BankUnited Financial

News Release

BankUnited, Inc. Reports Third Quarter 2018 Results

MIAMI LAKES, Fla.--(BUSINESS WIRE)--Oct. 24, 2018-- BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter ended September 30, 2018.

For the quarter ended September 30, 2018, the Company reported net income of $97.3 million, or $0.90 per diluted share compared to $67.8 million, or $0.62 per diluted share, for the quarter ended September 30, 2017, a 45% increase in diluted earnings per share. For the nine months ended September 30, 2018, the Company reported net income of $272.5 million, or $2.49 per diluted share, compared to $196.5 million, or $1.79 per diluted share, for the nine months ended September 30, 2017.

Non-loss share earnings per share(1) for the trailing four quarters ended September 30, 2018 increased by 28% to a total of $2.39 from a total of $1.87 for the preceding four quarters.

The annualized return on average stockholders’ equity for the nine months ended September 30, 2018 was 11.80% compared to 10.21% for the nine months ended September 30, 2017, while the annualized return on average assets was 1.19% compared to 0.92% for the same periods.

Rajinder Singh, President and Chief Executive Officer, said, "Results for this quarter were marked by strong growth in both GAAP and non-loss share EPS and by continued success increasing non-interest bearing DDA balances."

Performance Highlights

  • Net interest income increased by $10.7 million to $252.0 million for the quarter ended September 30, 2018 from $241.3 million for the quarter ended September 30, 2017. Interest income increased by $48.3 million, driven by increases in the average balances of loans and investment securities outstanding as well as increases in yields on interest earning assets. Interest expense increased by $37.6 million, driven primarily by increases in average interest bearing deposits and an increase in the cost of interest bearing liabilities. For the nine months ended September 30, 2018, net interest income increased by $43.6 million to $755.0 million from $711.4 million for the nine months ended September 30, 2017.
  • The net interest margin, calculated on a tax-equivalent basis, was 3.51% for the quarter ended September 30, 2018 compared to 3.60% for the immediately preceding quarter ended June 30, 2018 and 3.62% for the quarter ended September 30, 2017. Significant factors contributing to the decline in the net interest margin from the comparable quarter of the prior year were (i) an increase in the cost of interest bearing liabilities; (ii) the impact on tax equivalent yields of the reduction in the statutory federal income tax rate; and (iii) although yields on all categories of interest earning assets increased, non-covered loans and investment securities were added to the balance sheet at yields lower than the existing yield on earning assets, which is impacted by the yield on covered loans.
  • The provision for loan losses for the quarter ended September 30, 2018 totaled $1.2 million compared to $37.9 million for the quarter ended September 30, 2017. The provision for the quarter ended September 30, 2017 included $32.7 million related to taxi medallion loans.
  • Non-covered loans and leases, including equipment under operating lease, grew by $211 million during the quarter ended September 30, 2018. For the nine months ended September 30, 2018, non-covered loans and leases grew by $708 million.
  • For the quarter ended September 30, 2018, total deposits increased by $127 million, of which $98 million was non-interest bearing demand deposits. Total deposits increased by $427 million for the nine months ended September 30, 2018, of which $343 million was non-interest bearing demand deposits.
  • Book value per common share grew to $29.63 at September 30, 2018 from $28.32 at December 31, 2017 while tangible book value per common share increased to $28.88 from $27.59 over the same period.
  • During the quarter ended September 30, 2018, the Company completed the $150 million share repurchase program authorized by its Board of Directors, repurchasing 2.4 million shares for an aggregate purchase price of $96 million. During the nine months ended September 30, 2018, the Company repurchased approximately 3.8 million shares of its common stock for an aggregate purchase price of $150.0 million.
  • On October 23, 2018 the Board of Directors of the Company authorized the repurchase of up to an additional $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.

(1) Non-loss share earnings per share is a non-GAAP measure. See section entitled "Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measurements to their comparable GAAP financial measurements.

