News Release

Printer Friendly Version  View printer-friendly version
<< Back
BankUnited, Inc. Reports 2017 Results

MIAMI LAKES, Fla.--(BUSINESS WIRE)--Jan. 23, 2018-- BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter and year ended December 31, 2017.

For the quarter ended December 31, 2017, the Company reported net income of $417.8 million, or $3.79 per diluted share, compared to $63.3 million, or $0.59 per diluted share, for the quarter ended December 31, 2016. Excluding the impact of a discrete income tax benefit and related professional fees, net income for the quarter ended December 31, 2017 was $94.8 million, or $0.86 per diluted share.

For the year ended December 31, 2017, the Company reported net income of $614.3 million, or $5.58 per diluted share, compared to $225.7 million, or $2.09 per diluted share, for the year ended December 31, 2016. Excluding the impact of the discrete income tax benefit and professional fees, net income was $291.3 million or $2.65 per diluted share for the year ended December 31, 2017. The return on average stockholders’ equity for the year ended December 31, 2017 was 23.36% compared to 9.64% for the year ended December 31, 2016 while the return on average assets was 2.13% compared to 0.87% for the same periods. Excluding the impact of a discrete income tax benefit and related professional fees, the return on average stockholders’ equity and the return on average assets for the year ended December 31, 2017 were 11.08% and 1.01%, respectively.

Rajinder Singh, President and Chief Executive Officer, said, "2017 was a remarkable year for BankUnited. We delivered double digit growth in earnings, loans and deposits, while shifting our strategy to diversify our balance sheet and business mix. I’m also proud to say that tangible book value per share has grown at a compound annual rate of 11.7% since our 2011 IPO, to $27.59."

Performance Highlights

  • Earnings for the quarter ended December 31, 2017 benefited from a discrete income tax benefit of $327.9 million, inclusive of an expected federal benefit of $295.0 million, estimated state benefits of $24.2 million and estimated interest of $8.7 million.
  • Given the increase in capital generated by the income tax benefit discussed above, the Board of Directors of the Company has authorized a share repurchase program under which the Company may repurchase up to $150 million in shares of its outstanding common stock. Any repurchases will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.
  • The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017, reducing the statutory corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018. A tax benefit of $3.7 million, representing the impact of the rate change on deferred tax assets and liabilities existing at the date of enactment was recognized in earnings during the quarter ended December 31, 2017.
  • Net interest income increased by $11.3 million to $238.8 million for the quarter ended December 31, 2017 from $227.5 million for the quarter ended December 31, 2016. Interest income increased by $34.7 million, driven by increases in the average balances of loans and investment securities outstanding and an increase in the yield on interest earning assets. Interest expense increased by $23.4 million, driven by increases in average interest bearing deposits and an increase in the cost of interest bearing liabilities. For the year ended December 31, 2017, net interest income increased by $79.9 million to $950.3 million from $870.4 million for the year ended December 31, 2016.
  • The net interest margin, calculated on a tax-equivalent basis, decreased to 3.52% for the quarter ended December 31, 2017 from 3.67% for the quarter ended December 31, 2016 and 3.62% for the immediately preceding quarter ended September 30, 2017. Significant factors contributing to the decline in the net interest margin included the continued growth of non-covered loans and investment securities at yields lower than the yield on total interest earning assets and an increase in the cost of interest bearing liabilities. The net interest margin, calculated on a tax-equivalent basis, was 3.65% for the year ended December 31, 2017, compared to 3.73% for the year ended December 31, 2016.
  • Gain on sale of covered loans totaled $19.0 million for the quarter ended December 31, 2017. The Company sold substantially all of the covered home equity loans and lines of credit at higher than expected prices. The gain on sale was partially offset by a related loss on FDIC indemnification of $2.8 million, for a net impact on pre-tax earnings of $16.2 million.
  • Non-covered loans and leases, including equipment under operating lease, grew by $852 million during the fourth quarter of 2017. For the year ended December 31, 2017, non-covered loans and leases grew by $2.2 billion.
  • Total deposits increased by $655 million for the quarter ended December 31, 2017, to $21.9 billion. For the year ended December 31, 2017, total deposits increased by $2.4 billion.
  • Book value per common share grew to $28.32 at December 31, 2017, a 22.0% increase from December 31, 2016. Tangible book value per common share increased by 22.8% over the same period, to $27.59 at December 31, 2017. These increases were impacted by the discrete income tax benefit recognized in the quarter ended December 31, 2017.

Capital

The Company and its banking subsidiary continue to exceed all regulatory guidelines required to be considered well capitalized. The Company’s and BankUnited, N.A.'s regulatory capital ratios at December 31, 2017 were as follows:

     

BankUnited, Inc.

BankUnited, N.A.

Tier 1 leverage 9.7 % 10.5 %
 
Common Equity Tier 1 ("CET1") risk-based capital 13.1 % 14.1 %
 
Tier 1 risk-based capital 13.1 % 14.1 %
 
Total risk-based capital 13.8 % 14.8 %
 

Loans and Leases

Loans, including premiums, discounts and deferred fees and costs, increased to $21.4 billion at December 31, 2017 from $19.4 billion at December 31, 2016. Non-covered loans grew to $20.9 billion while covered loans declined to $503 million at December 31, 2017.

