Market Overview

BankUnited, Inc. Reports First Quarter 2019 Results

Share:

BankUnited, Inc. (the "Company") (NYSE:BKU) today announced financial
results for the quarter ended March 31, 2019.

For the quarter ended March 31, 2019, the Company reported net income of
$66.0 million, or $0.65 per diluted share compared to $85.2 million, or
$0.77 per diluted share, for the quarter ended March 31, 2018. Non-loss
share diluted earnings per share, as previously reported,(1)
for the quarter ended March 31, 2018 was $0.54.

The annualized return on average stockholders' equity for the three
months ended March 31, 2019 was 9.05%, while the annualized return on
average assets was 0.82%.

Rajinder Singh, Chairman, President and Chief Executive Officer, said,
"As we approach our tenth anniversary, we are excited to embark on the
next chapter of BankUnited's journey to becoming a premier regional
commercial and small business bank. We have launched a new
enterprise-wide program, BankUnited 2.0, focused on finding efficiencies
and improving effectiveness while simultaneously continuing to invest in
technology and product capability to meet our customers' evolving needs."

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

Quarterly Highlights

  • For the quarter ended March 31, 2019, total deposits increased by $205
    million, of which $143 million was non-interest bearing demand
    deposits. Non-interest bearing demand deposits represented 15.9% of
    total deposits at March 31, 2019, compared to 14.0% at the end of 2017.
  • Loans and leases, including equipment under operating lease, grew by
    $390 million during the quarter. At March 31, 2019, commercial real
    estate loans represented 34% of total loans and C&I loans represented
    44% of the portfolio. By comparison, at the end of 2017, commercial
    real estate loans represented 38% of total loans while C&I loans
    accounted for 42% of the portfolio.
  • As expected, net interest income decreased by $56.9 million to $190.9
    million for the quarter ended March 31, 2019 from $247.8 million for
    the quarter ended March 31, 2018. The net interest margin, calculated
    on a tax-equivalent basis, was 2.54% for the quarter ended March 31,
    2019 compared to 4.01% for the immediately preceding quarter ended
    December 31, 2018 and 3.56% for the quarter ended March 31, 2018. The
    most significant reason for the declines in net interest income and
    the net interest margin was the decrease in accretion on residential
    ACI loans (formerly covered loans).
  • During the quarter ended March 31, 2019, the Company repurchased
    approximately 1.1 million shares of its common stock for an aggregate
    purchase price of approximately $40 million, a weighted average price
    of $35.91 per share.
  • Book value per common share grew to $29.71 at March 31, 2019 from
    $29.49 at December 31, 2018 while tangible book value per common share
    increased to $28.92 from $28.71 over the same period.
  • As previously disclosed, the Single Family Shared-Loss Agreement
    between BankUnited N.A. ("the Bank") and the FDIC was terminated on
    February 13, 2019.

Loans and Leases

Loans, including premiums, discounts and deferred fees and costs,
totaled $22.4 billion at March 31, 2019 compared to $22.0 billion at
December 31, 2018.

A comparison of loan and lease portfolio composition at the dates
indicated follows (dollars in thousands):

  March 31, 2019   December 31, 2018
Residential and other consumer loans $ 5,045,687     22.6 % $ 4,948,989     22.5 %
Multi-family 2,536,588 11.3 % 2,585,421 11.8 %
Non-owner occupied commercial real estate 4,731,127 21.2 % 4,611,573 21.0 %
Construction and land 198,265 0.9 % 210,516 1.0 %
Owner occupied commercial real estate 1,979,161 8.9 % 2,007,603 9.1 %
Commercial and industrial 4,484,992 20.1 % 4,312,213 19.6 %
National commercial lending platforms 3,382,997  

15.0

% 3,300,693   15.0 %
$ 22,358,817   100.0 % $ 21,977,008   100.0 %
Equipment under operating lease, net $ 710,209   $ 702,354  
 

The residential portfolio grew by $100 million for the quarter ended
March 31, 2019. Continued runoff of the New York multi-family portfolio
led to a decline of $49 million in multi-family loans for the quarter
ended March 31, 2019. Non-owner occupied commercial real estate loans
grew by $120 million for the quarter ended March 31, 2019, driven
primarily by growth in the Florida portfolio. Commercial and industrial
loans, inclusive of owner occupied commercial real estate, grew by $144
million for the quarter ended March 31, 2019, reflecting growth in both
our Florida and New York footprints. Growth of $90 million in the
national commercial lending platforms, including equipment under
operating lease, included $41 million in growth at Bridge Funding Group
and a $63 million increase in mortgage warehouse outstandings, partially
offset by declines in the Pinnacle Public Finance and Small Business
Finance portfolios.