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 September 30, 2018 were as follows:

      BankUnited, Inc.     BankUnited, N.A.
Tier 1 leverage 9.5% 10.3%
 
Common Equity Tier 1 ("CET1") risk-based capital 13.2% 14.3%
 
Tier 1 risk-based capital 13.2% 14.3%
 
Total risk-based capital 13.8% 14.9%
 

Loans and Leases

Loans, including premiums, discounts and deferred fees and costs, totaled $21.9 billion at September 30, 2018 compared to $21.4 billion at December 31, 2017. Non-covered loans grew to $21.6 billion while covered loans declined to $360 million at September 30, 2018.

A comparison of non-covered loan and lease portfolio composition at the dates indicated follows:

     
September 30, 2018 June 30, 2018 December 31, 2017
Residential and other consumer loans $ 4,563,578     21.0% $ 4,448,660     20.6% $ 4,196,080     19.8%
Multi-family 2,762,998 12.8% 2,861,559 13.4% 3,218,953 15.4%
Non-owner occupied commercial real estate 4,567,589 21.4% 4,526,922 21.2% 4,474,801 21.5%
Construction and land 244,619 1.1% 255,393 1.2% 310,484 1.5%
Owner occupied commercial real estate 2,091,978 9.7% 2,046,266 9.6% 2,012,742 9.7%
Commercial and industrial 4,708,545 21.9% 4,594,857 21.5% 4,137,827 19.9%
Commercial lending subsidiaries 2,620,097   12.1% 2,684,716   12.5% 2,562,499   12.2%
$ 21,559,404   100.0% $ 21,418,373   100.0% $ 20,913,386   100.0%
Equipment under operating lease, net $ 661,677   $ 591,267   $ 599,502  
 

Residential and other consumer loans grew by $115 million for the quarter ended September 30, 2018. Multi-family loans declined by $99 million for the quarter ended September 30, 2018, primarily due to continued run-off of the New York portfolio, which decreased by $91 million. Commercial and industrial loans, inclusive of owner occupied commercial real estate, grew by $159 million for the quarter ended September 30, 2018, driven largely by growth in the Florida portfolio. Loans and leases for the commercial lending subsidiaries increased slightly, reflecting growth of $70 million in equipment under operating lease, largely offset by a decline in balances outstanding at Pinnacle Public Finance.

Asset Quality and Allowance for Loan and Lease Losses

For the quarters ended September 30, 2018 and 2017, the Company recorded provisions for loan losses of $1.2 million and $37.9 million, respectively, substantially all of which related to non-covered loans. For the nine months ended September 30, 2018 and 2017, the Company recorded provisions for loan losses of $13.3 million and $63.6 million, respectively, substantially all of which related to non-covered loans. The Company recorded net recoveries of $1.0 million and a provision of $32.7 million related to taxi medallion loans for the quarters ended September 30, 2018 and September 30, 2017, respectively. For the nine months ended September 30, 2018 and 2017, the provision related to taxi medallion loans totaled $13.0 million and $49.6 million, respectively.

Significant factors impacting the decrease in the provision for loan losses related to non-covered loans for the quarter and nine months ended September 30, 2018 as compared to the quarter and nine months ended September 30, 2017 were (i) lower loan growth; (ii) a net decrease in the provision related to certain quantitative and qualitative loss factors; (iii) a decrease in the provision related to taxi medallion loans; (iv) a decrease in the provision related to the impact of hurricanes during the third quarter of 2017; partially offset by (v) an increase in the provision related to specific reserves for loans other than taxi medallion loans.