For the quarter ended December 31, 2017, non-covered commercial loans, including commercial real estate loans, commercial and industrial loans, and loans and leases originated by our commercial lending subsidiaries, grew by $678 million to $16.7 billion. Equipment under operating lease, net, grew by $11 million during the fourth quarter of 2017. Non-covered residential and other consumer loans grew by $162 million to $4.2 billion during the fourth quarter of 2017.

The Florida franchise contributed non-covered loan growth for the quarter of $465 million and the New York franchise contributed net growth of $29 million. The Company's national platforms contributed non-covered loan and lease growth of $359 million. We refer to our commercial lending subsidiaries, our mortgage warehouse lending operations, the small business finance unit ("SBF") and our 1-4 family residential loan portfolio as national platforms. The most significant contributors to growth across the national platforms were residential at $162 million and the commercial lending subsidiaries at $191 million. In Florida, all portfolio segments contributed to non-covered loan growth with the most significant contributions coming from the C&I portfolio, with growth of $175 million, and the non-owner occupied CRE portfolio, with growth of $233 million. The increase in New York reflected continued expected runoff in multi-family loans of $169 million, more than offset by growth of $198 million across other portfolio segments. At December 31, 2017, the non-covered loan portfolio included $7.4 billion, $6.1 billion and $7.4 billion attributable to the Florida franchise, the New York franchise and the national platforms, respectively.

A comparison of portfolio composition at the dates indicated follows:

     
Non-Covered Loans Total Loans

December 31,
2017

 

December 31,
2016

December 31,
2017

 

December 31,
2016

Residential and other consumer loans 19.8 % 18.4 % 21.7 % 21.0 %
Multi-family 15.4 % 20.4 % 15.0 % 19.8 %
Non-owner occupied commercial real estate 21.5 % 19.9 % 21.0 % 19.3 %
Construction and land 1.5 % 1.7 % 1.5 % 1.6 %
Owner occupied commercial real estate 9.7 % 9.3 % 9.4 % 9.0 %
Commercial and industrial 19.9 % 18.1 % 19.4 % 17.5 %
Commercial lending subsidiaries 12.2 % 12.2 % 12.0 % 11.8 %
100.0 % 100.0 % 100.0 % 100.0 %
 

Asset Quality and Allowance for Loan and Lease Losses

For the quarters ended December 31, 2017 and 2016, the Company recorded provisions for loan losses of $5.2 million and $8.5 million, respectively, including provisions related to non-covered loans of $6.5 million and $9.0 million. For the years ended December 31, 2017 and 2016, the Company recorded provisions for loan losses of $68.7 million and $50.9 million, respectively, including provisions related to non-covered loans of $67.4 million and $52.6 million. The provision related to taxi medallion loans totaled $8.6 million and $2.2 million for the quarters ended December 31, 2017 and 2016, respectively, and $58.2 million and $11.9 million for the years ended December 31, 2017 and 2016, respectively.

The decrease in the provision for loan losses related to non-covered loans for the quarter ended December 31, 2017, as compared to the quarter ended December 31, 2016 reflected (i) a net decrease in the relative impact on the provision of changes in quantitative and qualitative loss factors, (ii) a reduction in the reserve established at September 30, 2017 related to the impact of Hurricanes Irma and Harvey and (iii) a decrease in provisions related to classified and specifically reserved loans, offset in part by (i) the increase in the provision related to taxi medallion loans and (ii) higher loan growth.

The increase in the provision for loan losses related to non-covered loans for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was driven by the increase in the provision related to taxi medallion loans, which was partially offset by (i) a net decrease in the relative impact on the provision of changes in quantitative and qualitative loss factors, (ii) a decrease in provisions for classified and specifically reserved loans and (iii) lower loan growth.

Non-covered, non-performing loans totaled $172.0 million or 0.82% of total non-covered loans at December 31, 2017, compared to $132.7 million or 0.71% of total non-covered loans at December 31, 2016. Non-performing taxi medallion loans comprised $106.1 million or 0.51% of total non-covered loans at December 31, 2017 and $60.7 million or 0.32% of total non-covered loans at December 31, 2016. As of December 31, 2017, the entire taxi medallion portfolio was on non-accrual status.

The ratios of the allowance for non-covered loan and lease losses to total non-covered loans and to non-performing, non-covered loans were 0.69% and 84.03%, respectively, at December 31, 2017, compared to 0.80% and 113.68% at December 31, 2016. The decrease in the ratio of the allowance for non-covered loan and lease losses to non-performing non-covered loans was primarily a result of charge-offs related to taxi medallion loans and the increase in non-performing taxi medallion loans in 2017. The ratio of net charge-offs to average non-covered loans was 0.38% for the year ended December 31, 2017, compared to 0.13% for the year ended December 31, 2016. The ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.29% and 0.06% for the years ended December 31, 2017 and 2016, respectively.

