Is the Florida bank BankUnited (BKUNA) typical of the where most regionals might find themselves in today’s financial markets? Maybe not-it’s in Florida, after all.
But if it is, ladies and germs, we’re in for a helluva big CRASH.
I’ve read two accounts this morning that peruse BKUNA‘s siuation and ’tain’t pretty.
“The bank is looking to raise $400 million of capital, which at the current stock price would translate into an additional 170m shares.”
“As of March 31st, the company had only 35 million shares outstanding. I’m no expert on secondary stock offerings, but seems to me that issuing another 170 million will effectively wipe out existing shareholders.”
“And yet they conveniently forget to mention that 60% of their loans outstanding are option ARMs.”
“This hasn’t hurt the company’s “profits” however. Each month the bank is recognizing accounting profits on “payments” that borrowers aren’t actually making in cash. It’s as if your credit card company recognized a full $1000 of income even though you only paid ‘em $10.”
“We see this in action on the annual cash flow statement, see page F-6 of the company’s proxy filing. The company’s TOTAL net profit in 2007 was $81.4 million. But that included over $181m of “negative amortization,” the accountants’ fancy word for “income” that wasn’t actually received in cash.”
“It’s amazing that CEO Alfred Camner hasn’t been fired. Or not, considering he owns 93% of the Class B voting shares, which have 10 times the voting power of the Class A shares available to individual investors.”
“‘Give me money to save my bank, and I’ll give you the voting power you need to fire me!’ No doubt with a comfortable retirement package.”
“(Cammer) is the Senior Managing Partner of law firm Camner, Lipsitz and Poller. Just in the last three years, CLP has billed BKUNA $12.0 million for legal fees related to ‘loan closings, foreclosures, litigation, corporate and other matters.'”
“As CEO of the bank, he pays himself to make bad loans. Then as Senior MP of his law firm, he pays himself again to clean up the mess his loans leave behind.”
“Camner’s daughter Errin is the Managing Director of that law firm.”
“And oh yeah, Camner’s other daughter Lauren sits on BKUNA’s board of directors and owns another small chunk of super-voting Class B shares.”
[BankUnited imploding by Option Armageddon]
As usual, Mish looks at the nitty gritty of the 10Q, and again, tells it like it is:
“It’s market cap today is $68 million. Now it wants to raise $400 million which is 588% of what the market says it’s worth. If that dilution comes on top of the declines we have already seen, its share price will be something like 32 cents.”
“I see $748 million in mortgage backed securities at ‘fair value.’ Anyone want to hazard a guess as to how ‘fair’ that value is?”
“What about a total loan portfolio of $12.3 billion? Isn’t that a little excessive for a bank with a market cap of $68 million.”
“I also see $73.4 million in REOs – real estate owned.”
Your tax dollars hard at work, enriching the lives of the few.
It’s Camner time!