UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 29, 2020
(
April 29, 2020
)
(Exact name of registrant as specified in its charter)
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(State of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(Registrant’s telephone number, including area code):
(
305
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569-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Class
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Trading Symbol
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Name of Exchange on Which Registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
☐
1
Item 2.02
Results of Operations and Financial Condition.
On
April 29, 2020
, BankUnited, Inc. (the “Company”) reported its results for the quarter ended
March 31, 2020
. A copy of the Company’s press release containing this information and slides containing supplemental information related to this release are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Item 8.01
Other Events.
The following risk factor supplements the disclosure in the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. As used in the risk factor, the terms the “Company,” “we,” “us,” and “our” refer to BankUnited, Inc. and its subsidiaries unless the context otherwise requires.
The COVID-19 pandemic has caused substantial disruption to the global economy which has adversely affected, and is expected to continue to adversely affect, the Company’s business and results of operations. The future impacts of the COVID-19 pandemic on the global economy and the Company’s business, results of operations and financial condition remains uncertain.
In March 2020, the World Health Organization declared novel coronavirus disease 2019 (COVID-19) as a global pandemic. The pandemic has resulted in governmental authorities implementing numerous measures attempting to contain the spread and impact of COVID-19 such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activities, including in major markets in which the Company and its clients are located or do business. The COVID-19 pandemic, and governmental responses to the pandemic, have severely negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels.
This macroeconomic environment has had, and could continue to have, an adverse effect on the Company’s business and operations. Should current economic impacts persist or continue to deteriorate, this macroeconomic environment could have a continued adverse effect on our business and operations, including, but not limited to, decreased demand for the Company’s products and services, protracted periods of lower interest rates, loss of income resulting from forbearances, deferrals and fee waivers provided by the Company to its consumer and commercial borrowers, increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs and possible constraints on liquidity and capital, whether due to increases in risk-weighted assets related to supporting client activities or to regulatory actions. The business operations of the Company may also be disrupted if significant portions of its workforce or those of vendors or third-party service providers are unable to work effectively, including because of illness, quarantines, government actions, restrictions in connection with the pandemic, and technology limitations and/or disruptions. The Company also faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions taken by governmental authorities in response to those conditions.
The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. Moreover, the effects of the COVID-19 pandemic may heighten many of the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K including, but not limited to, financial market conditions, economic conditions, credit risk, interest rate risk, risk of security breaches and technology changes.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.
2
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Exhibit
Number
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Description
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April 29, 2020
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April 29, 2020
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3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated:
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April 29, 2020
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BANKUNITED, INC.
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/s/ Leslie N. Lunak
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Name:
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Leslie N. Lunak
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Title:
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Chief Financial Officer
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4
EXHIBIT INDEX
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Exhibit
Number
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Description
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April 29, 2020
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April 29, 2020
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5
Exhibit 99.1
BANKUNITED, INC. REPORTS FIRST QUARTER
2020
RESULTS
Miami Lakes, Fla. —
April 29, 2020
— BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter ended
March 31, 2020
.
“The COVID-19 pandemic has altered life as we know it. While extraordinary changes in the economic backdrop and the implications of the COVID-19 outbreak had a material impact on our provision for credit losses this quarter, BankUnited’s capital and liquidity positions are strong. We are prepared to navigate these challenging circumstances and are intently focused on doing what we can to support our customers, communities and employees in these unprecedented times. I would be remiss not to add that I am extremely proud of the commitment demonstrated by our employees, many of whom have been working around the clock to help our clients during this difficult time. I am confident we will emerge stronger on the other side of this pandemic, well positioned to partner with our customers as they chart a path forward,” said Rajinder Singh, Chairman, President and Chief Executive Officer.
For the quarter ended
March 31, 2020
, the Company reported a net loss of
$(31.0) million
, or
$(0.33)
per diluted share, compared to net income of
$66.0 million
, or
$0.65
per diluted share, for the quarter ended March 31, 2019. Results for the quarter ended March 31, 2020 were negatively impacted by the application of the Current Expected Credit Losses ("CECL") accounting methodology, including the expected impact of COVID-19 on the provision for credit losses.
Our Response to the COVID-19 Pandemic
The COVID-19 pandemic has caused substantial disruption to the global economy and the communities we serve. In response to the pandemic, we have:
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Prioritized the well-being of our employees, operational resilience, liquidity, support to our customers, and asset quality.
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Activated our business continuity and contingency funding plans.
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Enabled 79% of our total employees, and 97% of our non-branch employees, to work remotely. We have not experienced any significant operational issues or disruptions in customer service as a result.
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Expanded certain employee benefits and launched a number of programs to keep our employees healthy and engaged.
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Implemented modified service models for all of our branches. To promote social distancing, customers are being served in these branches through drive through or lobby appointments only, and in some cases, with reduced hours. 24% of our retail branches are temporarily closed based on customer traffic counts and staffing levels.
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Supported our clients through participating in the Small Business Administration’s Paycheck Protection Program ("PPP"), and granting forbearance, deferrals and fee waivers on a case-by-case basis.
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Enhanced daily monitoring of liquidity trends and deposit flows, and confirmed and optimized sources of contingent liquidity.
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Pro-actively reached out to all of our borrowers with total credit exposure of $5 million or more, and to all borrowers in certain high-risk segments to assess the potential impact of COVID-19.
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Segregated certain segments of the loan portfolio for enhanced monitoring, including franchise finance, hotels and retail.
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Augmented our stress testing protocols.
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We remain confident in our long-term underlying strength and stability, and our ability to navigate these challenging conditions.
1
Financial Highlights
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The Company and its banking subsidiary exceeded all regulatory guidelines required to be considered well capitalized at
March 31, 2020
. The Company's and the Bank's CET1 risk-based capital ratios were
11.8%
and
12.9%
at March 31, 2020, respectively. The Company's and the Bank's Tier 1 leverage ratios were
8.5%
and
9.3%
at March 31, 2020, respectively.
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Our liquidity position remains strong. At March 31, 2020, the Bank had total same day available liquidity of approximately $8.5 billion.
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Non-interest bearing demand deposits grew by
$305 million
for the quarter ended
March 31, 2020
, to
18.4%
of total deposits at
March 31, 2020
compared to
17.6%
of total deposits at
December 31, 2019
and 15.9% of total deposits one year ago. Total deposits grew by
$606 million
for the quarter ended
March 31, 2020
.
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The average cost of total deposits declined to
1.36%
for the quarter ended
March 31, 2020
, from 1.48% for the immediately preceding quarter ended
December 31, 2019
, and 1.67% for the quarter ended
March 31, 2019
. On a spot basis, the average annual percentage yield ("APY") on total interest-bearing deposits declined to 1.35% at
March 31, 2020
from 1.71% at
December 31, 2019
, reflecting recent actions taken to reduce the cost of deposits.
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The provision for credit losses totaled
$125.4 million
for the quarter ended March 31, 2020, reflecting the application of the CECL methodology and encompassing the expected economic impact of the COVID-19 pandemic. The provision included approximately $93 million related to changes in the economic forecast since the initial adoption of CECL on January 1, 2020 and was impacted by an increase of approximately $16 million in specific reserves during the quarter. Most of the increase in specific reserves related to credits in the franchise finance portfolio segment. The provision for credit losses, excluding the portion related to unfunded commitments, was
0.53%
of average loans for the quarter ended March 31, 2020. For the quarter ended
March 31, 2019
, the Company recorded a provision for loan losses, under the incurred loss model, of
$10.3 million
.
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The Allowance for Credit Losses ("ACL") represented our current estimate of expected lifetime credit losses from the loan portfolio and totaled
$251 million
, or
1.08%
of total loans, at March 31, 2020. Upon initial adoption of CECL, at January 1, 2020, the ACL was
0.59%
of total loans and at December 31, 2019, calculated under an incurred loss methodology, the ACL was
0.47%
of total loans.
