BankUnited Financial Corporation Contributes $80 Million of Capital to BankUnited FSB

BankUnited Financial Corporation (NASDAQ:BKUNA):

Third-Quarter 2008 Summary:

• Total deposits of $7.6 billion at June 30, 2008, a 9.2% increase from June 30, 2007
• Tier 1 leverage capital ratio of 7.6%, as of June 30, 2008, and total risk-based capital ratio of 13.8%, as of June 30, 2008
• Provision for loan loss of $130 million for the quarter, resulting in a total loan loss reserve of $309.6 million, or 2.52% of total loans, as of June 30, 2008
• Mortgage Assistance Program introduced

BankUnited Financial Corporation (NASDAQ:BKUNA), parent company of BankUnited FSB, today reported a loss of $117.7 million, or a loss of $3.35 per diluted share for the quarter ended June 30, 2008, compared to earnings of $23.2 million, or $0.62 per diluted share, for the quarter ended June 30, 2007. The loss was primarily attributable to a $130 million provision for loan losses.

The company also announced it has made considerable progress toward raising additional capital and implementing its previously announced strategic plan. Recent steps include:

• Strengthening of BankUnited, FSB capital through an $80 million capital contribution from BankUnited Financial Corporation
• Progress in its pursuit to raise capital
• Increase in the reserve for loan losses to $309.6 million
• Reduction of expenses
• Suspending dividends on common stock
• Waiver by Camner family and board members of preferred stock dividends
• Implementing a Mortgage Assistance Program that waives pre-payment fees and offers attractive traditional mortgages to eligible customers

“Like many companies in the financial services industry, we have been impacted by the residential downturn," said Alfred R. Camner, BankUnited's chairman and chief executive officer. ”This quarter was a mix of strong results from our core banking operations offset by continued deterioration in the mortgage portfolio. We are aggressively managing non-performing assets and increased our provision for loan losses to $130 million, bringing our reserve for loan losses to $309.6 million. Historically, our underwriting standards required, in almost all cases, mortgage insurance on loans originated with a loan-to-value (LTV) ratio greater than 80%. As of June 30, 2008, approximately 40% of our non-performing loans were covered by mortgage insurance.

“As we announced in a separate press release today, we are launching a major new program to assist our mortgage borrowers. We will be reaching out to thousands of option ARM borrowers, the largest portion of which are in Florida, to place them into traditional mortgage products including government agency loans. We intend to waive pre-payment fees and to create additional incentives for these borrowers to make the transition both easy and affordable.

"To further strengthen our franchise, BankUnited Financial Corporation contributed $80 million in capital to BankUnited FSB. At June 30, 2008, BankUnited’s Tier 1 leverage capital ratio was 7.6% and total-risk based capital ratio was 13.8%. Furthermore, we have made considerable progress in our pursuit to raise additional capital.”

Ramiro Ortiz, BankUnited’s president and chief operating officer, added, “Our core banking operations continue to perform well and deposits increased to $7.6 billion, up 9.2% from one year ago. Our internal cross sell and retention measurements show that we continue to add multi-service households and retain, cross sell and deepen existing customer relationships.

"As part of our strategic plan, we are shrinking the residential mortgage loan portfolio, and the newly announced Mortgage Assistance Program should accelerate the decrease. Total loan balances decreased 2.8% from March 31, 2008, to $12 billion at June 30, 2008. Commercial and commercial real estate loan balances were $1.3 billion. We continue to have strong production in the small-business and middle-market sectors and our commercial real estate portfolio continues to perform well.

"Overall, we are pleased with the core bank's results and believe that we are taking the appropriate actions to manage non-performing assets. Our employees' ability to rise above the negative news about our industry has been inspiring.”

Asset Quality and Credit Standards

The ratio of non-performing assets as a percentage of total assets increased to 7.73% at June 30, 2008, from 4.75% at March 31, 2008, and 0.86% at June 30, 2007.

