SEC Filing | BankUnited, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

Commission File Number: 001-35039

BankUnited, Inc.

(Exact name of registrant as specified in its charter)


Delaware						27-0162450
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


14817 Oak Lane	Miami Lakes	FL	33016
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (305) 569-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting 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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Trading Symbol

Name of Exchange on Which Registered

Common Stock, $0.01 Par Value

BKU

New York Stock Exchange

The number of outstanding shares of the registrant common stock, $0.01 par value, as of May 2, 2022 was 81,787,178.

BANKUNITED, INC.

Form 10-Q

For the Quarter Ended March 31, 2022

TABLE OF CONTENTS


		Page

	Glossary of Defined Terms	ii

PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Stockholders’ Equity	6
	Notes to Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	59

ITEM 4.	Controls and Procedures	59

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	59

ITEM 1A.	Risk Factors	59

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

ITEM 6.	Exhibits	61

SIGNATURES		62

GLOSSARY OF DEFINED TERMS

The following acronyms and terms may be used throughout this Form 10-Q, including the consolidated financial statements and related notes.



ACL						Allowance for credit losses
AFS						Available for sale
ALCO						Asset/Liability Committee

ALM						Asset Liability Management
AOCI						Accumulated other comprehensive income
APY						Annual Percentage Yield

ASC						Accounting Standards Codification
ASU						Accounting Standards Update





BKU						BankUnited, Inc.
BankUnited						BankUnited, National Association
The Bank						BankUnited, National Association
Bridge						Bridge Funding Group, Inc.
Buyout loans						FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations
CARES Act						Coronavirus Aid, Relief, and Economic Security Act


CECL						Current expected credit losses
CET1						Common Equity Tier 1 capital

C&I						Commercial and Industrial loans, including owner-occupied commercial real estate
CLO						Collateralized loan obligations
CMBS						Commercial mortgage-backed securities
CME						Chicago Mercantile Exchange
CMOs						Collateralized mortgage obligations
COVID-19						Coronavirus disease of 2019
CPR						Constant prepayment rate

CRE						Commercial real estate loans, including multi-family; non-owner occupied commercial real estate; and construction and land

DDA						Demand deposit account
DFAST						Dodd-Frank Act Stress Test

DSCR						Debt Service Coverage Ratio


EVE						Economic value of equity

FASB						Financial Accounting Standards Board


FDIA						Federal Deposit Insurance Act
FDIC						Federal Deposit Insurance Corporation

FHA						Federal Housing Administration
FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation (credit score)

FRB						Federal Reserve Bank
GAAP						U.S. generally accepted accounting principles
GDP						Gross Domestic Product

GNMA						Government National Mortgage Association

HPI						Home price indices




ISDA						International Swaps and Derivatives Association


LGD						Loss Given Default


LIBOR						London InterBank Offered Rate

LTV						Loan-to-value
MBS						Mortgage-backed securities
MSA						Metropolitan Statistical Area


MWL						Mortgage warehouse lending

NRSRO						Nationally recognized statistical rating organization

NYSE						New York Stock Exchange

OCC						Office of the Comptroller of the Currency

OFAC						U.S. Department of the Treasury's Office of Foreign Assets Control

OREO						Other real estate owned

PCD						Purchased credit-deteriorated
PD						Probability of default
Pinnacle						Pinnacle Public Finance, Inc.

PPP						Small Business Administration’s Paycheck Protection Program









SBA						U.S. Small Business Administration

SEC						Securities and Exchange Commission

SOFR						Secured Overnight Financing Rate
S&P 500						Standard & Poor's 500 Index

TDR						Troubled-debt restructuring
Tri-State						New York, New Jersey and Connecticut
UPB						Unpaid principal balance



VIX						CBOE Volatility Index
WARM						Weighted-average remaining maturity

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)


	March 31, 2022		December 31, 2021
ASSETS
Cash and due from banks:
Non-interest bearing	$	17,780	$	19,143
Interest bearing	679,712		295,714
Cash and cash equivalents	697,492		314,857
Investment securities (including securities recorded at fair value of $10,562,098 and $10,054,198)	10,572,098		10,064,198
Non-marketable equity securities	190,534		135,859