Non-covered, non-performing loans totaled $206.1 million or 0.96% of total non-covered loans at September 30, 2018, compared to $172.0 million or 0.82% of total non-covered loans at December 31, 2017. Non-performing taxi medallion loans comprised $80.2 million or 0.37% of total non-covered loans at September 30, 2018 and $106.1 million or 0.51% of total non-covered loans at December 31, 2017. At September 30, 2018 and 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 0.58% and 60.51%, respectively, at September 30, 2018, compared to 0.69% and 84.03%, at December 31, 2017. The annualized ratio of net charge-offs to average non-covered loans was 0.21% for the nine months ended September 30, 2018, compared to 0.38% for the year ended December 31, 2017. The annualized ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.09% for the nine months ended September 30, 2018, compared to 0.29% for the year ended December 31, 2017. The most significant factors impacting the decline in the ratio of the allowance for non-covered loan and lease losses to total non-covered loans were (i) a decrease in certain loss factors, (ii) a decline in total criticized, classified and impaired loans, which typically carry higher reserves on a percentage basis, as a percentage of total loans and (iii) the impact of charge-offs on the ratio.

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

   
Three Months Ended September 30, 2018 Three Months Ended September 30, 2017
ACI
Loans
  Non-ACI
Loans
  Non-Covered
Loans
  Total ACI
Loans
  Non-ACI
Loans
  Non-Covered
Loans
  Total
Balance at beginning of period $ $ 590 $ 134,381 $ 134,971 $ 1,812 $ 2,737 $ 151,099 $ 155,648
Provision (recovery) (50 ) 1,250 1,200 261 37,593 37,854
Charge-offs (740 ) (12,340 ) (13,080 ) (36,028 ) (36,028 )
Recoveries   214   1,435   1,649     38   1,061   1,099  
Balance at end of period $   $ 14   $ 124,726   $ 124,740   $ 1,812   $ 3,036   $ 153,725   $ 158,573  
  Nine Months Ended September 30, 2018   Nine Months Ended September 30, 2017
ACI
Loans
  Non-ACI
Loans
  Non-Covered
Loans
  Total ACI
Loans
  Non-ACI
Loans
  Non-Covered
Loans
  Total
Balance at beginning of period $ $ 258 $ 144,537 $ 144,795 $ $ 2,100 $ 150,853 $ 152,953
Provision 517 12,825 13,342 1,812 881 60,880 63,573
Charge-offs (979 ) (35,001 ) (35,980 ) (55 ) (61,034 ) (61,089 )
Recoveries   218   2,365   2,583     110   3,026   3,136  
Balance at end of period $   $ 14   $ 124,726   $ 124,740   $ 1,812   $ 3,036   $ 153,725   $ 158,573  

Charge-offs related to taxi medallion loans totaled $0.7 million and $35.3 million for the quarters ended September 30, 2018 and 2017, respectively, and $14.2 million and $47.1 million for the nine months ended September 30, 2018 and 2017. The majority of charge-offs for the quarter ended September 30, 2018 related to one commercial relationship.

Deposits

At September 30, 2018, deposits totaled $22.3 billion compared to $21.9 billion at December 31, 2017. The average cost of total deposits was 1.35% for the quarter ended September 30, 2018, compared to 1.19% for the immediately preceding quarter ended June 30, 2018, and 0.87% for the quarter ended September 30, 2017. The average cost of total deposits was 1.19% for the nine months ended September 30, 2018, compared to 0.80% for the nine months ended September 30, 2017.

Net interest income

Net interest income for the quarter ended September 30, 2018 increased to $252.0 million from $241.3 million for the quarter ended September 30, 2017. Net interest income was $755.0 million for the nine months ended September 30, 2018, compared to $711.4 million for the nine months ended September 30, 2017. 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 increases in average interest bearing deposits and the cost of funds.

The Company’s net interest margin, calculated on a tax-equivalent basis, was 3.51% for the quarter ended September 30, 2018, compared to 3.62% for the quarter ended September 30, 2017. Net interest margin, calculated on a tax-equivalent basis, was 3.56% for the nine months ended September 30, 2018, compared to 3.69% for the nine months ended September 30, 2017.