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Pre-tax, pre-provision income totaled
$85.0 million
for the quarter ended March 31, 2020 compared to
$100.5 million
for the quarter ended
March 31, 2019
. Pre-tax, pre-provision income for the quarter ended March 31, 2020 included a
$5.0 million
unrealized loss on marketable equity securities, resulting from the impact on markets of the COVID-19 crisis. Inclusive of this
$5.0 million
unrealized loss, loss on investment securities was
$(3.5) million
for the quarter ended March 31, 2020 compared to a gain on investment securities of
$5.8 million
for the comparable quarter of the prior year, a negative variance of
$9.2 million
. Additional factors contributing to the decline in pre-tax, pre-provision income were a
$10.3 million
decline in net interest income, discussed further below, partially offset by a
$7.8 million
decrease in total non-interest expense.
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The net interest margin, calculated on a tax-equivalent basis, was
2.35%
for the quarter ended
March 31, 2020
, compared to 2.41% for the immediately preceding quarter ended December 31, 2019 and
2.54%
for the quarter ended
March 31, 2019
. Both yields on interest earning assets and the cost of interest bearing liabilities declined for the quarter ended March 31, 2020 as compared to the quarters ended December 31, 2019 and March 31, 2019; however, the repricing of interest bearing liabilities, particularly deposits, lagged the repricing of interest earning assets.
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Stockholders' equity was impacted by a decline of
$291.8 million
in accumulated other comprehensive income for the quarter ended March 31,2020, attributed to an increase in unrealized losses on investment securities available for sale and derivative instruments. The Company currently expects to recover the amortized cost basis of its available for sale securities portfolio. Share repurchases totaling approximately
$101 million
during the quarter ended
March 31, 2020
also impacted stockholders' equity. As previously reported, the Company has temporarily suspended its share repurchase program.
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As previously reported, the Company announced an increase of $0.02 in its quarterly cash dividend to $0.23 per common share, reflecting a 10% increase from the previous quarterly cash dividend of $0.21 per common share.
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2
Capital
The Company's and BankUnited, N.A.'s regulatory capital ratios at
March 31, 2020
and December 31, 2019 were as follows:
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March 31, 2020
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December 31, 2019
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Required to be Considered Well Capitalized
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BankUnited, Inc.
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BankUnited, N.A.
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BankUnited, Inc.
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BankUnited, N.A.
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Tier 1 leverage
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8.5
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%
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9.3
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%
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8.9
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%
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9.3
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%
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5.0
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%
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Common Equity Tier 1 ("CET1") risk-based capital
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11.8
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%
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12.9
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%
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12.3
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%
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12.9
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%
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6.5
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%
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Total risk-based capital
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12.6
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%
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13.7
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%
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12.8
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%
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13.4
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%
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10.0
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%
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As permitted by a recently issued inter-agency interim final rule, the Company has elected the option to temporarily delay the effects of the adoption of CECL on regulatory capital for two years, followed by a three-year transition period. On a fully phased in basis, at March 31, 2020, the Company's and the Bank's CET1 risk-based capital ratios would have been
11.5%
and
12.6%
, respectively.
The primary reason for the decline in the Company's regulatory capital ratios from December 31, 2019 to March 31, 2020 was share repurchases executed during the first quarter. During the quarter ended
March 31, 2020
, the Company repurchased approximately
3.3 million
shares of its common stock for an aggregate purchase price of $
101 million
, at a weighted average price of
$30.36
per share.
Liquidity
BankUnited's liquidity position remains strong. At March 31, 2020, same day available liquidity totaled approximately $8.5 billion, including cash, borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve Discount Window and Federal Funds lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Bank's amortizing securities and loan portfolios. At
March 31, 2020
, BankUnited had available borrowing capacity at the Federal Home Loan Bank of $4.5 billion, unused borrowing capacity at the Federal Reserve of $3.3 billion and unused Federal funds lines of credit totaling $225 million. The Bank utilizes the Federal Reserve's Paycheck Protection Program Liquidity Facility to provide liquidity to fund PPP loans.
Asset Quality and the Allowance for Credit Losses
Effective January 1, 2020, the Company adopted the Current Expected Credit Losses ("CECL") methodology for estimating its ACL as prescribed by Accounting Standards Codification ("ASC") 326. This accounting standard establishes a single framework for estimating expected credit losses for all financial assets carried at amortized cost and certain off-balance sheet credit exposures. The framework requires that management's estimate reflect expected credit losses over the remaining lives of financial instruments and consider historical events, current conditions and reasonable and supportable economic forecasts.
The following table presents the ACL at the dates indicated, related ACL coverage ratios, as well as net charge-off rates for the quarter ended March 31, 2020 and the year ended December 31, 2019 (dollars in thousands):
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ACL
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ACL to Total Loans
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ACL to Non-Performing Loans
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Net Charge-offs to Average Loans
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December 31, 2019 (incurred loss)
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$
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108,671
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0.47
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%
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53.07
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%
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0.05
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%
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January 1, 2020 (initial date of CECL adoption)
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$
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135,976
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0.59
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%
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66.4
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%
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N/A
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March 31, 2020 (expected loss)
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$
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250,579
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1.08
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%
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126.41
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%
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0.13
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%
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The Company based its reasonable and supportable forecast used in estimating the ACL at March 31, 2020 on Moody's March Mid-Cycle Baseline forecast dated March 27, 2020. This forecast incorporated a number of macroeconomic variables and other data and featured a peak-to-trough drop of approximately 20% in real GDP and a national unemployment rate approaching 9% in the second quarter 2020, with recovery beginning in the second half of 2020. For the quarter ended
March 31, 2020
, the Company recorded a provision for credit losses of
$125.4 million
, which included $3.6 million related to unfunded loan commitments.
3
The following table summarizes the activity in the ACL for the periods indicated (in thousands):
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Three Months Ended March 31,
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2020
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2019
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Beginning balance
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$
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108,671
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$
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109,931
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Cumulative effect of adoption of CECL
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27,305
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—
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Balance after adoption of CECL
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135,976
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109,931
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Provision
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121,865
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10,281
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Charge-offs
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(7,806
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)
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(6,133
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)
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Recoveries
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544
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624
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Ending balance
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$
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250,579
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$
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114,703
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Non-performing loans totaled
$198.2 million
or
0.85%
of total loans at
March 31, 2020
, compared to
$204.8 million
or
0.88%
of total loans at
December 31, 2019
. Non-performing loans included
$49.1 million
and
$45.7 million
of the guaranteed portion of SBA loans on non-accrual status, representing
0.21%
and
0.20%
of total loans at
March 31, 2020
and
December 31, 2019
, respectively.
The following table shows the composition of the Company's criticized and classified commercial loans at the dates indicated (dollars in thousands):
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March 31, 2020
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December 31, 2019
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Special Mention
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$
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288,148
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$
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72,881
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Substandard accruing
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238,786
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180,380
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Substandard non-accruing
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181,278
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185,906
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Total criticized and classified
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$
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708,212
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$
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439,167
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Percent of total loans
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3.10
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%
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1.90
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%
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The increase in special mention and substandard accruing loans was primarily attributed to downgrades in the Bridge franchise finance portfolio during the quarter ended
March 31, 2020
.