The following tables summarize the activity in the allowance for loan and lease losses for the periods indicated (in thousands):

           
Three Months Ended December 31, 2017 Three Months Ended December 31, 2016

ACI
Loans

 

 

Non-ACI
Loans

 

 

Non-
Covered
Loans

 

  Total

ACI
Loans

 

 

Non-ACI
Loans

 

 

Non-
Covered
Loans

  Total
Balance at beginning of period $ 1,812 $ 3,036 $ 153,725 $ 158,573 $ $ 2,785 $ 151,691 $ 154,476
Provision (recovery) (1,812 ) 477 6,509 5,174 (562 ) 9,024 8,462
Charge-offs (3,272 ) (16,832 )

(20,104

) (130 ) (10,146 ) (10,276 )
Recoveries   17   1,135   1,152     7   284   291  
Balance at end of period $   $ 258   $ 144,537   $ 144,795   $   $ 2,100   $ 150,853   $ 152,953  
 
           
Year Ended December 31, 2017 Year Ended December 31, 2016

ACI
Loans

 

Non-ACI
Loans

 

Non-
Covered
Loans

  Total

ACI
Loans

 

Non-ACI
Loans

 

Non-
Covered
Loans

  Total
Balance at beginning of period $ $ 2,100 $ 150,853 $ 152,953 $ $ 4,868 $ 120,960 $ 125,828
Provision (recovery) 1,358 67,389 68,747 (1,681 ) 52,592 50,911
Charge-offs (3,327 ) (77,866 ) (81,193 ) (1,216 ) (25,894 ) (27,110 )
Recoveries   127   4,161   4,288     129   3,195   3,324  
Balance at end of period $   $ 258   $ 144,537   $ 144,795   $   $ 2,100   $ 150,853   $ 152,953  
 

Charge-offs related to taxi medallion loans totaled $9.5 million and $6.9 million for the quarters ended December 31, 2017 and 2016, respectively, and $56.6 million and $11.1 million for the years ended December 31, 2017 and 2016, respectively.

Deposits

At December 31, 2017, deposits totaled $21.9 billion compared to $19.5 billion at December 31, 2016. The average cost of total deposits was 0.94% for the quarter ended December 31, 2017, compared to 0.87% for the immediately preceding quarter ended September 30, 2017, and 0.69 % for the quarter ended December 31, 2016. The average cost of total deposits was 0.83% for the year ended December 31, 2017, compared to 0.66% for the year ended December 31, 2016.

Net interest income

Net interest income for the quarter ended December 31, 2017 increased to $238.8 million from $227.5 million for the quarter ended December 31, 2016. Net interest income was $950.3 million for the year ended December 31, 2017, compared to $870.4 million for the year ended December 31, 2016. Increases in interest income were partially offset by increases in interest expense. The increases in interest income were primarily attributable to increases in the average balances of loans and investment securities and related average yields. Interest expense increased due to an increase in average interest bearing deposits and an increase in the cost of funds.

The Company’s net interest margin, calculated on a tax-equivalent basis, was 3.52% for the quarter ended December 31, 2017, compared to 3.62% for the immediately preceding quarter ended September 30, 2017 and 3.67% for the quarter ended December 31, 2016. Net interest margin, calculated on a tax-equivalent basis, was 3.65% for the year ended December 31, 2017, compared to 3.73% for the year ended December 31, 2016.

Significant offsetting factors impacting the declines in net interest margin for the quarter and year ended December 31, 2017, compared to the quarter and year ended December 31, 2016, included:

  • The tax-equivalent yield on loans increased to 5.15% for both the quarter and year ended December 31, 2017 from 5.01% and 5.11% for the quarter and year ended December 31, 2016, reflecting increased yields on both non-covered and covered loans.
  • The tax-equivalent yield on non-covered loans was 3.80% and 3.75%, respectively, for the quarter and year ended December 31, 2017, compared to 3.56% and 3.58% for the quarter and year ended December 31, 2016. The most significant factor contributing to increased yields on non-covered loans was the impact of increases in benchmark interest rates.
  • The tax-equivalent yield on covered loans increased to 60.90% and 55.22%, respectively, for the quarter and year ended December 31, 2017 from 46.43% and 41.82% for the quarter and year ended December 31, 2016.
  • The tax-equivalent yield on investment securities increased to 2.89% and 3.02%, respectively, for the quarter and year ended December 31, 2017 from 2.87% and 2.84% for the quarter and year ended December 31, 2016.
  • Growth of non-covered loans and investment securities at yields lower than the overall yield on interest earning assets.
  • The average rate on interest bearing liabilities increased to 1.25% and 1.12%, respectively, for the quarter and year ended December 31, 2017 from 0.93% for both the quarter and year ended December 31, 2016, reflecting higher average rates on both interest bearing deposits and FHLB advances. Increases in the cost of interest bearing liabilities primarily reflect increases in short-term market interest rates.

The Company’s net interest margin continues to be impacted by reclassifications from non-accretable difference to accretable yield on ACI loans. Non-accretable difference at acquisition represented the difference between the total contractual payments due and the cash flows expected to be received on these loans. The accretable yield on ACI loans represented the amount by which undiscounted expected future cash flows exceeded the recorded investment in the loans. As the Company’s expected cash flows from ACI loans have increased since the FSB Acquisition, the Company has reclassified amounts from non-accretable difference to accretable yield.