Significant offsetting factors impacting the declines in net interest margin for the quarter and nine months ended September 30, 2018, compared to the quarter and nine months ended September 30, 2017, included:

  • The tax-equivalent yield on loans increased to 5.47% and 5.39%, respectively, for the quarter and nine months ended September 30, 2018, compared to 5.15% for both the quarter and nine months ended September 30, 2017, reflecting increased yields on both non-covered and covered loans.
  • The tax-equivalent yield on non-covered loans was 4.05% and 3.94%, respectively, for the quarter and the nine months ended September 30, 2018, compared to 3.79% and 3.73% for the quarter and nine months ended September 30, 2017. The most significant factor contributing to the increased yield on non-covered loans was the impact of increases in benchmark interest rates.
  • The tax-equivalent yield on covered loans increased to 79.67% and 71.46%, respectively, for the quarter and nine months ended September 30, 2018 from 56.70% and 53.54% for the quarter and nine months ended September 30, 2017, reflecting continued improvements in expected cash flows from ACI loans.
  • The tax-equivalent yield on investment securities increased to 3.41% and 3.26%, respectively, for the quarter and nine months ended September 30, 2018 from 3.14% and 3.07% for the quarter and nine months ended September 30, 2017.
  • Tax-equivalent yields on non-covered loans and investment securities and the net interest margin were each negatively impacted by approximately 0.08% for the quarter ended September 30, 2018 as compared to the quarter ended September 30, 2017 as a result of the reduction in the statutory federal income tax rate. For the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017, the tax rate change negatively impacted the net interest margin by approximately 0.08%.
  • Growth of non-covered loans and investment securities at yields lower than the overall yield on interest earning assets, which is impacted by the yield on covered loans.
  • The average rate on interest bearing liabilities increased to 1.74% and 1.57%, respectively for the quarter and nine months ended September 30, 2018, from 1.17% and 1.08% for the quarter and nine months ended September 30, 2017, reflecting higher average rates on both interest bearing deposits and FHLB advances. Increases in the cost of interest bearing liabilities primarily reflect increases in market interest rates and extension of the duration of FHLB advances.

Non-interest income

Non-interest income totaled $38.7 million and $98.7 million, respectively, for the quarter and nine months ended September 30, 2018 compared to $53.3 million and $111.4 million, respectively, for the quarter and nine months ended September 30, 2017.

The most significant factors contributing to these decreases in non-interest income included (i) decreases of $26.5 million and $26.3 million, respectively, in gain on investment securities and (ii) increases of $10.5 million and $10.7 million, respectively, in gain on sale of covered loans, inclusive of the impact of FDIC indemnification for the quarter and nine months ended September 30, 2018, as compared to the corresponding periods in the prior year. During the quarter ended September 30, 2018, under the terms of the Purchase and Assumption Agreement with the FDIC, the Company sold approximately $154 million in unpaid principal balance of covered residential loans. Decreases in gain on investment securities primarily reflected gains recognized in the quarter ended September 30, 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.

Non-interest expense

Non-interest expense totaled $170.8 million and $493.9 million, respectively, for the quarter and nine months ended September 30, 2018 compared to $156.7 million and $473.7 million for the quarter and nine months ended September 30, 2017. The most significant components of non-interest expense are employee compensation and benefits and amortization of the FDIC indemnification asset. Employee compensation and benefits increased by $7.3 million and $19.8 million for the quarter and nine months ended September 30, 2018, compared to the quarter and nine months ended September 30, 2017, mainly due to an increase in the number of employees and compensation increases.

Amortization of the FDIC indemnification asset was $48.3 million and $132.9 million, respectively, for the quarter and nine months ended September 30, 2018, compared to $45.2 million and $135.4 million for the quarter and nine months ended September 30, 2017. The amortization rate increased to 103.87% and 76.73% for the quarter and nine months ended September 30, 2018 from 46.62% and 41.19% for the quarter and nine months ended September 30, 2017. 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. Although the amortization rate increased, total amortization expense declined for the nine months ended September 30, 2018 due to the reduction in the average balance of the indemnification asset.