Loans and Leases
A comparison of loan and lease portfolio composition at the dates indicated follows (dollars in thousands):
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March 31, 2020
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December 31, 2019
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Residential and other consumer loans
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$
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5,634,823
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24.4
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%
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$
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5,661,119
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24.5
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%
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Multi-family
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1,967,578
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8.5
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%
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2,217,705
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9.6
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%
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Non-owner occupied commercial real estate
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4,987,798
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21.5
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%
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5,030,904
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21.7
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%
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Construction and land
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222,223
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1.0
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%
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243,925
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1.1
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%
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Owner occupied commercial real estate
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2,026,510
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8.7
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%
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2,062,808
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8.9
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%
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Commercial and industrial
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5,008,573
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21.6
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%
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4,655,349
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20.1
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%
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Pinnacle
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1,187,607
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5.0
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%
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1,202,430
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5.2
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%
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Bridge - franchise finance
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647,699
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2.8
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%
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627,482
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2.6
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%
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Bridge - equipment finance
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649,154
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2.8
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%
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684,794
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3.0
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%
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|||||
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Mortgage warehouse lending
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852,313
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3.7
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%
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768,472
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3.3
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%
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|||||
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$
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23,184,278
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|
100.0
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%
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$
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23,154,988
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100.0
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%
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||||
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Operating lease equipment, net
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$
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684,563
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$
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698,153
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4
For the quarter ended
March 31, 2020
, total loans grew by
$29 million
. Commercial and industrial loans grew by
$353 million
and mortgage warehouse outstandings increased by
$84 million
due to increased utilization. The decline in multi-family balances was driven primarily by continued runoff of the New York portfolio. Residential activity for the quarter included purchases of approximately $286 million in GNMA early buyout loans, offset by approximately $202 million in re-poolings and paydowns. The core portfolio experienced a net decline of approximately $111 million driven by higher prepayment speeds in the current rate environment.
The following table presents loan portfolio sub-segments that, in light of current circumstances, have been identified for enhanced monitoring as of
March 31, 2020
(dollars in thousands):
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March 31, 2020
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Amount
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% of Total Loans
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|||||
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Retail exposure in the CRE portfolio
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$
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1,446,599
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6.2
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%
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Retail exposure in the C&I portfolio
(1)
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346,915
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1.5
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%
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||
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Bridge - franchise finance
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647,699
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2.8
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%
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||
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Hotel
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619,482
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2.7
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%
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||
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Airlines
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84,649
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0.4
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%
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Cruise lines
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71,374
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0.3
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%
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Energy
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46,348
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0.2
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%
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||
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$
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3,263,066
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14.1
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%
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||
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(1)
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Includes
$216 million
of owner-occupied commercial real estate loans.
|
There is also exposure to energy in the operating lease portfolio, primarily railcars, totaling $291 million at
March 31, 2020
.
Investment Securities
Investment securities totaled
$7.9 billion
at
March 31, 2020
compared to
$7.8 billion
at
December 31, 2019
, substantially all of which were available for sale ("AFS"). The AFS portfolio was in a net unrealized loss position of
$249.8 million
at
March 31, 2020
, compared to a net unrealized gain position of $38.3 million at December 31, 2019. Unrealized losses were primarily attributable to spread widening. The majority of the unrealized losses at March 31, 2020 related to the private label commercial mortgage backed security ("CMBS") and collateralized loan obligation ("CLO") portfolio segments. The CMBS and CLO portfolio segments, which totaled
$1.6 billion
and
$1.1 billion
at March 31, 2020, respectively, were in net unrealized loss positions of
$123.8 million
and
$74.7 million
, respectively. The Company monitors its AFS securities at the individual security level to evaluate whether any of the unrealized losses are indicative of credit losses. At March 31, 2020, our security level analysis incorporated assumptions about underlying collateral defaults, delinquencies, severity and other relevant factors generally consistent with those observed at the most severe point in the global financial crisis. Based on this analysis, due in large part to the level of credit enhancement provided by the structure of these securities, none of the AFS securities were determined to be credit loss impaired.
Net interest income
Net interest income for the quarter ended
March 31, 2020
decreased to
$180.6 million
from
$190.9 million
for the quarter ended
March 31, 2019
and
$185.3 million
for the immediately preceding quarter ended December 31, 2019. Interest income and interest expense decreased by
$27.7 million
and
$17.4 million
, respectively, for the quarter ended
March 31, 2020
compared to the quarter ended
March 31, 2019
and by
$15.3 million
and
$10.5 million
, respectively, compared to the immediately preceding quarter. Decreases in both interest income and expense are primarily a result of decreases in benchmark interest rates.
The Company’s net interest margin, calculated on a tax-equivalent basis, decreased to
2.35%
for the quarter ended
March 31, 2020
, from
2.41%
for the immediately preceding quarter ended
December 31, 2019
, and
2.54%
for the quarter ended
March 31, 2019
. Declines in yields on interest earning assets outpaced declines in average rates on interest bearing liabilities, at least in part because repricing of deposits lagged repricing of interest earning assets.
5
Significant factors contributing to these declines in the net interest margin included:
|
•
|
The tax-equivalent yield on loans decreased to
4.18%
for the quarter ended
March 31, 2020
, from 4.27% for the quarter ended December 31, 2019 and
4.50%
for the quarter ended
March 31, 2019
. The most significant factor contributing to these decreases was the impact of decreases in benchmark interest rates.
|
|
•
|
The tax-equivalent yield on investment securities decreased to
2.81%
for the quarter ended
March 31, 2020
from 3.18% for the quarter ended December 31, 2019 and
3.64%
for the quarter ended
March 31, 2019
. The most significant factors contributing to these decreases were the impact of decreases in benchmark interest rates and, to a lesser extent, increased prepayment speeds.
|
|
•
|
The average rate on interest bearing liabilities decreased to
1.82%
for the quarter ended
March 31, 2020
from 1.96% for the quarter ended December 31, 2019 and
2.10%
for the quarter ended
March 31, 2019
, reflecting lower average rates on interest bearing deposits, short term borrowings and FHLB advances. Decreases in the cost of interest bearing liabilities primarily reflect decreases in benchmark interest rates.
|
For the quarter ended
March 31, 2020
the increase in average non-interest bearing demand deposits as a percentage of total deposits positively impacted the net interest margin.
Non-interest income
Non-interest income totaled
$23.3 million
for the quarter ended
March 31, 2020
compared to
$36.3 million
for the quarter ended
March 31, 2019
.
The most significant factor contributing to the decrease in non-interest income for the quarter ended
March 31, 2020
compared to the quarter ended
March 31, 2019
was the decrease of
$9.2 million
in gain (loss) on investment securities. The loss on investment securities for the quarter ended
March 31, 2020
included
$5.0 million
of unrealized losses on marketable equity securities offset by
$1.5 million
in realized gains on available for sale securities.
Non-interest expense
Non-interest expense totaled
$118.9 million
for the quarter ended
March 31, 2020
compared to
$126.7 million
for the quarter ended
March 31, 2019
.
Significant factors contributing to the decrease in non-interest expense for the quarter ended
March 31, 2020
compared to the quarter ended
March 31, 2019
included:
|
•
|
Employee compensation and benefits decreased by
$6.3 million
, primarily due to a reduction in headcount and a decrease in equity based compensation expense related to the impact of a declining stock price on liability-classified awards.
|
|
•
|
Professional fees decreased by
$4.7 million
, primarily due to the consulting services in 2019 related to our BankUnited 2.0 initiative.
|
Earnings Conference Call and Presentation
A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Wednesday,
April 29, 2020
with Chairman, 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 4568078. A replay of the call will be available from 12:00 p.m. ET on April 29th through 11:59 p.m. ET on May 6th by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 4568078. An archived webcast will also be available on the Investor Relations page of
www.bankunited.com
.
6
About BankUnited, Inc.
BankUnited, Inc., with total assets of
$33.6 billion
at
March 31, 2020
, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 74 banking centers in
14
Florida counties and
5
banking centers in the New York metropolitan area at
March 31, 2020
.
