Given its markets, the high level of nonperforming loans on its books, and investors' wariness to throw more money at troubled banks, raising the $400 million BankUnited Financial Corp. says it needs is a tall order.
An early hurdle for the Coral Gables, Fla., company — the management team's insistence on retaining majority ownership — has been cleared. The $14.3 billion-asset thrift's managers, including chairman and chief executive Alfred R. Camner, agreed June 18 to give up control by converting their higher-ratio class B shares to class A common, reducing their stake to roughly 9%.
Matt Olney, an analyst with Stephens Inc., said it was inevitable that management would bend.
"You can't raise that amount of capital when your stock is trading at the valuation it is without giving up the voting power," Mr. Olney said.
Still, the move may not be enough; once burned, investors are twice shy, said Matthew Kelley, an analyst with Sterne Agee & Leach.
"You go down the whole capital-raising list the last couple of months, and everybody lost their shirt," Mr. Kelley said. "So I think it's reasonable to believe that the terms that people are willing to invest in … are only going to get more difficult."
Indeed, some analysts said BankUnited waited too long to raise capital.
"Investors came to them at the end of the year and said, 'Hey, we'll give you some capital if you'll give up your power.' The stock was at $5 or $6 then. And they said, 'No way.' But now it's at $1 and they're a lot more desperate than a few months ago," Mr. Olney said.
In afternoon trading Wednesday, BankUnited shares were at 81 cents, down from $20 a year ago.
BankUnited declined to comment for this story, but disclosed its intention to raise $400 million in a June 18 Securities and Exchange Commission filing.
BankUnited's Tier 1 capital ratio stood at 13.41% on March 31, down from 14.36% a year earlier. But with $608 million in nonperforming loans, some analysts said BankUnited's prospects are grim.
"Given the rapid deterioration in asset quality and low levels of reserve coverage, one has to question whether the company can continue to operate as a going concern given our projections for losses," said Michael Rose, an analyst with Raymond James.
Parallels to PFF Bancorp Inc. of Rancho Cucamonga, Calif., are hard to miss.
In early June the $4.4 billion-asset PFF announced a plan to raise $460 million in a private placement consisting of debt and stock. Less than two weeks later PFF said it was selling itself to FBOP Corp. in Oak Park, Ill., for just $30.5 million.
BankUnited aggressively marketed option adjustable-rate mortgages, with little documentation, in south Florida — one of the hardest-hit mortgage markets in the country.
In the past two quarters BankUnited lost $93.1 million. In the second quarter its nonperforming loans rose 763% from a year earlier, to $608 million. Its ratio of nonperformers to total loans was 4.41%, up from 0.58% in last year's second quarter.
BankUnited's deposit base is predominantly wholesale, making the company less attractive to potential buyers. BankUnited's allowance for loan losses nearly doubled in the second quarter, to $202 million, compared with the first quarter.
At the beginning of the year, BankUnited announced its plan to move away from option ARMs and try to focus on its commercial banking platform. But that will not be easy either, Mr. Rose said.
Southern Florida, he said, is "a challenging environment to operate in for everybody, let alone trying to transition from one business strategy to another."
