Quick Facts about BankUnited Financial Corp

Downey Financial is a great, pure play on SoCal Option ARMs. But what about other states?

BankUnited Financial (BKUNA) is a Coral Gables, FL based bank that primarily writes 1-4 family residential loans (84.7%), but also has home equity (3.3%) and land (2.8%) exposure.

Of the residential loans, FL represents 60.23%, with CA 6.06% and AZ 5.58%.

From a recent BKUNA investor presentation: "Tony Villamil echoed what we believe, Florida with it’s diverse economic influences and nationally leading population and job growth is the best banking market in the country."

Hmm. Is that claim sustained by the facts? "Florida had the most homes in the foreclosure process nationwide in February, according to RealtyTrac, which reported a two-fold year-over-year gain in delinquencies —more than 19,144 statewide." That is from the Florida Association of Realtors April newsletter. Per capita they have the 3rd most foreclosures.

Let's go to the 10-Q for a survey of facts:

87% of their 1-4 family residential loans are ARMs. 69.3% are option ARMs, 17.7% are non-option ARMs, the rest are fixed rate.

"The average LTV of the option ARM portfolio at inception was 73.67% with the adjustment for coverage of Private Mortgage Insurance (PMI)."

"Option ARMs represent 60.9% of BankUnited’s total loans outstanding as of December 31, 2006. ...Option ARM loans with a balance of $5.6 billion were negatively amortizing with approximately $129.7 million of their principal balances resulting from negative amortization. As of September 30, 2006, Option ARM loans with a balance of $5 billion were negatively amortizing with approximately $89 million of their principal balances resulting from negative amortization."

Their net income was $27M for 4Q 2006, but negative amortization balances increased by $40.7M. NegAm was 151% of net income.

BKUNA has a 115% cap for negative amortization.

"Upon reaching this limit the monthly payment increases to require full repayment of principal over the remaining term of the loan. The borrower has other options that would allow him to pay interest only or a higher amount that would reduce the outstanding loan balance in any month."

Risks to the trade:

• Watch out, because BKUNA sells for a bargain basement 0.98 P/BV ratio.

Fil Zucchi has a post on BKUNA at Minyanville.