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, ” "forecasts" 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, including as impacted by the COVID-19 pandemic. 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, 2019
and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC’s website (www.sec.gov).
Contact
BankUnited, Inc.
Investor Relations:
Leslie N. Lunak, 786-313-1698
llunak@bankunited.com
Source: BankUnited, Inc.
7
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except share and per share data)
|
March 31,
2020 |
December 31,
2019 |
||||||
|
ASSETS
|
|
|
|
|
|||
|
Cash and due from banks:
|
|
|
|
|
|||
|
Non-interest bearing
|
$
|
8,905
|
|
$
|
7,704
|
|
|
|
Interest bearing
|
757,793
|
|
206,969
|
|
|||
|
Cash and cash equivalents
|
766,698
|
|
214,673
|
|
|||
|
Investment securities (including securities recorded at fair value of $7,864,601 and $7,759,237)
|
7,874,601
|
|
7,769,237
|
|
|||
|
Non-marketable equity securities
|
281,714
|
|
253,664
|
|
|||
|
Loans held for sale
|
17,655
|
|
37,926
|
|
|||
|
Loans
|
23,184,278
|
|
23,154,988
|
|
|||
|
Allowance for credit losses
|
(250,579
|
)
|
(108,671
|
)
|
|||
|
Loans, net
|
22,933,699
|
|
23,046,317
|
|
|||
|
Bank owned life insurance
|
288,869
|
|
282,151
|
|
|||
|
Operating lease equipment, net
|
684,563
|
|
698,153
|
|
|||
|
Goodwill and other intangible assets
|
77,663
|
|
77,674
|
|
|||
|
Other assets
|
670,209
|
|
491,498
|
|
|||
|
Total assets
|
$
|
33,595,671
|
|
$
|
32,871,293
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|||
|
Liabilities:
|
|
|
|
|
|||
|
Demand deposits:
|
|
|
|
|
|||
|
Non-interest bearing
|
$
|
4,599,337
|
|
$
|
4,294,824
|
|
|
|
Interest bearing
|
2,535,696
|
|
2,130,976
|
|
|||
|
Savings and money market
|
10,323,899
|
|
10,621,544
|
|
|||
|
Time
|
7,541,839
|
|
7,347,247
|
|
|||
|
Total deposits
|
25,000,771
|
|
24,394,591
|
|
|||
|
Federal funds purchased
|
—
|
|
100,000
|
|
|||
|
Federal Home Loan Bank advances
|
5,144,409
|
|
4,480,501
|
|
|||
|
Notes and other borrowings
|
428,579
|
|
429,338
|
|
|||
|
Other liabilities
|
505,783
|
|
486,084
|
|
|||
|
Total liabilities
|
31,079,542
|
|
29,890,514
|
|
|||
|
Commitments and contingencies
|
|||||||
|
Stockholders' equity:
|
|||||||
|
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 92,406,294 and 95,128,231 shares issued and outstanding
|
924
|
|
951
|
|
|||
|
Paid-in capital
|
987,757
|
|
1,083,920
|
|
|||
|
Retained earnings
|
1,851,040
|
|
1,927,735
|
|
|||
|
Accumulated other comprehensive loss
|
(323,592
|
)
|
(31,827
|
)
|
|||
|
Total stockholders' equity
|
2,516,129
|
|
2,980,779
|
|
|||
|
Total liabilities and stockholders' equity
|
$
|
33,595,671
|
|
$
|
32,871,293
|
|
|
8
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
2019
|
|||||
|
Interest income:
|
|
|
|
|
|||
|
Loans
|
$
|
234,359
|
|
$
|
240,632
|
|
|
|
Investment securities
|
56,060
|
|
76,345
|
|
|||
|
Other
|
3,720
|
|
4,852
|
|
|||
|
Total interest income
|
294,139
|
|
321,829
|
|
|||
|
Interest expense:
|
|||||||
|
Deposits
|
82,822
|
|
97,421
|
|
|||
|
Borrowings
|
30,741
|
|
33,507
|
|
|||
|
Total interest expense
|
113,563
|
|
130,928
|
|
|||
|
Net interest income before provision for credit losses
|
180,576
|
|
190,901
|
|
|||
|
Provision for credit losses
|
125,428
|
|
10,281
|
|
|||
|
Net interest income after provision for credit losses
|
55,148
|
|
180,620
|
|
|||
|
Non-interest income:
|
|||||||
|
Deposit service charges and fees
|
4,186
|
|
3,830
|
|
|||
|
Gain on sale of loans, net
|
3,466
|
|
2,936
|
|
|||
|
Gain (loss) on investment securities, net
|
(3,453
|
)
|
5,785
|
|
|||
|
Lease financing
|
15,481
|
|
17,186
|
|
|||
|
Other non-interest income
|
3,618
|
|
6,518
|
|
|||
|
Total non-interest income
|
23,298
|
|
36,255
|
|
|||
|
Non-interest expense:
|
|||||||
|
Employee compensation and benefits
|
58,887
|
|
65,233
|
|
|||
|
Occupancy and equipment
|
12,369
|
|
13,166
|
|
|||
|
Deposit insurance expense
|
4,403
|
|
4,041
|
|
|||
|
Professional fees
|
3,204
|
|
7,871
|
|
|||
|
Technology and telecommunications
|
12,596
|
|
11,168
|
|
|||
|
Depreciation of operating lease equipment
|
12,603
|
|
11,812
|
|
|||
|
Other non-interest expense
|
14,806
|
|
13,399
|
|
|||
|
Total non-interest expense
|
118,868
|
|
126,690
|
|
|||
|
Income (loss) before income taxes
|
(40,422
|
)
|
90,185
|
|
|||
|
Provision (benefit) for income taxes
|
(9,471
|
)
|
24,213
|
|
|||
|
Net income (loss)
|
$
|
(30,951
|
)
|
$
|
65,972
|
|
|
|
Earnings (loss) per common share, basic
|
$
|
(0.33
|
)
|
$
|
0.65
|
|
|
|
Earnings (loss) per common share, diluted
|
$
|
(0.33
|
)
|
$
|
0.65
|
|
|
9
BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
|
2020
|
2019
|
||||||||||||||||||||
|
|
Average
Balance |
Interest
(1)(2)
|
Yield/
Rate (1)(2) |
Average
Balance |
Interest
(1)(2)
|
Yield/
Rate (1)(2) |
||||||||||||||||
|
Assets:
|
||||||||||||||||||||||
|
Interest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Loans
|
$
|
22,850,065
|
|
$
|
238,108
|
|
4.18
|
%
|
$
|
21,974,453
|
|
$
|
245,010
|
|
4.50
|
%
|
||||||
|
Investment securities
(3)
|
8,107,649
|
|
56,951
|
|
2.81
|
%
|
8,520,555
|
|
77,607
|
|
3.64
|
%
|
||||||||||
|
Other interest earning assets
|
646,628
|
|
3,720
|
|
2.31
|
%
|
496,141
|
|
4,852
|
|
3.96
|
%
|
||||||||||
|
Total interest earning assets
|
31,604,342
|
|
298,779
|
|
3.79
|
%
|
30,991,149
|
|