Changes in accretable yield on ACI loans for the years ended December 31, 2017 and 2016 were as follows (in thousands):

   
Balance at December 31, 2015 $ 902,565
Reclassifications from non-accretable difference 76,751
Accretion (303,931 )
Balance at December 31, 2016 675,385
Reclassifications from non-accretable difference, net 81,501
Accretion (301,827 )
Balance at December 31, 2017 $ 455,059  
 

Non-interest income

Non-interest income totaled $46.5 million and $157.9 million, respectively, for the quarter and year ended December 31, 2017 compared to $29.3 million and $106.4 million, respectively, for the quarter and year ended December 31, 2016. The increase of $17.3 million for the quarter ended December 31, 2017 compared to the quarter ended December 31, 2016 was primarily due to an increase of $16.1 million in gain on sale of covered loans, net of the related loss on FDIC indemnification.

The most significant factors contributing to the $51.5 million increase in non-interest income for the year ended December 31, 2017 compared to the year ended December 31, 2016 included (i) an increase of $19.0 million in gain on sale of investment securities available for sale, (ii) an increase of $18.7 million in gain on sale of covered loans, net of the related loss on FDIC indemnification, and (iii) an increase of $9.1 million in lease financing income.

Increases in gain on sale of investment securities primarily reflected gains recognized in 2017 from the sale of certain securities formerly covered under the Commercial Shared-Loss Agreement and originally acquired at significant discounts in the FSB Acquisition. Increases in gain on sale of covered loans, net of the related loss on FDIC indemnification, primarily related to better than expected pricing on the sale of substantially all of the covered home equity loans and lines of credit in the fourth quarter of 2017. Increases in lease financing income generally corresponded to growth in the operating lease portfolio.

Non-interest expense

Non-interest expense totaled $161.3 million and $635.0 million, respectively, for the quarter and year ended December 31, 2017 compared to $156.2 million and $590.4 million, respectively, for the quarter and year ended December 31, 2016. The most significant driver of the increase for the quarter ended December 31, 2017 compared to the quarter ended December 31, 2016 was professional fees of $6.8 million related to the discrete income tax benefit recognized during the quarter.

The most significant components of the $44.5 million increase for the year ended December 31, 2017 compared to the year ended December 31, 2016 were (i) an increase in amortization of the FDIC indemnification asset of $16.4 million, (ii) an increase in employee compensation and benefits of $14.8 million and (iii) an increase of $9.4 million in professional fees.

Amortization of the FDIC indemnification asset was $41.1 million and $176.5 million, respectively, for the quarter and year ended December 31, 2017, compared to $43.4 million and $160.1 million, respectively, for the quarter and year ended December 31, 2016. The amortization rate increased to 49.65% and 42.90%, respectively, for the quarter and year ended December 31, 2017 from 31.05% and 25.14%, respectively, for the quarter and year ended December 31, 2016. As the expected cash flows from ACI loans have increased, expected cash flows from the FDIC indemnification asset have decreased, resulting in continued increases in the amortization rate.

Provision for income taxes

The effective income tax rate was (251.3)% and (51.9)%, respectively, for the quarter and year ended December 31, 2017, compared to 31.3% and 32.7%, respectively, for the quarter and year ended December 31, 2016. The effective income tax rates for the quarter and year ended December 31, 2017 reflect a discrete income tax benefit of $327.9 million related to a matter that arose during an ongoing audit of the Company's 2013 federal income tax return. During that audit, the Company asserted that U.S. federal income taxes paid in respect of certain income previously reported by the Company for its 2012, 2013 and 2014 tax years related to the basis assigned to certain loans acquired in the FSB Acquisition should be refunded to the Company, in light of guidance issued after the relevant returns had been filed (including Treasury Regulations finalized in October 2017 clarifying and modifying the treatment of such acquired loans). The IRS issued a Field Attorney's Advice in the fourth quarter of 2017 agreeing with the Company's position. The discrete tax benefit recognized includes expected refunds of federal income tax of $295 million, as well as estimated interest on the federal refund and estimated refunds from certain state and local taxing jurisdictions. Although the Company expects to receive the federal tax refund following completion of the audit, the Company cannot provide assurances as to when or if it will ultimately receive the refund (or the related state and local refunds) because the IRS has not yet finalized its entire internal process, or provided the Company with a notice of proposed adjustment or revenue agent report and the refund claims are subject to review by the Joint Committee on Taxation. The Company is continuing to evaluate whether it has claims in other state jurisdictions and whether it may have any claims for federal or state income taxes relating to tax years prior to 2012. The Company cannot provide assurances as to when or to what extent it may have any claims relating to such other state and local taxing jurisdictions or in respect of prior tax years.

The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017, reducing the statutory corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018. The impact of the rate change on deferred tax assets and liabilities existing at the date of enactment was recognized in earnings during the quarter ended December 31, 2017, resulting in a tax benefit of $3.7 million. The decrease in the corporate income tax rate is currently expected to reduce the Company's effective tax rate to a range of approximately 23% to 24%.

Excluding the impact of the discrete income tax benefit and the impact of enactment of the Tax Cuts and Jobs Act of 2017, the effective income tax rate was 27.6% and 30.1%, respectively, for the quarter and year ended December 31, 2017, compared to 31.3% and 32.7%, respectively, for the quarter and year ended December 31, 2016. The adjusted effective income tax rate in all of the periods presented differed from the statutory federal income tax rate of 35% primarily due to the effect of income not subject to tax, partially offset by state income taxes.

