FDIC seizes Florida's BankUnited in largest bank failure this year
WASHINGTON -- Regulators on Thursday shut down BankUnited, a struggling Florida thrift whose closure is expected to cost the Federal Deposit Insurance Corp. $4.9 billion.
The failure of the Coral Gables, Fla.-based bank represents the second-largest hit to the FDIC's insurance fund so far — the costliest was last year's seizure of California lender IndyMac, on which the FDIC is estimated to lose $10.7 billion.
BankUnited is the 34th federally insured institution to be closed this year, and the biggest. The FDIC on Thursday took control of the bank, which called itself Florida's largest banking institution with about $13 billion in assets as of May 2.
The Office of Thrift Supervision, a Treasury Department agency, said Thursday that BankUnited reported $1.2 billion in losses last year as defaults on loans piled up. The thrift "was critically undercapitalized and in an unsafe condition to conduct business," the agency said in a statement.
The bank has been sold to a group of investors led by John Kanas, the former head of North Fork Bank. It will re-open Friday as a newly chartered savings bank called BankUnited.
The new bank will assume $12.7 billion in assets and $8.3 billion of its total $8.6 billion in deposits. In addition, the FDIC and the new bank agreed to share losses on about $10.7 billion in assets.
Deposits will be insured by the FDIC, and customers can continue to use BankUnited FSB checks, ATM cards and debit cards, the FDIC said.
The failed bank's parent was BankUnited Financial Corp. It had 1,083 employees and 85 branches, all in Florida, mostly located along the state's southeast coast.
The 34 bank failures this year in the U.S. compare with 25 in all of last year and three in 2007. As the economy nationwide has soured, amid rising unemployment, tumbling home prices and soaring loan defaults, bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level in nearly a quarter-century — $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.
The FDIC expects that bank failures will cost the insurance fund around $65 billion through 2013.
The failure of IndyMac, which had $32 billion in assets, was the second-largest last year, trailing only the September failure of Washington Mutual.
Thrifts have been the most troubled regulated institutions during the financial crisis and among the most spectacular failures. By law, they must have at least 65% of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn.
Seattle-based thrift Washington Mutual was the biggest bank to collapse in U.S. history, with around $307 billion in assets. It was later acquired by JPMorgan Chase for $1.9 billion.