327,469
|
|
4.26
|
%
|
||||||||||
|
Allowance for credit losses
|
(138,842
|
)
|
(111,074
|
)
|
||||||||||||||||||
|
Non-interest earning assets
|
1,749,752
|
|
1,603,922
|
|
||||||||||||||||||
|
Total assets
|
$
|
33,215,252
|
|
$
|
32,483,997
|
|
||||||||||||||||
|
Liabilities and Stockholders' Equity:
|
||||||||||||||||||||||
|
Interest bearing liabilities:
|
||||||||||||||||||||||
|
Interest bearing demand deposits
|
$
|
2,173,628
|
|
6,959
|
|
1.29
|
%
|
$
|
1,702,479
|
|
5,639
|
|
1.34
|
%
|
||||||||
|
Savings and money market deposits
|
10,412,202
|
|
37,756
|
|
1.46
|
%
|
11,453,980
|
|
52,817
|
|
1.87
|
%
|
||||||||||
|
Time deposits
|
7,510,070
|
|
38,107
|
|
2.04
|
%
|
6,907,011
|
|
38,965
|
|
2.29
|
%
|
||||||||||
|
Total interest bearing deposits
|
20,095,900
|
|
82,822
|
|
1.66
|
%
|
20,063,470
|
|
97,421
|
|
1.97
|
%
|
||||||||||
|
Short term borrowings
|
94,066
|
|
367
|
|
1.56
|
%
|
137,378
|
|
824
|
|
2.40
|
%
|
||||||||||
|
FHLB advances
|
4,414,830
|
|
25,084
|
|
2.29
|
%
|
4,660,222
|
|
27,374
|
|
2.38
|
%
|
||||||||||
|
Notes and other borrowings
|
429,098
|
|
5,290
|
|
4.93
|
%
|
404,852
|
|
5,309
|
|
5.25
|
%
|
||||||||||
|
Total interest bearing liabilities
|
25,033,894
|
|
113,563
|
|
1.82
|
%
|
25,265,922
|
|
130,928
|
|
2.10
|
%
|
||||||||||
|
Non-interest bearing demand deposits
|
4,368,553
|
|
3,605,131
|
|
||||||||||||||||||
|
Other non-interest bearing liabilities
|
749,101
|
|
657,360
|
|
||||||||||||||||||
|
Total liabilities
|
30,151,548
|
|
29,528,413
|
|
||||||||||||||||||
|
Stockholders' equity
|
3,063,704
|
|
2,955,584
|
|
||||||||||||||||||
|
Total liabilities and stockholders' equity
|
$
|
33,215,252
|
|
$
|
32,483,997
|
|
||||||||||||||||
|
Net interest income
|
$
|
185,216
|
|
$
|
196,541
|
|
||||||||||||||||
|
Interest rate spread
|
1.97
|
%
|
2.16
|
%
|
||||||||||||||||||
|
Net interest margin
|
2.35
|
%
|
2.54
|
%
|
||||||||||||||||||
|
(1)
|
On a tax-equivalent basis where applicable
|
|
(2)
|
Annualized
|
|
(3)
|
At fair value except for securities held to maturity
|
10
BANKUNITED, INC. AND SUBSIDIARIES
EARNINGS (LOSS) PER COMMON SHARE
(In thousands except share and per share amounts)
|
Three Months Ended March 31,
|
|||||||
|
c
|
2020
|
2019
|
|||||
|
Basic earnings per common share:
|
|
|
|
|
|||
|
Numerator:
|
|
|
|
|
|||
|
Net income (loss)
|
$
|
(30,951
|
)
|
$
|
65,972
|
|
|
|
Distributed and undistributed earnings allocated to participating securities
|
—
|
|
(2,697
|
)
|
|||
|
Income (loss) allocated to common stockholders for basic earnings per common share
|
$
|
(30,951
|
)
|
$
|
63,275
|
|
|
|
Denominator:
|
|||||||
|
Weighted average common shares outstanding
|
93,944,529
|
|
98,856,775
|
|
|||
|
Less average unvested stock awards
|
(1,101,370
|
)
|
(1,171,921
|
)
|
|||
|
Weighted average shares for basic earnings (loss) per common share
|
92,843,159
|
|
97,684,854
|
|
|||
|
Basic earnings (loss) per common share
|
$
|
(0.33
|
)
|
$
|
0.65
|
|
|
|
Diluted earnings (loss) per common share:
|
|||||||
|
Numerator:
|
|||||||
|
Income (loss) allocated to common stockholders for basic earnings per common share
|
$
|
(30,951
|
)
|
$
|
63,275
|
|
|
|
Adjustment for earnings reallocated from participating securities
|
—
|
|
5
|
|
|||
|
Income (loss) used in calculating diluted earnings per common share
|
$
|
(30,951
|
)
|
$
|
63,280
|
|
|
|
Denominator:
|
|||||||
|
Weighted average shares for basic earnings (loss) per common share
|
92,843,159
|
|
97,684,854
|
|
|||
|
Dilutive effect of stock options and certain shared-based awards
|
—
|
|
279,779
|
|
|||
|
Weighted average shares for diluted earnings per common share
|
92,843,159
|
|
97,964,633
|
|
|||
|
Diluted earnings (loss) per common share
|
$
|
(0.33
|
)
|
$
|
0.65
|
|
|
11
BANKUNITED, INC. AND SUBSIDIARIES
SELECTED RATIOS
|
|
Three Months Ended March 31,
|
||||
|
|
2020
|
2019
|
|||
|
Financial ratios
(4)
|
|
|
|
|
|
|
Return on average assets
|
(0.37
|
)%
|
0.82
|
%
|
|
|
Return on average stockholders’ equity
|
(4.1
|
)%
|
9.1
|
%
|
|
|
Net interest margin
(3)
|
2.35
|
%
|
2.54
|
%
|
|
|
|
March 31, 2020
|
December 31, 2019
|
|||
|
Asset quality ratios
|
|
|
|||
|
Non-performing loans to total loans
(1)(5)
|
0.85
|
%
|
0.88
|
%
|
|
|
Non-performing assets to total assets
(2) (5)
|
0.61
|
%
|
0.63
|
%
|
|
|
Allowance for credit losses to total loans
|
1.08
|
%
|
0.47
|
%
|
|
|
Allowance for credit losses to non-performing loans
(1) (5)
|
126.41
|
%
|
53.07
|
%
|
|
|
Provision for credit losses to average loans
(4)
|
0.53
|
%
|
0.04
|
%
|
|
|
Net charge-offs to average loans
(4)
|
0.13
|
%
|
0.05
|
%
|
|
|
(1)
|
We define non-performing loans to include non-accrual loans and loans other than government insured residential loans that are past due 90 days or more and still accruing. Contractually delinquent government insured residential loans on which interest continues to be accrued are excluded from non-performing loans.
|
|
(2)
|
Non-performing assets include non-performing loans, OREO and other repossessed assets.
|
|
(3)
|
On a tax-equivalent basis.
|
|
(4)
|
Annualized for the three month periods.
|
|
(5)
|
Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling
$49.1 million
or
0.21%
of total loans and
0.15%
of total assets, at
March 31, 2020
; compared to
$45.7 million
or
0.20%
of total loans and
0.14%
of total assets, at
December 31, 2019
.
