BankUnited posts wider-than-expected Q3 loss

(Reuters) - BankUnited Financial Corp BKUNA.O posted a wider-than-expected quarterly loss, as it set aside more money for bad loans, and said it was shrinking its residential mortgage loan portfolio.

The Coral Gables, Florida-based parent of BankUnited FSB, reported third-quarter loss of $117.7 million, or $3.35 a share, compared with earnings of $23.2 million, or 62 cents, last year.

Analysts, on average, were expecting a loss of $1.01 a share, before special items, according to Reuters Estimates.

The company, which has been hurt by deteriorating residential housing market and increased foreclosures, took a provision of $130 million for bad loans for the quarter ended June 30, 2008, compared with $98 million for the previous quarter and $4.4 million for the year-ago quarter.

BankUnited launched a mortgage assistance program to provide relief to borrowers, mostly in Florida, whose option-adjustable rate mortgage loans are no longer optimal for their current situations.

The company intends to waive pre-payment fees and provide additional incentives to the borrowers to place them into traditional mortgage products, including government agency loans.

The new program should help the company to shrink its residential mortgage loan portfolio, BankUnited said.

BankUnited said it ended the quarter with a Tier 1 capital ratio, which measures its ability to cover losses, of 7.6 percent. Regulators consider 6 percent sufficient.

BankUnited Financial Corp contributed $80 million in capital to BankUnited FSB.

Net interest margin fell to 1.66 percent from the second quarter's 2.05 percent.

Shares of the company closed at $1.45 Friday on Nasdaq.

(Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Anil D'Silva)