Provision for income taxes

The effective income tax rate was 18.0% and 21.4% for the quarter and nine months ended September 30, 2018, compared to 32.2% and 31.2% for the quarter and nine months ended September 30, 2017. These declines in the effective income tax rate were primarily attributable to the reduction of the statutory corporate federal income tax rate from 35% to 21%, effective January 1, 2018. Additionally, the effective income tax rate differed from the statutory federal income tax rate of 21% in both periods due primarily to income not subject to tax, offset by state income taxes.

Covered loans and the FDIC indemnification asset

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

Changes in accretable yield on ACI loans for the nine months ended September 30, 2018 and the year ended December 31, 2017 were as follows (in thousands):

Balance, December 31, 2016   $ 675,385
Reclassifications from non-accretable difference, net 81,501
Accretion (301,827 )
Balance, December 31, 2017 455,059
Reclassifications from non-accretable difference, net 78,561
Accretion (249,609 )
Balance, September 30, 2018 $ 284,011  

At September 30, 2018, total future estimated amortization of the FDIC indemnification asset was approximately $82 million.

The estimates of expected cash flows from ACI loans underlying the balance of accretable yield and future estimated amortization of the FDIC indemnification asset reflected above as of September 30, 2018 were predicated on the assumption that a final sale of all of the remaining covered loans would occur in the second quarter of 2019. Based on preliminary discussions with the FDIC that have taken place subsequent to September 30, 2018, there is a reasonable possibility that a portion of these loans may be retained by the Bank and that the sale of any loans not retained may occur earlier than the second quarter of 2019. If a decision is made to retain a portion of the covered loan portfolio and the timing of sale of the remaining loans is accelerated, we expect the amount of estimated future amortization of the FDIC indemnification asset to increase and the timing of that amortization to be accelerated. Additionally, we expect that the balance of accretable yield will increase, in part due to expected collection of additional contractual interest, and that accretion will occur over a longer period of time reflective of the expected lives of the retained loans. Loss share coverage with respect to any loans retained is expected to terminate no later than May 21, 2019.

Impact of Hurricane Michael

In October, 2018, Hurricane Michael made landfall in the Florida panhandle as a category 4 hurricane, impacting some areas of Florida and the southeastern United States with significant wind damage, flooding and power outages. While the Company does not have physical operations in areas significantly impacted by the storm, some of the Company's borrowers may have been impacted. The Company is in the process of assessing the potential impact of the hurricane on the value of collateral underlying our loans and the ability of borrowers to repay their obligations to the Bank. Uncertainty remains as to the ultimate impact of the storm on the allowance for loan and lease losses.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Wednesday, October 24, 2018 with President and Chief Executive Officer, Rajinder P. Singh, and Chief Financial Officer, Leslie N. Lunak.

The earnings release and slides with supplemental information relating to the 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 7741909. A replay of the call will be available from 12:00 p.m. ET on October 24th through 11:59 p.m. ET on October 31st by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 7741909. 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 $31.5 billion at September 30, 2018, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 86 banking centers in 15 Florida counties and 5 banking centers in the New York metropolitan area at September 30, 2018.

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 estimate of cumulative losses on the covered assets, as of September 30, 2018, is approximately $3.5 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 September 30, 2018.