|
12
Non-GAAP Financial Measures
Pre-tax, pre-provision income is a non-GAAP financial measure. Management believes this measure is relevant to understanding the performance of the Company attributable to elements other than the provision for credit losses, particularly in view of the adoption of the CECL accounting methodology in the current quarter, which may impact comparability of operating results to prior periods. This measure also provides a meaningful basis for comparison to other financial institutions. The following table reconciles the non-GAAP financial measurement of pre-tax, pre-provision income to the comparable GAAP financial measurement of income (loss) before income taxes for the
three months ended March 31, 2020
and
2019
(in thousands):
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
||||||
|
Income (loss) before income taxes (GAAP)
|
$
|
(40,422
|
)
|
$
|
90,185
|
|
|
|
Plus: Provision for credit losses
|
125,428
|
|
10,281
|
|
|||
|
Pre-tax, pre-provision income (non-GAAP)
|
$
|
85,006
|
|
$
|
100,466
|
|
|
13
Exhibit 99.2 BankUnited, Inc. Q1 2020 – Supplemental Information April 29, 2020
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the current views of BankUnited, Inc. (“BankUnited,” “BKU” or the “Company”) 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, ” "forecasts" or the negative version of those words or other comparable words. Any forward-looking statements contained in this presentation 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, including as impacted by the COVID-19 pandemic. 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, 2019 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC’s website (www.sec.gov). 2
Our Response to the Pandemic • Provided access to branches while taking steps to protect customers and employees; 76% of branches moved to drive-through or lobby appointments only Supporting our • Digital solutions have helped to minimize business disruption • Customers Provided short-term funding for small to medium-sized business customers through the Paycheck Protection Program (PPP) • Granted extensions, deferrals and forbearance for certain customers; waived select fees • Temporarily halted new foreclosure actions on residential real estate • Seamless move to remote work environment; 97% of non-branch employees working remotely • Expanded employee benefits – increased medical benefits to cover all COVID-19 related expenses; increased PTO • Regular communications to keep employees healthy and engaged – CEO calls, status updates, Supporting our learning and development opportunities, well-being toolkits Employees • Access to employee assistance programs – nutrition, mental and physical wellness, financial awareness and education • Enhanced cleaning and personal protective measures for employees working at our corporate locations and branches • No furloughs to date • Business continuity plan led by executive management and operating as intended • Pro-active outreach to borrowers to assess COVID-19 impact • Segregated portfolio into risk segments for enhanced monitoring Prioritizing Prudent • Activated contingency funding plan Risk Management • Enhanced workout and recovery staffing and processes • Enhanced stress testing regimen • Established weekly cadence of Board of Directors meetings • Strong capital and liquidity ratios Managing from a • Consolidated CET 1 capital of 11.8% and Tier 1 leverage capital of 8.5% at March 31, 2020 Position of Strength • Same day available liquidity exceeding $8 billion 3
Our Strong Capital Position We are entering this cycle from a position of strength and believe we are well positioned to withstand a severe downtown. ($ in millions) • We stressed our March 31, 2020 portfolio using both the 2018 DFAST and 2020 DFAST severely adverse scenarios. Actual ACL and 2018 DFAST Severely 2020 DFAST Severely Required to be Regulatory Capital Adverse Projected Adverse Projected Considered Well Ratios at Losses and Capital Losses and Capital Capitalized March 31, 2020 Ratios (1) Ratios (1) Lifetime Expected Losses $ 251 $ 575 $ 445 Capital Ratios Tier 1 leverage 9.3% 8.6% 8.9% 5.0% CET 1 risk-based capital 12.9% 11.8% 12.2% 6.5% Total risk-based capital 13.7% 13.1% 13.5% 10.0% • The table summarizes projected lifetime losses under both DFAST scenarios and the pro-forma impact of immediate recognition of additional stressed losses on BankUnited N.A.’s regulatory capital ratios as of March 31, 2020. • Pro-forma regulatory capital ratios continue to exceed “well capitalized” guidelines. (1) The Pinnacle portfolio, which is a primarily investment grade municipal portfolio, was excluded from this stress testing exercise. 4
We Have Ample Liquidity • Available liquidity has Key Liquidity Ratios 12/31/19 3/31/20 4/21/20 remained stable leading up 30 Day Liquidity Ratio 1.8x 1.4x 1.6x to and through the period of the pandemic Loans to Deposits 95.1% 92.8% 94.7% • Deposits grew by $606 Wholesale Funding / Total Assets 25.3% 27.5% 26.8% million in the first quarter; $305 million of that growth was non-interest bearing $8.5BN $8.5BN DDA. Cash, $0.5 Cash, $0.7 • We will remain focused on FRB Discount FRB Discount DDA growth and aggressively Window Window reducing our cost of deposits $3.3 $3.3 in the second quarter and beyond FHLB Atlanta FHLB Atlanta $4.5 $4.3 Other, $0.2 Other, $0.2 March 31, 2020 April 21, 2020 5
Trended Deposit Portfolio Continuing to focus on transforming our deposit mix; NIDDA has grown 27% since December 31, 2018 ($ in millions) $28,000 $26,000 $25,001 $24,395 $23,679 $23,922 $23,956 $24,000 $23,474 Non- interest $4,295 $4,599 $22,000 $3,621 $3,765 $4,099 $4,127 Demand $20,000 Interest $1,771 $1,761 $1,831 $1,847 $2,131 $2,536 $18,000 Demand $16,000 $14,000 Money $11,262 $11,386 $10,911 $10,936 $10,622 $10,324 Market / $12,000 Savings $10,000 $8,000 $6,000 $4,000 $6,820 $6,767 $7,081 $7,046 $7,347 $7,542 Time $2,000 $0 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Cost of 1.52% 1.67% 1.70% 1.67% 1.48% 1.36% Deposits 6
Reducing Cost of Deposits We have consistently priced down our deposit portfolio since the Fed began lowering interest rates in late 2019. Spot Average Annual Percentage Yield At December 31, 2019 At March 31, 2020 At April 17, 2020 (“APY”) Total non-maturity deposits 1.11% 0.83% 0.54% Total interest-bearing deposits 1.71% 1.35% 1.08% 7
CECL Impacted by the Pandemic CECL Methodology Underlying Principles Reasonable & Supportable Forecast Key Variables • The ACL under CECL represents • Our ACL estimate was informed • The models ingest numerous management’s best estimate at primarily by the Mid-Cycle national, regional and MSA level the balance sheet date of Baseline forecast issued by economic variables and data expected credit losses over the Moody’s on March 27, 2020. We points. Key data points include: life of the loan portfolio. chose to use a forecast issued as close to the end of the quarter • Unemployment rate • Required to consider historical as feasible. • Market Volatility Index information, current conditions (VIX) and a reasonable and • Assumes Real GDP decline of • Stock Price Index (S&P 500) supportable economic forecast. approximately 20% in Q2, • Real GDP unemployment rising to • A variety of interest rates • For most portfolio segments, approximately 9% in Q2, VIX and spreads BankUnited uses econometric approaching 60, and Y-O-Y • HPI models to project PD, LGD and decline in S&P 500 reaching a • CRE forecasts expected losses at the loan level low of near 30%. • CPI and aggregates those expected losses by segment. • Recovery begins in the second half of 2020; unemployment • Qualitative adjustments may be remains elevated into 2023. applied to the quantitative results. 8