Loans	23,370,029		23,765,053
Allowance for credit losses	(125,443)		(126,457)
Loans, net	23,244,586		23,638,596
Bank owned life insurance	314,697		309,477
Operating lease equipment, net	627,146		640,726

Goodwill	77,637		77,637
Other assets	607,434		634,046
Total assets	$	36,331,624	$	35,815,396

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposits:
Non-interest bearing	$	9,663,307	$	8,975,621
Interest bearing	2,872,430		3,709,493
Savings and money market	13,029,823		13,368,745
Time	2,975,715		3,384,243
Total deposits	28,541,275		29,438,102
Federal funds purchased	199,000		199,000
FHLB advances	3,395,000		1,905,000
Notes and other borrowings	721,291		721,416
Other liabilities	613,826		514,117
Total liabilities	33,470,392		32,777,635

Commitments and contingencies

Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 84,052,021 and 85,647,986 shares issued and outstanding	841		856
Paid-in capital	626,564		707,503
Retained earnings	2,391,526		2,345,342
Accumulated other comprehensive loss	(157,699)		(15,940)
Total stockholders' equity	2,861,232		3,037,761
Total liabilities and stockholders' equity	$	36,331,624	$	35,815,396

The accompanying notes are an integral part of these consolidated financial statements

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)


	Three Months Ended March 31,
		2022		2021
Interest income:
Loans		$	191,562	$	205,335
Investment securities		43,048		38,501
Other		1,354		1,593
Total interest income		235,964		245,429
Interest expense:
Deposits		11,857		22,376
Borrowings		15,465		26,813
Total interest expense		27,322		49,189
Net interest income before provision for credit losses		208,642		196,240
Provision for (recovery of) credit losses		7,830		(27,989)
Net interest income after provision for credit losses		200,812		224,229
Non-interest income:
Deposit service charges and fees		5,960		4,900
Gain (loss) on sale of loans, net		(824)		1,754
Gain (loss) on investment securities, net		(7,868)		2,365
Lease financing		13,415		12,488
Other non-interest income		3,618		8,789
Total non-interest income		14,301		30,296
Non-interest expense:
Employee compensation and benefits		67,088		59,288
Occupancy and equipment		11,512		11,875
Deposit insurance expense		3,403		7,450
Professional fees		2,262		1,912
Technology and telecommunications		17,004		15,741

Depreciation of operating lease equipment		12,610		12,217

Other non-interest expense		12,445		14,738
Total non-interest expense		126,324		123,221
Income before income taxes		88,789		131,304
Provision for income taxes		21,639		32,490
Net income		$	67,150	$	98,814
Earnings per common share, basic		$	0.79	$	1.06
Earnings per common share, diluted		$	0.79	$	1.06

The accompanying notes are an integral part of these consolidated financial statements

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(In thousands)


	Three Months Ended March 31,
		2022		2021

Net income		$	67,150	$	98,814
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding loss arising during the period		(174,980)		(22,485)
Reclassification adjustment for net securities gains realized in income		(1,978)		(2,955)
Net change in unrealized gains (losses) on securities available for sale		(176,958)		(25,440)
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period		31,179		24,611
Reclassification adjustment for net losses realized in income		4,020		11,156

Net change in unrealized gains (losses) on derivative instruments		35,199		35,767
Other comprehensive income (loss)		(141,759)		10,327
Comprehensive income (loss)		$	(74,609)	$	109,141

The accompanying notes are an integral part of these consolidated financial statements

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	67,150	$	98,814
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion, net	(3,382)		(8,202)
Provision for (recovery of) credit losses	7,830		(27,989)

(Gain) loss on sale of loans, net	824		(1,754)

(Gain) loss on investment securities, net	7,868		(2,365)
Equity based compensation	6,614		7,669
Depreciation and amortization	18,947		18,142
Deferred income taxes	12,924		6,599

Proceeds from sale of loans held for sale	248,843		203,155


Other:
Decrease in other assets	56,905		24,498
Increase in other liabilities	32,767		67,832
Net cash provided by operating activities	457,290		386,399

Cash flows from investing activities:

Purchases of investment securities	(1,698,615)		(920,302)
Proceeds from repayments and calls of investment securities	559,785		535,586
Proceeds from sale of investment securities	482,307		410,242
Purchases of non-marketable equity securities	(106,875)		(1,199)
Proceeds from redemption of non-marketable equity securities	52,200		19,355
Purchases of loans	(862,163)		(963,441)
Loan originations and repayments, net	1,000,544		1,164,935
Proceeds from sale of loans, net	5,159		114,742



Acquisition of operating lease equipment	—		(38,875)
Other investing activities	(11,964)		(1,771)
Net cash provided by (used in) investing activities	(579,622)		319,272

The accompanying notes are an integral part of these consolidated financial statements

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)


	Three Months Ended March 31,
	2022		2021
Cash flows from financing activities:
Net increase (decrease) in deposits	(896,827)		236,266
Net decrease in federal funds purchased	—		(180,000)
Additions to FHLB borrowings	1,810,000		920,000
Repayments of FHLB borrowings	(320,000)		(1,020,000)

Dividends paid	(19,876)		(22,309)

Repurchase of common stock	(82,103)		(7,263)
Other financing activities	13,773		19,715
Net cash provided by (used in) financing activities	504,967		(53,591)
Net increase in cash and cash equivalents	382,635		652,080
Cash and cash equivalents, beginning of period	314,857		397,716
Cash and cash equivalents, end of period	$	697,492	$	1,049,796

Supplemental disclosure of cash flow information:
Interest paid	$	17,616	$	41,379
Income taxes (refunded) paid, net	$	(13,092)	$	39,459

Supplemental schedule of non-cash investing and financing activities:


Transfers from loans to loans held for sale	$	254,826	$	305,028

Dividends declared, not paid	$	20,966	$	21,405

The accompanying notes are an integral part of these consolidated financial statements

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share data)


	Common Shares Outstanding	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
















Balance at December 31, 2021	85,647,986	$	856	$	707,503	$	2,345,342	$	(15,940)	$	3,037,761
Comprehensive loss	—	—		—		67,150		(141,759)		(74,609)
Dividends ($0.25 per common share)	—	—		—		(20,966)		—		(20,966)
Equity based compensation	468,050	5		6,326		—		—		6,331
Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(132,112)	(1)		(5,181)		—		—		(5,182)

Repurchase of common stock	(1,931,903)	(19)		(82,084)		—		—		(82,103)
Balance at March 31, 2022	84,052,021	$	841	$	626,564	$	2,391,526	$	(157,699)	$	2,861,232



Balance at December 31, 2020	93,067,500	$	931	$	1,017,518	$	2,013,715	$	(49,152)	$	2,983,012
Comprehensive income	—	—		—		98,814		10,327		109,141
Dividends ($0.23 per common share)	—	—		—		(21,405)		—		(21,405)
Equity based compensation	539,711	5		4,007		—		—		4,012
Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(140,084)	(1)		(5,686)		—		—		(5,687)
Exercise of stock options	1,569	—		25		—		—		25
Repurchase of common stock	(205,064)	(2)		(7,261)		—		—		(7,263)
Balance at March 31, 2021	93,263,632	$	933	$	1,008,603	$	2,091,124	$	(38,825)	$	3,061,835

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Note 1 Basis of Presentation and Summary of Significant Accounting Policies

BankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited, collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporate customers through 62 banking centers located in 12 Florida counties and 4 banking centers located in the New York metropolitan area at March 31, 2022. The Bank also offers certain commercial lending and deposit products through national platforms.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, these do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in BKU’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected in future periods.

The Company has a single reportable segment.

Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Actual results could differ significantly from these estimates.

The most significant estimate impacting the Company's consolidated financial statements is the ACL.

New Accounting Pronouncements Adopted During the Three Months Ended March 31, 2022

ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible debt and convertible preferred stock by reducing the number of accounting models for these instruments, resulting in fewer embedded conversion features being separately recognized from the host contract. Additionally, this ASU revises the criteria for determining whether contracts in an entity's own equity meet the scope exception from derivative accounting, which will change the population of contracts that are recognized as assets or liabilities. The amendments in this ASU also revise certain aspects of the guidance on calculating earnings per share with respect to convertible instruments and instruments that may be settled in the entity's own shares. The Company adopted this ASU on January 1, 2022, with no material impact on the Company's consolidated financial position, results of operations, and cash flows.