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. 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, 2017 which is 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)

 
September 30,
2018
December 31,
2017
ASSETS
Cash and due from banks:
Non-interest bearing $ 11,644 $ 35,246
Interest bearing 268,155   159,336  
Cash and cash equivalents 279,799 194,582
Investment securities (including securities recorded at fair value of $7,217,403 and $6,680,832) 7,227,403 6,690,832
Non-marketable equity securities 273,427 265,989
Loans held for sale 37,179 34,097
Loans (including covered loans of $359,767 and $503,118) 21,919,171 21,416,504
Allowance for loan and lease losses (124,740 ) (144,795 )
Loans, net 21,794,431 21,271,709
FDIC indemnification asset 152,517 295,635
Bank owned life insurance 262,987 252,462
Equipment under operating lease, net 661,677 599,502
Goodwill and other intangible assets 77,729 77,796
Other assets 746,487   664,382  
Total assets $ 31,513,636   $ 30,346,986  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposits:
Non-interest bearing $ 3,413,610 $ 3,071,032
Interest bearing 1,587,812 1,757,581
Savings and money market 10,588,075 10,715,024
Time 6,715,793   6,334,842  
Total deposits 22,305,290 21,878,479
Federal funds purchased 175,000
Federal Home Loan Bank advances 4,946,000 4,771,000
Notes and other borrowings 402,780 402,830
Other liabilities 609,678   268,615  
Total liabilities 28,438,748 27,320,924
 
Commitments and contingencies
 
Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 103,793,325 and 106,848,185 shares issued and outstanding 1,037 1,068
Paid-in capital 1,364,864 1,498,227
Retained earnings 1,667,092 1,471,781
Accumulated other comprehensive income 41,895   54,986  
Total stockholders' equity 3,074,888   3,026,062  
Total liabilities and stockholders' equity $ 31,513,636   $ 30,346,986  
 
   

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)

 
Three Months Ended September 30, Nine Months Ended September 30,
2018   2017 2018   2017
Interest income:
Loans $ 293,543 $ 253,815 $ 855,807 $ 739,586
Investment securities 59,319 51,851 165,396 141,624
Other 4,855   3,777   13,145   10,606  
Total interest income 357,717   309,443   1,034,348   891,816  
Interest expense:
Deposits 75,257 45,919 196,916 120,161
Borrowings 30,492   22,260   82,392   60,209  
Total interest expense 105,749   68,179   279,308   180,370  
Net interest income before provision for loan losses 251,968 241,264 755,040 711,446
Provision for (recovery of) loan losses (including ($50), $261, $517 and $2,693 for covered loans) 1,200   37,854   13,342   63,573  
Net interest income after provision for loan losses 250,768   203,410   741,698   647,873  
Non-interest income:
Income from resolution of covered assets, net 3,134 6,400 10,689 22,066
Net gain (loss) on FDIC indemnification 3,090 (4,838 ) (1,925 ) (14,174 )
Deposit service charges and fees 3,677 3,251 10,674 9,706
Gain (loss) on sale of loans, net (including $5,037, $0, $4,739 and $(1,582) related to covered loans) 8,691 2,447 12,960 6,601
Gain on investment securities, net 432 26,931 2,938 29,194
Lease financing 14,091 13,287 45,685 40,067
Other non-interest income 5,620   5,848   17,673   17,903  
Total non-interest income 38,735   53,326   98,694   111,363  
Non-interest expense:
Employee compensation and benefits 65,612 58,327 198,185 178,386
Occupancy and equipment 18,887 18,829 56,704 56,689
Amortization of FDIC indemnification asset 48,255 45,225 132,852 135,351
Deposit insurance expense 5,375 5,764 14,810 16,827
Professional fees 5,240 2,748 10,772 12,573
Telecommunications and data processing 4,187 3,452 11,772 10,481
Depreciation of equipment under operating lease 9,870 8,905 28,662 25,655
Other non-interest expense 13,372   13,455   40,105   37,735  
Total non-interest expense 170,798   156,705   493,862   473,697  
Income before income taxes 118,705 100,031 346,530 285,539
Provision for income taxes 21,377   32,252   74,067   89,060  
Net income $ 97,328   $ 67,779   $ 272,463   $ 196,479  
Earnings per common share, basic $ 0.90   $ 0.62   $ 2.50   $ 1.79  
Earnings per common share, diluted $ 0.90   $ 0.62   $ 2.49   $ 1.79  
Cash dividends declared per common share $ 0.21   $ 0.21   $ 0.63   $ 0.63  
 
