Now that federal regulators have extended their April 30 deadline for BankUnited Financial Corp. (NASDAQ:BKUNA) to find a buyer by two weeks, to May 14, the question needs to be asked: Why are regulators doing this, given that the embattled Coral Gables, Fla.-based thrift, deemed critically undercapitalized by the Office of Thrift Supervision, has received interest from at least two bidding groups? (See related story from The Deal Pipeline.)
The troubles besetting BankUnited, which was the eighth-largest bank in Florida as of June 30 -- and the largest with headquarters in Florida -- may have led to "extremely disappointing" bids from the interested parties, says one source. "You'd have to pay anyone to take the bank," the source says.
Indeed, Kenneth Thomas, an independent bank analyst based in Miami, says that the South Florida thrift, which suffered steep declines in the value of its portfolio of option adjustable-rate mortgages, could see losses approaching $2 billion on its asset portfolio of $14 billion. This would leave a sizable hole for any buyer, even after accounting for Thomas' estimate of $500 million in franchise value, any government aid in the form of money from the Troubled Asset Relief Program and the tax benefit to the acquirer accruing from BankUnited's losses in 2008.
"This will be the costliest rescue for the FDIC since Downey Savings & Loan," Thomas speculates.
The FDIC took a $1.4 billion hit to its balance sheet in November, after it seized the Southern California-based Downey Savings & Loan, and engineered a sale to Minneapolis-based U.S. Bancorp (NYSE:USB).
The costliest failure for the FDIC in the current wave of bank collapses came from IndyMac, which cost the agency $10.7 billion.
Thomas says that, given mounting losses for the FDIC, it behooves them to take as long as they need, in the absence of a bank run, to minimize any losses it can. He suggests as well that BankUnited's position in Florida, the fourth-largest banking state in terms of deposits, could ultimately gain it other interested bidders.
"Why not take your time?" he asks, and name Downey's buyer, U.S. Bank, as a potential bidder. - Vipal Monga
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