Non-GAAP Financial Measures

Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful base for comparability to other financial institutions. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at December 31, 2017 (in thousands except share and per share data):

   
Total stockholders’ equity $ 3,026,062
Less: goodwill and other intangible assets 77,796
Tangible stockholders’ equity $ 2,948,266
 
Common shares issued and outstanding 106,848,185
 
Book value per common share $ 28.32
 
Tangible book value per common share $ 27.59
 

Net income, earnings per diluted common share, return on average stockholders' equity and return on average assets, in each case excluding the impact of a discrete income tax benefit and related professional fees are non-GAAP financial measures. Management believes disclosure of these measures enhances readers' ability to compare the Company's financial performance for the current period to that of other periods presented. The following table reconciles these non-GAAP financial measurements to the comparable GAAP financial measurements of net income' earnings per diluted share, return on average stockholders' equity and return on average assets for the three months and year ended December 31, 2017 (in thousands except share and per share data):

   

Three Months
Ended December
31, 2017

Year Ended
December 31,
2017

Net income excluding the impact of a discrete income tax benefit and related professional fees:
Net income (GAAP) $ 417,794 $ 614,273
Less discrete income tax benefit (327,945 ) (327,945 )
Add back related professional fees, net of tax of $1,802 4,995   4,995  
Net income excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) $ 94,844   $ 291,323  
 
Diluted earnings per common share, excluding the impact of a discrete income tax benefit and related professional fees:
Diluted earnings per common share (GAAP) $ 3.79 $ 5.58
Less impact on diluted earnings per common share of discrete income tax benefit and related professional fees, before allocation to participating securities (non-GAAP) (3.04 ) (3.05 )
Less impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated to participating securities (non-GAAP) 0.12   0.12  
Diluted earnings per common share, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP)(1) $ 0.86   $ 2.65  
 
Impact on diluted earnings per common share of discrete income tax benefit and related professional fees:
Discrete income tax benefit and related professional fees, net of tax $ 322,950 $ 322,950
Weighted average shares for diluted earnings per share (GAAP) 106,071,934   105,857,487  
Impact on diluted earnings per common share of discrete income tax benefit and related professional fees, before allocation to participating securities (non-GAAP) $ 3.04   $ 3.05  
 
Impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated to participating securities:
Discrete income tax benefit and related professional fees, net of tax, allocated to participating securities $ (12,354 ) $ (12,424 )
Weighted average shares for diluted earnings per share (GAAP) 106,071,934   105,857,487  
Impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated to participating securities (non-GAAP) $ (0.12 ) $ (0.12 )

(1) Amount for the three months ended December 31, 2017 adjusted for rounding.

 
   

Three Months
Ended December
31, 2017

Year Ended
December 31,
2017

Return on average assets, excluding the impact of a discrete income tax benefit and related professional fees:
Return on average assets (GAAP) 5.54 % 2.13 %
Less impact on return on average assets of discrete income tax benefit and related professional fees (non-GAAP) (4.28 )% (1.12 )%
Return on average assets, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) 1.26 % 1.01 %
 
Impact on return on average assets of discrete income tax benefit and related professional fees:
Discrete income tax benefit and related professional fees, net of tax $ 322,950 $ 322,950
Average assets 29,924,277   28,825,394  
Impact on return on average assets of discrete income tax benefit and related professional fees (non-GAAP) (1) 4.28 % 1.12 %
 
Return on average stockholders' equity, excluding the impact of a discrete income tax benefit and related professional fees:
Return on stockholders' equity (GAAP) 59.33 % 23.36 %
Less impact on return on stockholders' equity of discrete income tax benefit and related professional fees (non-GAAP) (45.86 )% (12.28 )%
Return on stockholders' equity, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) 13.47 % 11.08 %
 
Impact on return on average stockholders' equity of discrete income tax benefit and related professional fees:
Discrete income tax benefit and related professional fees, net of tax $ 322,950 $ 322,950
Average stockholders' equity 2,793,701   2,629,372  
Impact on return on average stockholders' equity of discrete income tax benefit and related professional fees (non-GAAP) (1) 45.86 % 12.28 %

(1) Annualized for the three months period.

 

The effective tax rate excluding the impact of the discrete income tax benefit and the impact of the change in the federal statutory rate on existing deferred tax assets and liabilities is a non-GAAP financial measure. Management believes disclosure of this measure enhances readers' ability to compare the Company's financial performance for the current period to that of other periods presented. The following table reconciles this non-GAAP financial measurement to the comparable GAAP financial measurement of the effective tax rate for the three months and year ended December 31, 2017:

   

Three Months
Ended December
31, 2017

Year Ended
December 31,
2017

Effective income tax rate, excluding the impact of a discrete income tax benefit and impact of enactment of the Tax Cuts and Jobs Act of 2017:
Effective income tax rate (GAAP) (251.3 )% (51.9 )%
Less impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP) 278.9 % 82.0 %
Effective income tax rate, excluding the impact of a discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP) 27.6 % 30.1 %
 
Impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP):
Discrete income tax benefit $ (327,945 ) $ (327,945 )
Tax benefit recognized from enactment of the Tax Cuts and Jobs Act of 2017 (3,744 ) (3,744 )
$ (331,689 ) $ (331,689 )
Income before income taxes (GAAP) 118,922   404,461  
Impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP) (278.9 )% (82.0 )%
 

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Tuesday, January 23, 2018 with President and Chief Executive Officer, Rajinder P. Singh, and Chief Financial Officer, Leslie N. Lunak.