Asset Quality and Allowance for Loan and Lease
Losses

For the three months ended March 31, 2019 and 2018, the Company recorded
provisions for loan losses of $10.3 million and $3.1 million,
respectively. The provision for the quarter ended March 31, 2018
included $2.8 million related to taxi medallion loans.

Contributing factors impacting the increase in the provision for loan
losses for the quarter ended March 31, 2019 as compared to the quarter
ended March 31, 2018 included (i) increases related to the relative
impact on the provision of changes in certain quantitative and
qualitative loss factors; (ii) an increase in the provision related to
specific reserves; and (iii) higher loan growth, offset by the reduction
in the provision related to taxi medallion loans.

Non-performing loans totaled $133.2 million or 0.60% of total loans at
March 31, 2019, compared to $129.9 million or 0.59% of total loans at
December 31, 2018. The ratios of the allowance for loan and lease losses
to total loans and to non-performing loans were 0.51% and 86.12%,
respectively, at March 31, 2019, compared to 0.50% and 84.63%, at
December 31, 2018. The annualized ratio of net charge-offs to average
loans was 0.10% for the three months ended March 31, 2019, compared to
0.28% for the year ended December 31, 2018, of which 0.18% related to
taxi medallion loans.

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

      Three Months Ended March 31,
2019   2018

Residential

and Other

Consumer

  Commercial   Total

Residential

and Other

Consumer

  Commercial   Total
Beginning balance $ 10,788 $ 99,143 $ 109,931 $ 10,720 $ 134,075 $ 144,795
Provision 150 10,131 10,281 374 2,773 3,147
Charge-offs (6,133 ) (6,133 ) (282 ) (10,350 ) (10,632 )
Recoveries 14   610   624   20   146   166  
Ending balance $ 10,952   $ 103,751   $ 114,703   $ 10,832   $ 126,644   $ 137,476  
 

Charge-offs related to taxi medallion loans totaled $5.4 million for the
quarter ended March 31, 2018.

Deposits

At March 31, 2019, deposits totaled $23.7 billion compared to $23.5
billion at December 31, 2018. The average cost of total deposits was
1.67% for the quarter ended March 31, 2019, compared to 1.52% for the
immediately preceding quarter ended December 31, 2018, and 1.04% for the
quarter ended March 31, 2018.

Net interest income

Net interest income for the quarter ended March 31, 2019 decreased to
$190.9 million from $247.8 million for the quarter ended March 31, 2018.
Interest income decreased by $5.9 million, primarily due to a decrease
in both the yield on and average balance of formerly covered residential
ACI loans. Interest expense increased by $51.0 million due to increases
in both average interest bearing liabilities and the cost of funds.

As expected, the Company's net interest margin, calculated on a
tax-equivalent basis, decreased to 2.54% for the quarter ended March 31,
2019, from 4.01% for the immediately preceding quarter ended December
31, 2018 and 3.56% for the quarter ended March 31, 2018.

The most significant factor impacting the decrease in net interest
margin for the three months ended March 31, 2019 compared to the three
months ended March 31, 2018 was the decrease in accretion on formerly
covered residential ACI loans. Both the average balance of and yield on
these loans declined. The decline in the average balance resulted from
the sale of a substantial portion of the loans during 2018. The yield on
the remaining loans declined to 33.00% for the three months ended March
31, 2019 from 65.22% for the three months ended March 31, 2018, due
primarily to changes in assumptions about the remaining period over
which accretable yield would be realized, attributable to management's
decision to retain certain loans beyond expiration of the Single Family
Shared-Loss Agreement.

Other offsetting factors contributing to the decline in the net interest
margin included:

  • The tax-equivalent yield on loans other than formerly covered
    residential loans increased to 4.24% for the three months ended March
    31, 2019, from 3.83% for the three months ended March 31, 2018. The
    most significant factor contributing to this increased yield was the
    impact of increases in benchmark interest rates.
  • The tax-equivalent yield on investment securities increased to 3.64%
    for the three months ended March 31, 2019 from 3.04% for the three
    months ended March 31, 2018.
  • The average rate on interest bearing liabilities increased to 2.10%
    for the three months ended March 31, 2019, from 1.37% for the three
    months ended March 31, 2018, reflecting higher average rates on both
    interest bearing deposits and FHLB advances. Increases in the cost of
    interest bearing liabilities primarily reflect increases in market
    interest rates.

Non-interest income

Non-interest income totaled $36.3 million for the three months ended
March 31, 2019 compared to $28.0 million for the three months ended
March 31, 2018.