 

BANKUNITED, INC. AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS

(Dollars in thousands)

 
Three Months Ended September 30,
2018   2017

Average
Balance

  Interest (1)  

Yield/

Rate(1)(2)

Average
Balance

  Interest (1)  

Yield/
Rate(1)(2)

Assets:
Interest earning assets:
Non-covered loans $ 21,311,706 $ 216,746 4.05% $ 19,710,115 $ 187,928 3.79%
Covered loans 408,182   81,302   79.67% 518,026   73,452   56.70%
Total loans 21,719,888 298,048 5.47% 20,228,141 261,380 5.15%
Investment securities (3) 7,118,626 60,677 3.41% 7,002,615 55,046 3.14%
Other interest earning assets 507,318   4,855   3.80% 545,224   3,777   2.75%
Total interest earning assets 29,345,832 363,580 4.94% 27,775,980 320,203 4.60%
Allowance for loan and lease losses (137,784 ) (160,231 )
Non-interest earning assets 1,859,619   1,699,912  
Total assets $ 31,067,667   $ 29,315,661  
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,592,908 4,550 1.13% $ 1,590,206 3,415 0.85%
Savings and money market deposits 10,483,248 38,520 1.46% 9,968,512 21,964 0.87%
Time deposits 6,728,915   32,187   1.90% 6,290,056   20,540   1.30%
Total interest bearing deposits 18,805,071 75,257 1.59% 17,848,774 45,919 1.02%
Federal funds purchased 89,218 445 2.00% —%
FHLB advances 4,772,902 24,743 2.06% 4,924,325 16,946 1.37%
Notes and other borrowings 402,782   5,304   5.27% 402,828   5,314   5.28%
Total interest bearing liabilities 24,069,973 105,749   1.74% 23,175,927 68,179   1.17%
Non-interest bearing demand deposits 3,369,393 3,036,046
Other non-interest bearing liabilities 520,118   468,735  
Total liabilities 27,959,484 26,680,708
Stockholders' equity 3,108,183   2,634,953  
Total liabilities and stockholders' equity $ 31,067,667   $ 29,315,661  
Net interest income $ 257,831   $ 252,024  
Interest rate spread 3.20% 3.43%
Net interest margin 3.51% 3.62%

______

(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)

 
Nine Months Ended September 30,
2018   2017

Average
Balance

  Interest (1)   Yield/
Rate (1)(2)
Average
Balance
  Interest (1)   Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Non-covered loans $ 21,073,130 $ 622,039 3.94% $ 19,169,479 $ 535,926 3.73%
Covered loans 460,485   246,811   71.46% 560,934   225,194   53.54%
Total loans 21,533,615 868,850 5.39% 19,730,413 761,120 5.15%
Investment securities (3) 6,932,504 169,645 3.26% 6,569,553 151,337 3.07%
Other interest earning assets 503,378   13,145   3.49% 557,623   10,606   2.54%
Total interest earning assets 28,969,497 1,051,640 4.85% 26,857,589 923,063 4.59%
Allowance for loan and lease losses (141,047 ) (157,015 )
Non-interest earning assets 1,905,278   1,754,499  
Total assets $ 30,733,728   $ 28,455,073  
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,604,666 12,902 1.07% $ 1,564,229 8,913 0.76%
Savings and money market deposits 10,610,889 100,891 1.27% 9,557,907 55,741 0.78%
Time deposits 6,507,726   83,123   1.71% 5,988,433   55,507   1.24%
Total interest bearing deposits 18,723,281 196,916 1.41% 17,110,569 120,161 0.94%
Federal funds purchased 30,066 445 1.97% —%
FHLB advances 4,665,799 66,028 1.89% 4,889,578 44,262 1.21%
Notes and other borrowings 402,809   15,919   5.27% 402,821   15,947   5.28%
Total interest bearing liabilities 23,821,955 279,308   1.57% 22,402,968 180,370   1.08%
Non-interest bearing demand deposits 3,327,521 3,034,682
Other non-interest bearing liabilities 498,368   443,430  
Total liabilities 27,647,844 25,881,080
Stockholders' equity 3,085,884   2,573,993  
Total liabilities and stockholders' equity $ 30,733,728   $ 28,455,073  
Net interest income $ 772,332   $ 742,693  
Interest rate spread 3.28% 3.51%
Net interest margin 3.56% 3.69%

