Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

US Banking Stocks Downward Spiral to Zero

Companies / Credit Crisis 2008 Jun 20, 2008 - 11:15 AM GMT

By: Mike_Shedlock

Companies Best Financial Markets Analysis ArticleOn Wednesday, BankUnited Financial Corporation Announced Public Offering of Stock .
BankUnited Financial Corporation (BKUNA) today announced the launch of a public offering of its Class A common stock, with gross proceeds of $400 million. The offering is expected to be pursuant to customary underwriting terms for a firm commitment offering of this type.


BankUnited expects to use the net proceeds from this offering for general corporate purposes, including contributing capital to its bank subsidiary. This offering was not greeted with open arms to say the least. Bank United was crushed 33% ahead of the news (who knew?) and another 19% the following day. Its stock now sits at $1.90.

Bank United Weekly Chart


Why Now?

Why didn't Bank United raise capital at $31, $20, $14, or even $8?

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.

Problem Financials

  • Bank United (BKUNA) $1.90
  • Chorus Bank (CORS) $4.74
  • Washington Mutual (WM) $6.35
  • Indymac (IMB) $1.26
  • Ambac (ABK) $2.03
  • Keycorp (KEY) $11.35
  • MBIA (MBI) $6.45
  • Fifth Third (FITB) $9.75

Opportunities Missed

Every one of those companies had enormous opportunities to shed assets or raise capital. Now, BKUNA is doing so at $1.90 and Fifth Third at $9.75 (see Fifth Third Clobbered In Capital Raising Plan ). Ambac is in denial about the need to raise capital. So is Indymac.

None of these companies could see what was happening even though it was perfectly obvious to many of us.

So why now for Bank United? This is a guess on my part, but I suspect the Fed told Bank United to raise capital or be taken over. I also think this is part of the reason Paulson is desperately pleading for more Fed power. See my comments on this horrendous idea in Screams For More Fed Authority Get Louder .

Will $400 million be enough for Bank United?

To answer, let's take a look at the balance sheet from the latest 10Q .

Bank United Assets


Hmm. What have we here?

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. Anyone want to guess the fair value of that?Finally, I see Goodwill of $28.3 million that is most likely worthless.

But wait... There's more. Let's look at the liability side.

Bank United Liabilities


That's interesting isn't it? Bank United, a bank worth $68 million, is in hoc to the Federal Home Loan Bank for $5.86 billion.

Federal Home Loan Bank System


Inquiring minds just might be interested in the FHLBank System .

Mission:

"The mission of the Federal Home Loan Banks is to provide cost-effective funding to members for use in housing, community, and economic development; to provide regional affordable housing programs, which create housing opportunities for low and moderate-income families; to support housing finance through advances and mortgage programs; and to serve as a reliable source of liquidity for its membership."

Advances:

"FHLBank Advances. Advance lending is the FHLBanks' main business line. It currently represents about two-thirds of all the FHLBanks assets. These loans, known as advances, are well-collateralized loans used by members to support mortgage lending, community investment and other credit needs of their customers.”

FHLBank consolidated obligations are sold to institutional investors through the Office of Finance. The Office of Finance, which handles FHLBank transactions, is able to sell the debt at rates just slightly higher than Treasury bonds because FHLBank products are rated Aaa/AAA by Moody's and Standards and Poor's.

The FHLBanks frequently borrow short, primarily in the form of discount notes, while our membership tends to lend long, primarily to fund 15 to 30-year mortgages. At first blush, this may appear to be a term mismatch, but it's not. In fact, the FHLBank System intermediates on behalf of its members to reduce term mismatch risk and provide liquidity.

FHLBanks don't fund individual mortgages. They fund mortgage pools. Since these pools are constantly changing, they have no maturity. Consequently, the many term rates FHLBanks issue reflect their member needs, including the advances they use to minimize their own interest rate risk.

The FHLBanks are not the only prominent financial institution that operates this way. The U.S. Treasury does it, too.

Financial Highlights:
(As of December 31, 2006)

* $1.02 Trillion in assets
* $ 641 Billion in advances
* $ 98 Billion in mortgage loans
* 4.41% Capital to Asset Ratio
This Ponzi scheme cannot possibly be solvent. The only question is when it blows sky high.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance, low volatility, regardless of market direction. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility. You are currently viewing my global economics blog which has commentary 7-10 times a week. I am a "professor" on Minyanville. My Minyanville Profile can be viewed at: http://www.minyanville.com/gazette/bios.htm?bio=87 I do weekly live radio on KFNX the Charles Goyette show every Wednesday. When not writing about stocks or the economy I spends a great deal of time on photography. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at www.michaelshedlock.com.

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014