Drivers of Change in the ACL under CECL ($ in millions) Economic Forecast Changes in Portfolio and Specific Assumption Reserves Day 1 Changes Adjustment • Changes in the • Majority reasonable • New loans related to and • Exits/runoff franchise supportable • Portfolio finance economic seasoning • Exacerbated forecast • Risk rating by COVID-19 migration ALLL ACL 12/31/19 3/31/20 %of Total 47 bps 1.08% Loans 9
Allocation of the Allowance for Credit Losses (ACL) ($ in millions) Allowance for Credit Losses Allowance for Credit Losses January 1, 2020 March 31, 2020 Total % of Loans Total % of Loans Residential and other consumer $ 19.3 0.34% $ 12.6 0.22% Commercial: Commercial real estate 16.7 0.22% 40.8 0.57% Commercial and industrial 83.6 1.12% 157.6 2.00% Pinnacle 0.4 0.03% 0.6 0.05% Franchise finance 9.0 1.44% 32.9 5.08% Equipment finance 7.0 1.02% 6.1 0.94% Total commercial 116.7 0.67% 238.0 1.36% Allowance for credit losses $ 136.0 0.59% $ 250.6 1.08% Asset Quality Ratios December 31, 2019 March 31, 2020 Non-performing loans to total loans (1) 0.88% 0.85% Non-performing assets to total assets 0.63% 0.61% Allowance for credit losses to non-performing loans (1) 53.07% 126.41% Provision for credit losses to average loans 0.04% 0.53% Net charge-offs to average loans (2) 0.05% 0.13% (1) Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling $49.1 million, or 0.21% of total loans and 0.15% of total assets, at March 31, 2020; compared to $45.7 million, or 0.20% of total loans and 0.14% of total assets, at December 31, 2019. (2) Annualized for the three month period. 10
Loan Portfolio At March 31, 2020 Prudently underwritten and well-diversified $23 billion loan portfolio ($ in millions) OOCRE (2) $1,918 8% Non-OOCRE (2) $4,923 Const and Land (2) 21% $207 Residential Commercial 1% $5,635 $17,549 24% 76% C&I (2) (3) Multi-Family $4,941 $1,968 21% 9% MWL $852 BFG- Equip(1) 4% BFG- Franchise $649 $648 3% SBF Pinnacle 3% $255 $1,188 1% 5% (1) Excludes operating lease equipment. (2) Excludes amounts from SBF. (3) Excludes amounts from Mortgage Warehouse Lending. 11
Loan Portfolio – Granular, Diversified Commercial & Industrial Portfolio At March 31, 2020 ($ in millions) • Includes $2.1 billion of owner- occupied real estate Industry Balance(1) Commitment % of Portfolio • Some key observations: Finance and Insurance $ 1,263 $ 1,865 18.0% • Educational services – well Wholesale Trade 805 1,143 11.4% Educational Services 633 663 9.0% established private colleges, Transportation and Warehousing 475 597 6.7% universities and high schools Health Care and Social Assistance 473 564 6.7% • Transportation and Manufacturing 377 519 5.4% warehousing – cruise lines, Admin and Support and Waste Management 350 398 5.0% aviation authorities, logistics Retail Trade 347 442 4.9% • Health care – larger physician Real Estate and Rental and Leasing 326 496 4.6% Information 297 434 4.2% practice management Professional, Scientific, and Technical Services 282 360 4.0% companies, HMO’s, mental Construction 277 429 3.9% health & substance abuse; no Accommodation and Food Services 241 298 3.4% small practices Other Services (except Public Administration) 231 272 3.3% • Arts and entertainment – Arts, Entertainment, and Recreation 212 260 3.0% Public Administration 209 228 3.0% stadiums, professional sports Utilities 161 238 2.3% teams, gaming Other 76 89 1.2% • Accommodation and food $ 7,035 $ 9,295 100% services – time share, direct food services businesses and concessionaires (1) Includes amounts from SBF. 12
Loan Portfolio – Commercial Real Estate (Breakdown by Property Type) At March 31, 2020 ($ in millions) Property Type Balance Commitment Wtd. Avg. DSCR Wtd. Avg. LTV % of Portfolio Office $ 2,074 $ 2,154 1.90 59.0% 28.8% Multifamily 2,073 2,187 1.65 56.4% 28.9% Retail 1,447 1,454 1.76 57.5% 20.2% Warehouse/Industrial 788 823 1.92 58.1% 11.0% Hotel 619 630 1.90 57.0% 8.6% Other 177 209 1.62 48.6% 2.5% $ 7,178 $ 7,457 1.79 57.4% 100% • Commercial real estate loans are secured by income-producing, non-owner occupied properties, typically with well capitalized middle market sponsors in our primary geographic footprint • Multifamily loans include approximately $1.5 billion in New York, of which approximately $1.1 billion is secured by properties in which some or all units are rent regulated. • 79% of the CRE portfolio has LTVs less than 65% • 84% of the retail segment and 78% of the hotel segment have LTVs less than 65% • We do minimal construction lending. Construction and land loans, included in the table, represent only 1% of the total loan portfolio. 13
Loan Portfolio – Modifications Summary Through April 20, 2020 ($ in millions) REQUESTS RECEIVED APPROVED • Granted extensions, deferrals, Count UPB % of Portfolio Count UPB % of Portfolio and forbearance to customers CRE - Property Type: impacted by COVID-19 Hotel 30 $505 90% 30 $505 90% Retail 83 576 43% 57 372 28% • To date, we have completed Office 15 251 13% 9 195 10% COVID related loan Industrial 8 80 11% 7 66 9% modification requests for: Multifamily 24 209 11% 20 171 9% Total 160 $1,621 24% 123 $1,309 19% • Over 1,400 loan C&I - Industry relationships Accommodation and Food Services 11 $85 38% 7 $36 16% • Approximately $2.6 Arts, Entertainment, and Recreation 6 44 20% 5 40 18% Retail Trade 4 51 15% 1 7 2% billion in loans Manufacturing 3 30 9% 2 27 7% • Modifications are typically Other 25 138
Loan Portfolio – Paycheck Protection Program (PPP) Through April 24, 2020 We have made a concerted effort to help our existing customers obtain a PPP loan Intake Phase I Phase II • Began accepting intake forms • During Phase I of PPP, of the • For Phase II of PPP, anticipate from customers on April 3, applications that qualified, 89% funding additional $150 million 2020 have successfully funded. We of PPP loans • Launched our digital portal on have funded approximately • Includes those we could not April 6, 2020 2,500 loans for $663 million. secure funding for during • Received over 3,000 • We helped protect Phase I applications (approximately approximately 81,000 jobs 2,800 loans were processed) 15
Loan Portfolio – Segments Identified for Heightened Monitoring At March 31, 2020 Moderate exposure to sectors most impacted by the pandemic ($ in millions) Criticized/ Segments of Interest Balance % of Total Loans Non Performing Pass Rated Classified Retail - CRE $ 1,447 6.2% $ 36 $ 11 98% Retail - C&I 347 1.5% 7 4 98% BFG - Franchise Finance 648 2.8% 272 38 58% Hotel 619 2.7% 38 22 94% Airlines 85 0.4% - - 100% Cruise line 71 0.3% - - 100% Energy(1) 46 0.2% - - 100% Total $ 3,263 14.1% $ 353 $ 75 89% • We contacted all borrowers in higher risk segments, and all remaining borrowers with exposure greater than $5 million to assess potential impact • Have and will continue to work with borrowers to provide relief in the form of deferrals and temporary forbearance • Expect many borrowers to benefit from government relief programs; airlines particularly are receiving significant relief • Notable sector commentary: • Cruise Lines – borrowers are companies with strong balance sheets; substantial majority are investment grade clients • Minimal exposure to high-risk construction lending • No consumer student loan, auto, home equity or credit card exposure (1) There is also exposure to energy in the operating lease portfolio, primarily railcars, totaling $291 million at March 31, 2020. 16