_______

(1) On a tax-equivalent basis where applicable
(2) Annualized
(3) 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 September 30, Nine Months Ended September 30,

 

2018   2017 2018   2017
Basic earnings per common share:
Numerator:
Net income $ 97,328 $ 67,779 $ 272,463 $ 196,479
Distributed and undistributed earnings allocated to participating securities (3,771 ) (2,525 ) (10,444 ) (7,331 )
Income allocated to common stockholders for basic earnings per common share $ 93,557 $ 65,254 $ 262,019 $ 189,148
Denominator:
Weighted average common shares outstanding 105,063,770 106,809,381 105,914,807 106,488,396
Less average unvested stock awards (1,178,982 ) (1,101,485 ) (1,170,209 ) (1,102,381 )
Weighted average shares for basic earnings per common share 103,884,788   105,707,896   104,744,598   105,386,015  
Basic earnings per common share $ 0.90   $ 0.62   $ 2.50   $ 1.79  
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share $ 93,557 $ 65,254 $ 262,019 $ 189,148
Adjustment for earnings reallocated from participating securities 13   6   37   21  
Income used in calculating diluted earnings per common share $ 93,570 $ 65,260 $ 262,056 $ 189,169
Denominator:
Weighted average shares for basic earnings per common share 103,884,788 105,707,896 104,744,598 105,386,015
Dilutive effect of stock options and executive share-based awards 499,431   365,286   512,801   479,459  
Weighted average shares for diluted earnings per common share 104,384,219   106,073,182   105,257,399   105,865,474  
Diluted earnings per common share $ 0.90   $ 0.62   $ 2.49   $ 1.79  
 
   

BANKUNITED, INC. AND SUBSIDIARIES

SELECTED RATIOS

 
Three Months Ended September 30, Nine Months Ended September 30,
2018   2017 2018   2017
Financial ratios (5)
Return on average assets 1.24% 0.92% 1.19% 0.92%
Return on average stockholders’ equity 12.42% 10.21% 11.80% 10.21%
Net interest margin (4) 3.51% 3.62% 3.56% 3.69%
 
  September 30, 2018   December 31, 2017
Non-Covered   Total Non-Covered   Total
Asset quality ratios
Non-performing loans to total loans (1) (3) 0.96% 0.94% 0.82% 0.81%
Non-performing assets to total assets (2) 0.68% 0.70% 0.60% 0.61%
Allowance for loan and lease losses to total loans (3) 0.58% 0.57% 0.69% 0.68%
Allowance for loan and lease losses to non-performing loans (1) 60.51% 60.47% 84.03% 83.53%
Net charge-offs to average loans (5) 0.21% 0.21% 0.38% 0.38%
 

_____

(1) We define non-performing loans to include non-accrual loans, and loans, other than ACI loans and government insured residential loans, that are past due 90 days or more and still accruing. Contractually delinquent ACI loans and government insured residential loans on which interest continues to be accreted or accrued 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 and nine month periods.

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 comparison 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 September 30, 2018 (in thousands except share and per share data):

Total stockholders’ equity   $ 3,074,888
Less: goodwill and other intangible assets 77,729
Tangible stockholders’ equity $ 2,997,159
 
Common shares issued and outstanding 103,793,325
 
Book value per common share $ 29.63
 
Tangible book value per common share $ 28.88
 

Source: BankUnited, Inc.

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