prohibited by the OTS order.

Calls to BankUnited officials were not returned Wednesday.

If BankUnited were to fail, likely bidders on its branches, deposits, and certain assets in a government-assisted deal could include Regions Financial Corp. in Birmingham, Ala.; SunTrust Banks Inc. in Atlanta; and BB&T Corp. in Winston-Salem, N.C., according to an analyst, who asked not to be named. All three have been buyers in similar deals this year. Other bidders in a government-assisted deal could include Fifth Third Bancorp in Cincinnati, which also has already bought assets from a failed bank, and Spain's Banco Bilbao Vizcaya Argentaria SA, whose U.S. retail bank operates under the name BBVA Compass, said Jeff Davis, a bank analyst and principal at Wolf River Capital LLC.

BB&T and Fifth Third declined to comment; Regions, SunTrust, and BBVA did not return phone calls.

On Tuesday BankUnited said it was reviewing the company's regulatory, liquidity, and capital issues, which it said — combined with "adverse market conditions" — prevented it from filing its financial statements for fiscal 2008 by Dec. 15.

BankUnited's overreliance on option adjustable-rate mortgages became glaringly evident as the housing crisis deepened. Last Dec. 31, such loans made up made up 70% of its residential portfolio and 59% of its total loan book. At that point, then-chief executive Alfred R. Camner said the company would focus on adding commercial loans, particularly commercial real estate loans. However, at Sept. 30, commercial loans made up about 11% of its total portfolio, according to the Federal Deposit Insurance Corp. — one percentage point more than their share at Dec. 31, 2007. It has also sought to slash costs by cutting jobs. In September, the company said that it would trim 12% of its staff, or about 160 employees. And in October, it reshuffled management. Mr. Camner, a BankUnited founder, retired as chairman and chief executive officer. Ramiro A. Ortiz, the president and chief operating officer, is now also the CEO. Efforts to reach Mr. Camner Wednesday were unsuccessful. BankUnited's woes have driven its shares down more than 96.5% this year. On Wednesday, the stock closed at 24 cents, down 2.5 cents.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.