Loan Portfolio – Retail At March 31, 2020 ($ in millions) Retail - Commercial Real Estate Property Type Balance Key observations on the CRE segment: Retail - Unanchored $ 696 • No significant mall or “big box” Retail - Anchored 690 exposure Restaurant 28 • We estimate that Gas station 26 approximately 60% of the CRE Construction to perm 7 $ 1,447 retail portfolio is supported by businesses that we consider to be essential or moderately essential Retail – Commercial & Industrial Not Secured by Owner Occupied Industry Total Balance Real Estate Real Estate Gas station $ 1 $ 96 $ 97 Furniture stores 32 6 38 Health and personal care stores 25 4 29 Grocery stores 1 23 24 Vending machine operators 20 1 21 Specialty food stores 2 18 20 Florists 14 1 15 Automobile dealers 7 7 14 Electronic shopping and mail-order houses 12 1 13 Other 16 60 76 $ 130 $ 217 $ 347 17
Loan Portfolio – BFG Franchise Finance At March 31, 2020 ($ in millions) Portfolio Breakdown by Concept Restaurant Concepts Balance %of BFG Franchise • Fitness concepts may be under Burger King $ 67.1 10% Dunkin' Donuts 39.4 6% added stress due to social Sonic 27.9 4% distancing measures arising Domino's 26.2 4% from the pandemic Jimmy Johns 23.4 4% • QSR margins have been under Other 217.1 34% stress from rising labor costs $ 401.1 62% and disruption from food delivery services, but concepts Non-Restaurant Concepts Balance %of BFG Franchise that have adopted digital Planet Fitness $ 107.3 17% ordering, take-out and drive- Orange Theory Fitness 86.7 13% Other 52.6 8% thru models may be better $ 246.6 38% able to weather the current stress Portfolio Breakdown by Geography CA 17% FL 10% Other CO 58% 8% TX 7% 18
Loan Portfolio – Hotel At March 31, 2020 ($ in millions) Exposure by Flag • This sector is experiencing significant disruption and declines in revenue due to Other COVID-19 and social distancing Sheraton $89 Marriott measures $39 14% $171 • 77% of our exposure is in 6% 28% Florida, followed by 13% in New York IHG • Includes $60.9 million in SBA $57 loans of which $16.5 million is 9% guaranteed Hilton $86 Independent 14% $177 29% Total Portfolio: $619.5mm 19
Loan Portfolio – BFG Energy Exposure At March 31, 2020 ($ in millions) BFG Energy Portfolio • Our energy exposure is modest Balance • Assets in the operating lease Operating leases $ 291.3 Loan/Finance Lease 46.3 portfolio have useful lives that Total $ 337.6 span multiple economic cycles • Railcar fleet is 56% tank cars, 42% sand hoppers and 2% other Exposure by Asset Type Other 3% Marine 17% Aircraft 11% Rail 69% 20
Loan Portfolio – Residential At March 31, 2020 High quality residential portfolio consists of primarily prime jumbo mortgages with de-minimis charge-offs since inception as well as fully government insured assets Product Type FICO Distribution(1) Formerly Covered Govt 30 Yr 760 19% 7/1 ARM ARM 64% 27% 22% Breakdown by LTV(1) Breakdown by Vintage(1) More 2020 than 80% 2% 4% 2019 60% or 18% less Prior 26% 36% 71% - 2018 80% 61% - 12% 47% 70% 2017 23% 2016 16% 16% (1) Excludes government insured residential loans. FICOs are refreshed routinely. LTVs are typically based on valuation at origination. 21
Asset Quality – Non-Performing Asset Trends At March 31, 2020 Non-performing loans to total loans(1) Non-performing assets to total assets(1) Net charge-offs to average loans(2) 1.00% Guaranteed portion of non-accrual SBA loans 0.88% 0.85% 0.20% 0.75% 0.21% 0.63% 0.59% 0.61% 0.14% 0.08% 0.15% 0.50% 0.43% 0.06% 0.28% 0.68% 0.64% 0.25% 0.51% 0.49% 0.46% 0.37% 0.13% 0.05% 0.00% December 31, 2018 December 31, 2019 March 31, 2020 (1) Non-performing loans and assets exclude the guaranteed portion of non-accrual SBA loans totaling $49.1 million or 0.21% of total loans and 0.15% of total assets at March 31, 2020, $45.7 million or 0.20% of total loans and 0.14% of total assets at December 2019 and $17.8 million or 0.08% of total loans and 0.06% of total assets, at December 2018. (2) Net charge-off ratio is annualized for the three months ended March 31, 2020. 22
Asset Quality – Criticized and Classified Commercial Loans At March 31, 2020 ($ in millions) Commercial Real Estate Commercial & Industrial Special Mention Substandard Accruing $226.2 Substandard Non-accruing Doubtful $170.0 $107.6 $108.3 $106.8 $89.6 Dec 31, 2018 Dec 31, 2019 Mar 31, 2020 Dec 31, 2018 Dec 31, 2019 Mar 31, 2020 Franchise Finance Equipment Finance SBF(1) $272.2 $90.7 $74.5 $65.4 $54.0 $24.5 $23.9 $20.9 $12.4 Dec 31, 2018 Dec 31, 2019 Mar 31, 2020 Dec 31, 2018 Dec 31, 2019 Mar 31, 2020 Dec 31, 2018 Dec 31, 2019 Mar 31, 2020 (1) Includes the guaranteed portion of non-accrual SBA loans totaling $49.1 million, $45.7 million and $17.8 at March 31, 2020, December 31, 2019 and 23 December 2018, respectively.
Asset Quality – Non-Performing Loans by Portfolio Segment At March 31, 2020 ($ in millions) $205 $198 $62 $64 $130 $14 $21 $38 $34 $5 $12 $17 $65 $29 $50 $24 $38 $17 $19 $17 $7 December 31, 2018 December 31, 2019 March 31, 2020 Residential CRE C&I Equipment Franchise SBF(1) (1) Includes the guaranteed portion of non-accrual SBA loans totaling $49.1 million, $45.7 million and $17.8 at March 31, 2020, December 31, 2019 and December 2018, respectively. 24
Asset Quality – Delinquencies At March 31, 2020 Delinquencies have not increased materially since March 31, 2020, helped by modifications ($ in millions) 30-59 Days PD $29.8 Dec 31, 2018 60-89 Days PD $5.5 90 Days+ PD $30.1 30-59 Days PD $63.2 Dec 31, 2019 60-89 Days PD $21.7 90 Days+ PD $105.9 30-59 Days PD $128.8 Mar 31, 2020 60-89 Days PD $13.0 90 Days+ PD $128.7 Residential & Other Cons(1) CRE C&I Franchise Equipment (1) Excludes government insured residential loans. 25
Investment Securities AFS No credit losses expected on the $7.8 billion portfolio; unrealized losses attributable primarily to widening spreads - valuations have started to recover since March 31, 2020 ($ in millions) Portfolio Composition Ratings Distribution Other US govt Not rated State and 3% 1% municipal and agency obligations CLOs 37% 3% 14% Gov Resi real estate 37% AAA lease- 53% backed Private Private securities label label 7% CMBS RMBS and AA 21% CMOs A 7% 15% 2% December 31, 2019 March 31, 2020 April 22, 2020 (1) Net Unrealized Net Unrealized Net Unrealized Portfoio Gain (Loss) Fair Value Gain (Loss) Fair Value Gain (Loss) Fair Value US Government and Agency $ 11 $ 2,826 $ (24) $ 2,894 $ 3 $ 2,877 Private label RMBS and CMOs 11 1,012 (12) 1,174 (4) 1,182 Private label CMBS 5 1,725 (124) 1,605 (118) 1,610 Residential real estate lease-backed securities 3 470 (21) 529 (4) 546 CLOs (8) 1,197 (75) 1,095 (70) 1,099 State and Municipal Obligations 15 273 15 271 14 270 Other 1 196 (9) 254 (4) 262 Total $ 38 $ 7,699 $ (250) $ 7,822 $ (183) $ 7,846 (1) Investments available for sale held at March 31, 2020 valued as of April 22, 2020. 26
Investment Securities – Asset Quality of Select Non-Agency Securities At March 31, 2020 Strong credit enhancement levels on CLOs and CMBS A Collateralized Loan Obligations (CLOs) 3% AA Subordination Wtd. Avg. 12% Rating Min Max Avg Stress Scenario Loss AAA 36.03 48.09 42.06 21.00 AA 27.77 40.29 34.03 22.32 A 25.55 29.37 27.46 23.94 AAA Total 29.78 39.25 34.52 21.27 85% Private Label Commercial Mortgage-Backed Securities (CMBS) A AA 5% 12% Subordination Wtd. Avg. Rating Min Max Avg Stress Scenario Loss AAA 25.72 80.27 53.00 12.27 AA 30.37 85.85 58.11 12.28 AAA A 21.50 73.64 47.57 13.45 83% Total 25.86 79.92 52.89 13.24 27