The earnings release will be available on the Investor Relations page under About Us on 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 (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the confirmation number for the call is 6577859. A replay of the call will be available from 12:00 p.m. ET on January 23rd through 11:59 p.m. ET on January 30th by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 6577859. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.

About BankUnited, Inc. and the FSB Acquisition

BankUnited, Inc., with total assets of $30.3 billion at December 31, 2017, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 87 banking centers in 15 Florida counties and 6 banking centers in the New York metropolitan area at December 31, 2017.

On May 21, 2009, BankUnited acquired substantially all of the assets and assumed all of the non-brokered deposits and substantially all other liabilities of BankUnited, FSB from the FDIC, in a transaction referred to as the FSB Acquisition. Concurrently with the FSB Acquisition, BankUnited entered into two loss sharing agreements, or the Loss Sharing Agreements, which covered certain legacy assets, including the entire legacy loan portfolio and OREO, and certain purchased investment securities. Assets covered by the Loss Sharing Agreements are referred to as “covered assets” (or, in certain cases, “covered loans”). The Loss Sharing Agreements do not apply to subsequently purchased or originated loans or other assets. Effective May 22, 2014 and consistent with the terms of the Loss Sharing Agreements, loss share coverage was terminated for those commercial loans and OREO and certain investment securities that were previously covered under the Loss Sharing Agreements. Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC will reimburse BankUnited for 80% of losses, including certain interest and expenses, up to the $4.0 billion stated threshold and 95% of losses in excess of the $4.0 billion stated threshold. The Company’s current estimate of cumulative losses on the covered assets is approximately $3.6 billion. The Company has received $2.7 billion from the FDIC in reimbursements under the Loss Sharing Agreements for claims filed for incurred losses as of December 31, 2017.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance.

The Company generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including (without limitations) those relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, as well as risks that the tax refund for which a discrete income tax benefit was recorded is not received by the Company or is delayed, further determinations by or communications with the IRS that may supplement or change the notifications provided by the IRS to the Company to date, formal or informal changes in policy of the IRS with respect to the tax position giving rise to the discrete income tax benefit, the ability of the Company to pursue and obtain recoveries in respect of tax years prior to 2012 and the ability of the Company to pursue and obtain refunds in respect of previously paid state or local taxes. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and in the Company's subsequent filings with the SEC, which are all available at the SEC’s website (www.sec.gov).

     

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)
 
December 31,
2017
December 31,
2016

ASSETS

Cash and due from banks:
Non-interest bearing $ 35,246 $ 40,260
Interest bearing 159,336   408,053  
Cash and cash equivalents 194,582 448,313
Investment securities available for sale, at fair value 6,680,832 6,073,584
Investment securities held to maturity 10,000 10,000
Non-marketable equity securities 265,989 284,272
Loans held for sale 34,097 41,198
Loans (including covered loans of $503,118 and $614,042) 21,416,504 19,395,394
Allowance for loan and lease losses (144,795 ) (152,953 )
Loans, net 21,271,709 19,242,441
FDIC indemnification asset 295,635 515,933
Bank owned life insurance 252,462 239,736
Equipment under operating lease, net 599,502 539,914
Goodwill and other intangible assets 77,796 78,047
Other assets 664,382   406,713  
Total assets $ 30,346,986   $ 27,880,151  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Demand deposits:
Non-interest bearing $ 3,162,032 $ 2,960,591
Interest bearing 1,666,581 1,523,064
Savings and money market 10,715,024 9,251,593
Time 6,334,842   5,755,642  
Total deposits 21,878,479 19,490,890
Federal Home Loan Bank advances 4,771,000 5,239,348
Notes and other borrowings 402,830 402,809
Other liabilities 268,615   328,675  
Total liabilities 27,320,924 25,461,722
 
Commitments and contingencies
 
Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 106,848,185 and 104,166,945 shares issued and outstanding 1,068 1,042
Paid-in capital 1,498,227 1,426,459
Retained earnings 1,471,781 949,681
Accumulated other comprehensive income 54,986   41,247  
Total stockholders' equity 3,026,062   2,418,429  
Total liabilities and stockholders' equity $ 30,346,986   $ 27,880,151  
 
