Biggest Bank Failure of The Year

The FDIC could not even wait until Friday night, the traditional time for announcing bank failures. Let's see if there are more banks closed tonight. The cost to FDIC's insurance fund is $4.9 billion, almost half of the fund balance, time to tap into government funds.-Lou

BankUnited Shut Down, Sold To Private-Equity Group

The largest bank failure so far in 2009 is also notable because the failed bank's buyer is a consortium of private-equity firms.

BankUnited, FSB, based in Coral Gables, Fla., was closed by the Office of Thrift Supervision on Thursday, and the Federal Insurance Deposit Corporation was appointed receiver.

The bank was bought by a newly chartered federal savings bank named BankUnited. The BankUnited management team is headed by John Kanas, the former head of North Fork Bank. Ownership includes WL Ross & Co., Carlyle Investment Management, Blackstone Capital Partners V, Centerbridge Capital Partners, LeFrak Organization, The Wellcome Trust, Greenaap Investments and East Rock Endowment Fund.

BankUnited, was established in 1984, had $13.1 billion in total assets, 85 branches and had 1,083 employees. The FDIC estimates that this failure will cost its deposit-insurance fund $4.9 billion.
The bank was “critically undercapitalized and in an unsafe condition to conduct business. The bank reported losses of $1.2 billion in 2008 as loan quality continued to deteriorate,” according to a press release from the Office of Thrift Supervision.

Such strong language is unusual from the press releases sent by government agencies regarding bank closures. Also unusual was the Thursday action; most bank-failure announcements occur late Friday evening.

The FDIC immediately chartered BankUnited as a federal savings bank which will take over banking operations and all nonbrokered deposits of BankUnited, FSB.

The newly formed bank will take on $12.7 billion of the bank’s assets and $8.3 billion nonbrokered deposits, which should minimize disruptions for customers.

BankUnited will not assume the approximately $348 million in brokered deposits. The FDIC said it will pay the brokers directly, and that customers who placed money with brokers should contact them directly for more information.

This is the 34th bank insured by the FDIC to fail this year, and the third bank in the state of Florida to fail this year.