For the quarter ended June 30, 2008, the provision for loan losses totaled $130 million, compared to $98 million for the quarter ended March 31, 2008, and $4.4 million for the quarter ended June 30, 2007.

Net charge-offs for the quarter ended June 30, 2008, were $22.7 million, or an annualized rate of 0.73% of average total loans. This compares to $13.3 million, or an annualized rate of 0.42% of average total loans, for the quarter ended March 31, 2008, and $1.1 million, or an annualized rate of 0.04% of average total loans, for the quarter ended June 30, 2007.

Residential and consumer residential net-charge offs for the quarter were $22.4 million, net of $10.7 million in estimated recoveries from mortgage insurance. Net charge-offs on the consumer portfolio were $64,000, and commercial and commercial real estate net-charge offs were $165,000.

The total allowance for loan losses was $309.6 million at June 30, 2008, compared to $202.3 million at March 31, 2008, and $45.1 million at June 30, 2007. The allowance for loan losses as a percentage of the total loan portfolio was 2.52% at June 30, 2008, compared to 1.61% at March 31, 2008, and 0.36% at June 30, 2007.

BankUnited’s underwriting standards provide that, in almost all cases, borrowers of loans originated with loan-to-value (LTV) ratios greater than 80% are required to purchase mortgage insurance. Nineteen percent, or $1.8 billion, of the residential loan portfolio had mortgage insurance as of June 30, 2008. The average LTV at inception of the residential portfolio as of June 30, 2008 was 79.9%. With the adjustment for coverage of mortgage insurance, the average LTV at inception of that portfolio was 75.6%.

Net-Interest Margin

Net-interest margin for the quarter ended June 30, 2008, was 1.66%, compared to 2.05% for the preceding quarter, and 2.40% for the same quarter last year.

Deposit Growth and Funding

Total deposits increased to $7.6 billion at June 30, 2008, up from $6.9 billion at March 31, 2008, and 9.2% from $7.0 billion at June 30, 2007. This growth, combined with a reduction in asset size, allowed BankUnited to maintain its strong liquidity position. Core deposits increased to $5.3 billion at June 30, 2008, up from $5.1 billion at March 31, 2008, and $5.0 billion at June 30, 2007.

Non-CD deposits increased 1.8% to $2.5 billion at June 30, 2008, up from $2.4 billion at June 30, 2007. Non-interest-bearing deposits were $328 million at June 30, 2008, down 3.9% from June 30, 2007.

Loan Balances

Total net loans at June 30, 2008, were $12.0 billion, compared to $12.3 billion at March 31, 2008, and $12.3 billion as of June 30, 2007.

Commercial and commercial real estate loan balances were $1.3 billion at June 30, 2008, compared to the same level at March 31, 2008 and up from $1.2 billion at June 30, 2007.

Consumer loan balances, which include specialty consumer mortgage loans originated through branch offices, were $1.3 billion at June 30, 2008, compared to $1.2 billion at March 31, 2008, and $1.1 billion as of June 30, 2007.

Residential loan balances decreased $302 million during the quarter to $9.5 billion at June 30, 2008, a 3.3% decrease from $9.8 billion at June 30, 2007.

The average outstanding balance of a residential loan in the portfolio as of June 30, 2008 was $293,213. Option-ARM balances totaled $7.1 billion, which represented 68.2% of total residential loan balances and 57.5% of total loan balances. The growth in negative amortization for the quarter ended June 30, 2008, was $22.3 million, compared to $37 million for the quarter ended March 31, 2008, and $46.4 million for the quarter ended June 30, 2007. Of the $7.1 billion in option-ARM balances, $6.5 billion had negative amortization of $376 million, or 5.3% of the option-ARM portfolio.