     
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
 
Three Months Ended December 31, Years Ended December 31,
2017   2016 2017   2016
Interest income:
Loans $ 262,276 $ 233,715 $ 1,001,862 $ 896,154
Investment securities 46,683 40,896 188,307 150,859
Other 3,686   3,354   14,292   12,204  
Total interest income 312,645   277,965   1,204,461   1,059,217  
Interest expense:
Deposits 50,772 33,346 170,933 119,773
Borrowings 23,047   17,120   83,256   69,059  
Total interest expense 73,819   50,466   254,189   188,832  
Net interest income before provision for loan losses 238,826 227,499 950,272 870,385
Provision for (recovery of) loan losses (including $(1,335), $(562), $1,358 and $(1,681) for covered loans) 5,174   8,462   68,747   50,911  
Net interest income after provision for loan losses 233,652   219,037   881,525   819,474  
Non-interest income:
Income from resolution of covered assets, net 5,384 9,729 27,450 36,155
Net loss on FDIC indemnification (8,046 ) (8,349 ) (22,220 ) (17,759 )
Service charges and fees 5,310 4,934 20,864 19,463
Gain (loss) on sale of loans, net (including $18,988, $425, $17,406 and $(14,470) related to covered loans) 20,988 2,954 27,589 (4,406 )
Gain on investment securities available for sale, net 4,272 4,396 33,466 14,461
Lease financing 13,770 11,976 53,837 44,738
Other non-interest income 4,863   3,647   16,918   13,765  
Total non-interest income 46,541   29,287   157,904   106,417  
Non-interest expense:
Employee compensation and benefits 59,438 56,637 237,824 223,011
Occupancy and equipment 18,697 18,804 75,386 76,003
Amortization of FDIC indemnification asset 41,115 43,380 176,466 160,091
Deposit insurance expense 5,184 4,940 22,011 17,806
Professional fees 11,103 4,130 23,676 14,249
Telecommunications and data processing 3,485 3,543 13,966 14,343
Depreciation of equipment under operating lease 9,360 11,576 35,015 31,580
Other non-interest expense 12,889   13,213   50,624   53,364  
Total non-interest expense 161,271   156,223   634,968   590,447  
Income before income taxes 118,922 92,101 404,461 335,444
Provision (benefit) for income taxes (298,872 ) 28,807   (209,812 ) 109,703  
Net income $ 417,794   $ 63,294   $ 614,273   $ 225,741  
Earnings per common share, basic $ 3.80   $ 0.59   $ 5.60   $ 2.11  
Earnings per common share, diluted $ 3.79   $ 0.59   $ 5.58   $ 2.09  
Cash dividends declared per common share $ 0.21   $ 0.21   $ 0.84   $ 0.84  
 
   
BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
 
Three Months Ended December 31,
2017   2016
Average
Balance
  Interest (1)   Yield/
Rate (1)(2)
Average
Balance
  Interest (1)   Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Non-covered loans $ 20,393,782 $ 194,775 3.80 % $ 18,492,356 $ 165,339 3.56 %
Covered loans 494,856   75,347   60.90 % 645,498   74,954   46.43 %
Total loans 20,888,638 270,122 5.15 % 19,137,854 240,293 5.01 %
Investment securities (3) 6,921,032 50,026 2.89 % 6,109,671 43,907 2.87 %
Other interest earning assets 500,949   3,686   2.92 % 573,299   3,354   2.33 %
Total interest earning assets 28,310,619 323,834 4.56 % 25,820,824 287,554 4.44 %
Allowance for loan and lease losses (154,857 ) (157,901 )
Non-interest earning assets 1,768,515   1,853,168  
Total assets $ 29,924,277   $ 27,516,091  
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,652,150 3,960 0.95 % $ 1,506,315 2,203 0.58 %
Savings and money market deposits 10,241,065 24,655 0.96 % 8,832,144 14,488 0.65 %
Time deposits 6,408,592   22,157   1.37 % 5,771,695   16,655   1.15 %
Total interest bearing deposits 18,301,807 50,772 1.10 % 16,110,154 33,346 0.82 %
FHLB advances 4,810,674 17,734 1.46 % 5,107,913 11,800 0.92 %
Notes and other borrowings 403,219   5,313   5.27 %   403,151   5,320   5.28 %
Total interest bearing liabilities 23,515,700 73,819   1.25 % 21,621,218 50,466   0.93 %
Non-interest bearing demand deposits 3,173,075 3,037,676
Other non-interest bearing liabilities 441,801   446,738  
Total liabilities 27,130,576 25,105,632
Stockholders' equity 2,793,701   2,410,459  
Total liabilities and stockholders' equity $ 29,924,277   $ 27,516,091  
Net interest income $ 250,015   $ 237,088  
Interest rate spread 3.31 % 3.51 %
Net interest margin 3.52 % 3.67 %
(1) On a tax-equivalent basis where applicable
(2) Annualized
(3) At fair value except for securities held to maturity
 
   
BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
 
Years Ended December 31,
2017   2016

Average
Balance

 

Interest (1)

