They're Done! Time to Take this Turkey out of the Oven!

BankUnited (BKUNA) Florida's largest bank is raising (translation: praying for suckers to help them) $400 million, according to this Press Release. There's just one problem: BankUnited's market cap has fallen to $65 million from almost $800 million a year ago. It's a little too late to raise capital now, as the impending dilution has dropped the stock 47% since Tuesday's close.

Time to take this turkey out of the oven!

So, the question is what cooked this bird? Subprime lending? NO! It's those just-now-exploding arm-neg-am loans. These brilliant financial inventions account for over 50% of their lending portfolio.

Thanks to Option ARMageddon for this analysis:

[Negative amortization option ARM's haven'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.