BankUnited’s option ARM loans are re-amortized over the remaining term at the earlier of five years from inception of the loan or upon reaching 115% of the original principal balance. As of June 30, 2008, a total of 128 loans had reached the maximum 115% of the original loan amount. These 128 loans had an aggregate balance of $42.9 million, or 0.41% of the total residential loan balance as of June 30, 2008. The period from inception to the point at which the loans reached the 115% maximum amount ranged from 27 months to 50 months. Of the 128 loans that had reached the reset mark, 120, or 94% were performing as of June 30, 2008. The company estimates that approximately $48 million of option ARM loans will reach the 115% limit during the remaining quarter of fiscal 2008, and that $686 million will reach the 115% limit during fiscal year 2009.

Non-Interest Income

Total non-interest income for the quarter was a loss of $18.2 million, compared to a loss of $18.2 million for the quarter ended March 31, 2008, and income of $8.3 million for the quarter ended June 30, 2007. The loss is primarily due to writedowns of $23.9 million pre-tax, or $0.68 per diluted share, on several mortgage-backed securities and $1.2 million pre-tax, or $0.04 per diluted share, on other investment securities held in the company’s investment portfolio. The total pre-tax impairment is $25.1 million.

Fee income, which includes loan fees, deposit fees and other fees (excluding loan-servicing fees), was $3.7 million for the third quarter of fiscal 2008, down slightly from $3.8 million for the second quarter of fiscal 2008, and up 1.7% from $3.6 million for the third quarter of fiscal 2007.

Revenue from insurance and investments sales was $1.8 million in the quarter ended June 30, 2008, down from $2.0 million at March 31, 2008, and up 8.4% from $1.7 million in the quarter ended June 30, 2007.

BankUnited sold $331 million of conforming agency residential mortgage loans during the quarter ended June 30, 2008, for a gain of $1.6 million, compared to sales of $279 million for a gain of $2.1 million in the quarter ended March 31, 2008. For the quarter ended June 30, 2007, the company sold $116 million of conforming agency and traditional ARMs for a gain of $470,000.

BankUnited’s portfolio of residential loans serviced for others was $2.1 billion at June 30, 2008, compared to $1.5 billion at June 30, 2007. Amortization exceeded servicing fees for a loss of $50,000 for the third quarter of fiscal 2008, compared to servicing fee income of $824,000 for the third quarter of fiscal 2007.

During the fiscal quarter ended June 30, 2008, BankUnited transferred $6.4 million of loans which the company had the ability and intent to hold from loans-held-for-sale to its portfolio of loans to be held to maturity. As a result of the transfer, the company recognized a $1.6 million pre-tax writedown on the loans.

Gain on sale of assets, including loans and securities, totaled $1.6 million for the quarter ended June 30, 2008, compared to $2.4 million for the quarter ended March 31, 2008, and $505,000 for the quarter ended June 30, 2007.

Expenses and Efficiency Ratio

Non-interest expense was $56.6 million for the quarter ended June 30, 2008, compared to $57.2 million for the quarter ended March 31, 2008.

Comparing the third quarter of fiscal 2008 to the third quarter of fiscal 2007, non-interest expense increased 12.2% to $56.6 million from $50.5 million.

The efficiency ratio for the quarter was 140.3%, up from 55.9% for the same quarter of fiscal 2007.

Capital, Capital Ratios and Book Value

Book value per common share was $16.35 as of June 30, 2008, compared to $19.63 at March 31, 2008 and $22.40 at June 30, 2007.

Core and risk-based capital ratios were 7.6% and 13.8%, respectively, at June 30, 2008, compared to 7.8% and 14.6% at March 31, 2008, and 7.5% and 14.7% at June 30, 2007.

Chairman and chief executive officer Alfred R. Camner, members of his family and other members of the board of directors have agreed to waive their receipt of preferred stock dividends. It is expected that these dividends will be waived until the bank returns to profitability.

About BankUnited

BankUnited Financial Corp. is the holding company for BankUnited FSB, the largest banking institution headquartered in Florida. At June 30, 2008, BankUnited had assets of $14.2 billion.