  Yield/
Rate (1)
Average
Balance
  Interest (1)   Yield/
Rate (1)
Assets:
Interest earning assets:
Non-covered loans $ 19,478,071 $ 730,701 3.75 % $ 17,282,886 $ 617,863 3.58 %
Covered loans 544,279   300,540   55.22 % 721,268   301,614   41.82 %
Total loans 20,022,350 1,031,241 5.15 % 18,004,154 919,477 5.11 %
Investment securities (2) 6,658,145 201,363 3.02 % 5,691,617 161,385 2.84 %
Other interest earning assets 543,338   14,292   2.63 % 541,816   12,204   2.25 %
Total interest earning assets 27,223,833 1,246,896 4.58 % 24,237,587 1,093,066 4.51 %
Allowance for loan and lease losses (156,471 ) (139,469 )
Non-interest earning assets 1,758,032   1,923,298  
Total assets $ 28,825,394   $ 26,021,416  
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,586,390 12,873 0.81 % $ 1,382,717 8,343 0.60 %
Savings and money market deposits 9,730,101 80,397 0.83 % 8,361,652 51,774 0.62 %
Time deposits 6,094,336   77,663   1.27 % 5,326,630   59,656   1.12 %
Total interest bearing deposits 17,410,827 170,933 0.98 % 15,070,999 119,773 0.79 %
FHLB advances 4,869,690 61,996 1.27 % 4,801,406 47,773 0.99 %
Notes and other borrowings 402,921   21,259   5.28 %   403,197   21,287   5.28 %
Total interest bearing liabilities 22,683,438 254,188   1.12 % 20,275,602 188,833   0.93 %
Non-interest bearing demand deposits 3,069,565 2,968,192
Other non-interest bearing liabilities 443,019   435,645  
Total liabilities 26,196,022 23,679,439
Stockholders' equity 2,629,372   2,341,977  
Total liabilities and stockholders' equity $ 28,825,394   $ 26,021,416  
Net interest income $ 992,708   $ 904,233  
Interest rate spread 3.46 % 3.58 %
Net interest margin 3.65 % 3.73 %
(1) On a tax-equivalent basis where applicable
(2) At fair value except for securities held to maturity
 
 
BANKUNITED, INC. AND SUBSIDIARIES
EARNINGS PER COMMON SHARE
(In thousands except share and per share amounts)
 
Three Months Ended December 31, Years Ended December 31,

 

2017   2016 2017   2016
Basic earnings per common share:
Numerator:
Net income $ 417,794 $ 63,294 $ 614,273 $ 225,741
Distributed and undistributed earnings allocated to participating securities (15,865 ) (2,459 ) (23,250 ) (8,760 )
Income allocated to common stockholders for basic earnings per common share $ 401,929 $ 60,835 $ 591,023 $ 216,981
Denominator:
Weighted average common shares outstanding 106,829,796 104,154,514 106,574,448 104,097,182
Less average unvested stock awards (1,108,945 ) (1,133,163 ) (1,104,035 ) (1,157,378 )
Weighted average shares for basic earnings per common share 105,720,851   103,021,351   105,470,413   102,939,804  
Basic earnings per common share $ 3.80   $ 0.59   $ 5.60   $ 2.11  
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share $ 401,929 $ 60,835 $ 591,023 $ 216,981
Adjustment for earnings reallocated from participating securities (130 ) (7 ) (263 ) 62  
Income used in calculating diluted earnings per common share $ 401,799 $ 60,828 $ 590,760 $ 217,043
Denominator:
Weighted average shares for basic earnings per common share 105,720,851 103,021,351 105,470,413 102,939,804
Dilutive effect of stock options 351,083   757,391   387,074   716,366  
Weighted average shares for diluted earnings per common share 106,071,934   103,778,742   105,857,487   103,656,170  
Diluted earnings per common share $ 3.79   $ 0.59   $ 5.58   $ 2.09  
 
   

BANKUNITED, INC. AND SUBSIDIARIES

SELECTED RATIOS

 
Three Months Ended December 31, Years Ended December 31,
2017   2016 2017   2016
Financial ratios (5)
Return on average assets 5.54 % 0.92 % 2.13 % 0.87 %
Return on average assets, excluding the impact of the
discrete income tax benefit and related professional fees
(non-GAAP) 1.26 % 1.01 %
Return on average stockholders’ equity 59.33 % 10.45 % 23.36 % 9.64 %
Return on average stockholders' equity, excluding the impact
of the discrete income tax benefit and related professional
fees (non-GAAP) 13.47 % 11.08 %
Net interest margin (4) 3.52 % 3.67 % 3.65 % 3.73 %
 
  December 31, 2017   December 31, 2016

Non-
Covered

  Total

Non-
Covered

  Total
Asset quality ratios
Non-performing loans to total loans (1) (3) 0.82 % 0.81 % 0.71 % 0.70 %
Non-performing assets to total assets (2) 0.60 % 0.61 % 0.51 % 0.53 %
Allowance for loan and lease losses to total loans (3) 0.69 % 0.68 % 0.80 % 0.79 %
Allowance for loan and lease losses to non-performing loans (1) 84.03 % 83.53 % 113.68 % 112.55 %

Net charge-offs to average loans

0.38 % 0.38 % 0.13 % 0.13 %
(1) We define non-performing loans to include non-accrual loans, and loans, other than ACI loans, that are past due 90 days
or more and still accruing. Contractually delinquent ACI loans on which interest continues to be accreted are excluded
from non-performing loans.
(2) Non-performing assets include non-performing loans, OREO and other repossessed assets.
(3) Total loans include premiums, discounts, and deferred fees and costs.
(4) On a tax-equivalent basis.
(5) Annualized for the three month periods.
 

Source: BankUnited, Inc.

BankUnited, Inc.
Investor Relations:
Leslie N. Lunak, 786-313-1698
llunak@bankunited.com