ASU No. 2022-01, Fair Value Hedging—Portfolio Layer Method (Topic 815). This ASU expands the portfolio layer method of hedge accounting prescribed in ASU No. 2017-12 to allow multiple hedged layers of a single closed portfolio and to include portfolios of both prepayable and non-prepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same accounting method to similar hedging strategies. The ASU also specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on accounting and disclosure of hedge basis adjustments and specifies how hedge basis adjustments should be considered in determining credit losses for assets in the designated closed portfolio. This ASU is effective for public business entities for interim and annual periods in fiscal years beginning after December 15, 2022. The Company adopted this ASU upon its release in March 2022 with no material impact on the Company's consolidated financial position, results of operations, and cash flows.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Accounting Pronouncements Not Yet Adopted

ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326). This ASU eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors. The ASU enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, updates certain requirements related to accounting for credit losses under ASC 326 and requires disclosure of current-period gross write offs of financing receivables by year of origination. The ASU is effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company has not completed its evaluation of the impact of adoption of this ASU, however, the impact of adoption on the Company's consolidated financial position, results of operations, and cash flows is not expected to be material. Adoption will lead to additional and revised disclosures in the Company's financial statements.

Note 2 Earnings Per Common Share

The computation of basic and diluted earnings per common share is presented below for the periods indicated (in thousands, except share and per share data):


	Three Months Ended March 31,
c		2022		2021
Basic earnings per common share:
Numerator:
Net income		$	67,150	$	98,814
Distributed and undistributed earnings allocated to participating securities		(929)		(1,252)
Income allocated to common stockholders for basic earnings per common share		$	66,221	$	97,562
Denominator:
Weighted average common shares outstanding		84,983,873		93,075,702
Less average unvested stock awards		(1,211,807)		(1,205,529)
Weighted average shares for basic earnings per common share		83,772,066		91,870,173
Basic earnings per common share		$	0.79	$	1.06
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share		$	66,221	$	97,562
Adjustment for earnings reallocated from participating securities		1		1
Income used in calculating diluted earnings per common share		$	66,222	$	97,563
Denominator:
Weighted average shares for basic earnings per common share		83,772,066		91,870,173
Dilutive effect of certain share-based awards		137,704		93,540
Weighted average shares for diluted earnings per common share		83,909,770		91,963,713
Diluted earnings per common share		$	0.79	$	1.06

Potentially dilutive unvested shares totaling 1,267,676 and 1,283,294 were outstanding at March 31, 2022 and 2021, respectively, but excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Note 3 Investment Securities

Investment securities include investment securities available for sale, marketable equity securities, and investment securities held to maturity. The investment securities portfolio consisted of the following at the dates indicated (in thousands):



	March 31, 2022
	Amortized Cost		Gross Unrealized				Carrying Value (1)
			Gains		Losses
Investment securities available for sale:
U.S. Treasury securities	$	109,402	$	—	$	(7,883)	$	101,519
U.S. Government agency and sponsored enterprise residential MBS	2,175,183		8,679		(18,238)		2,165,624
U.S. Government agency and sponsored enterprise commercial MBS	753,232		1,270		(39,908)		714,594

Private label residential MBS and CMOs	2,827,169		29		(119,157)		2,708,041
Private label commercial MBS	2,752,931		1,420		(42,365)		2,711,986
Single family real estate-backed securities	506,111		234		(12,476)		493,869
Collateralized loan obligations	1,079,220		—		(6,740)		1,072,480
Non-mortgage asset-backed securities	119,282		27		(1,911)		117,398
State and municipal obligations	204,920		3,995		(1,636)		207,279
SBA securities	169,724		1,872		(2,484)		169,112

	10,697,174		$	17,526	$	(252,798)	10,461,902
Investment securities held to maturity	10,000						10,000
	$	10,707,174					10,471,902
Marketable equity securities							100,196
							$	10,572,098

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022



	December 31, 2021
	Amortized Cost		Gross Unrealized				Carrying Value (1)
			Gains		Losses
Investment securities available for sale:
U.S. Treasury securities	$	114,385	$	173	$	(2,898)	$	111,660
U.S. Government agency and sponsored enterprise residential MBS	2,093,283		12,934		(8,421)		2,097,796
U.S. Government agency and sponsored enterprise commercial MBS	861,925		5,287