Serving customers through 85 branches in 13 coastal counties, including Miami-Dade, Broward, Palm Beach, Martin, St. Lucie, Collier, Charlotte, Manatee, Hillsborough, Sarasota, Lee, Indian River and Pinellas, BankUnited offers a full spectrum of consumer and commercial banking products and services, including online products that can be accessed through http://www.bankunited.com. For additional information, call 877-779-2265.

Chairman and Chief Executive Officer Alfred R. Camner, President and Chief Operating Officer Ramiro Ortiz, Chief Financial Officer Bert Lopez and Senior Executive Vice President of Corporate Finance James Foster will review, in a prepared statement, the third quarter results by telephone and webcast beginning at 4:30 p.m. EDT.

Presentation materials will be available on the company’s website at www.bankunited.com prior to the call. The call may be accessed via a live Internet webcast at www.bankunited.com or through a dial-in telephone number at 888-680-0878 (domestic) or 617-213-4855 (international). The call leader is Alfred R. Camner. The name of the call is BankUnited, and the pass code for the call is 48216466. A replay of the call will be available from 6:30 p.m. EDT on Aug. 8 through 11:59 p.m. EDT on Aug. 15 by calling toll-free 888-286-8010 (domestic) or 617-801-6888 (international). The pass code for the replay is 62729201.

Forward-Looking Statements

This press release and the presentation, to which it refers, may contain certain forward-looking statements, which are based on management's expectations regarding factors that may impact the company's earnings and performance in future periods. Words and phrases such as: “will,” "expect," "anticipate," "estimate," "project," "believe," "intend," "should," “would,” "may," "can," "could," "plan," "target" and similar expressions are intended to identify "forward-looking statements." Actual results or performance could differ from those implied or contemplated by such statements. Factors that could cause future results and performance to vary materially from management expectations include, but are not limited to, national and regional business and economic conditions, fiscal and monetary policies; natural events such as hurricanes; changes in interest rates; changes in policy or discretionary decisions by the federal home loan banks or the federal reserve; a reduced demand for credit; a decrease in deposit flows, loan demand or deposit or other customers; risks associated with residential mortgage lending or a slowdown in the housing market, including, without limitation, continued deterioration in credit quality, reduced real estate values and slower sales, interest rate changes, payment elections by borrowers of option ARM loans and deterioration in the ability of borrowers to repay their loans and other debts; competition from other financial service companies in our markets; potential or actual litigation; potential or actual actions by regulators, including, without limitation, new, changed or increased regulatory restrictions; changes in regulations, laws, policies or standards, including, among others, changes in accounting standards, guidelines, interpretations or policies; the outcome of ongoing tax audits; the issuance, redemption or deferral of payments on company debt or equity; the concentration of operations in Florida; reliance on other companies for products and services; the impact of war and the threat and impact of terrorism; volatility in the market price of the company’s common stock; unfavorable conditions in the capital markets; the possible loss of key personnel; the possible inability to successfully implement strategic initiatives, and mortgage loss mitigation programs/homeowner assistance programs, and other economic, competitive, servicing capacity, governmental, regulatory and technological factors affecting the company’s operations, price, products and delivery of services. Neither the success, timing, nor terms of the Company’s capital raising efforts are certain. The Company is not able to make any assurances, including but not limited to any assurances that any increased rate of sale of foreclosed homes will continue in future periods, the percentage of such unsold homes in escrow or under negotiation will be representative of the number or percentage of homes sold in future periods, the quality of our loan portfolio will continue in future periods, we will have adequate liquidity in future periods. The Company does not update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required by law. Please refer to the documents that BankUnited Financial Corporation files periodically with the SEC, such as the Form 10-K for the 2007 fiscal year, and reports on Form 10-QA for the March 31, 2008 period, which contain additional important factors that could cause actual results to differ from the company’s current expectations and from the forward-looking statements contained in this press release.