Significant factors contributing to the increase in non-interest income
for the three months ended March 31, 2019 compared to the three months
ended March 31, 2018 included (i) an increase of $5.4 million in gain on
investment securities; and (ii) an increase of $3.1 million in lease
financing income. Gains on investment securities for the three months
ended March 31, 2019 related to sales of securities in the course of
managing the Company's liquidity position and to increases in the fair
values of certain marketable equity securities.

Non-interest expense

Non-interest expense totaled $126.7 million for the three months ended
March 31, 2019 compared to $161.8 million for the three months ended
March 31, 2018. The most significant component of the decrease in
non-interest expense was the $40.3 million decrease in amortization of
the FDIC indemnification asset. The FDIC indemnification asset was
amortized to zero during the fourth quarter of 2018 in light of the
expected termination of the Single Family Shared-Loss Agreement.

Professional fees increased by $5.0 million during the three months
ended March 31, 2019 compared to the three months ended March 31, 2018.
The increase in professional fees was primarily attributable to
consulting services related to our BankUnited 2.0 initiative and the
implementation of CECL.

Provision for income taxes

The effective income tax rate was 26.8% for the three months ended March
31, 2019, compared to 23.1% for the three months ended March 31, 2018.
An increase in state income taxes contributed to the increase in the
effective tax rate. The effective income tax rate differed from the
statutory federal income tax rate of 21% for the three months ended
March 31, 2019 due primarily to income not subject to tax, offset by
state income taxes.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m.
ET on Wednesday, April 24, 2019 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 2969278. A replay of the
call will be available from 12:00 p.m. ET on April 24th through 11:59
p.m. ET on May 1st by calling (855) 859-2056 (domestic) or (404)
537-3406 (international). The pass code for the replay is 2969278. An
archived webcast will also be available on the Investor Relations page
of www.bankunited.com.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $32.7 billion at March 31, 2019,
is the bank holding company of BankUnited, N.A., a national bank
headquartered in Miami Lakes, Florida with 80 banking centers in 14
Florida counties and 5 banking centers in the New York metropolitan area
at March 31, 2019.

Forward-Looking Statements

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

The Company generally identifies forward-looking statements by
terminology such as "outlook," "believes," "expects," "potential,"
"continues," "may," "will," "could," "should," "seeks," "approximately,"
"predicts," "intends," "plans," "estimates," "anticipates" or the
negative version of those words or other comparable words. Any
forward-looking statements contained in this press release are based on
the historical performance of the Company and its subsidiaries or on the
Company's current plans, estimates and expectations. The inclusion of
this forward-looking information should not be regarded as a
representation by the Company that the future plans, estimates or
expectations contemplated by the Company will be achieved. Such
forward-looking statements are subject to various risks and
uncertainties and assumptions, including (without limitations) those
relating to the Company's operations, financial results, financial
condition, business prospects, growth strategy and liquidity. If one or
more of these or other risks or uncertainties materialize, or if the
Company's underlying assumptions prove to be incorrect, the Company's
actual results may vary materially from those indicated in these
statements. These factors should not be construed as exhaustive. The
Company does not undertake any obligation to publicly update or review
any forward-looking statement, whether as a result of new information,
future developments or otherwise. A number of important factors could
cause actual results to differ materially from those indicated by the
forward-looking statements. Information on these factors can be found in
the Company's Annual Report on Form 10-K for the year ended December 31,
2018 which is available at the SEC's website (www.sec.gov).

BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except share and per share data)
   
March 31,
2019
December 31,
2018
ASSETS
Cash and due from banks:
Non-interest bearing $ 16,470 $ 9,392
Interest bearing 224,981   372,681  
Cash and cash equivalents 241,451 382,073
Investment securities (including securities recorded at fair value
of $8,364,624 and $8,156,878)
8,374,624 8,166,878
Non-marketable equity securities 276,827 267,052
Loans held for sale 28,730 36,992
Loans (including covered loans of $201,376 at December 31, 2018) 22,358,817 21,977,008
Allowance for loan and lease losses (114,703 ) (109,931 )
Loans, net 22,244,114 21,867,077
Bank owned life insurance 272,805 263,340
Equipment under operating lease, net 710,209 702,354
Goodwill and other intangible assets 77,707 77,718
Other assets 476,509   400,842  

Total assets

$ 32,702,976   $ 32,164,326  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits:
Non-interest bearing $ 3,764,713 $ 3,621,254
Interest bearing 1,761,575 1,771,465
Savings and money market 11,386,119 11,261,746
Time 6,766,876   6,819,758  
Total deposits 23,679,283 23,474,223
Federal funds purchased 175,000 175,000
Federal Home Loan Bank advances 5,026,000 4,796,000
Notes and other borrowings 402,701 402,749
Other liabilities 496,602   392,521  
Total liabilities 29,779,586 29,240,493
 
Commitments and contingencies
 
Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares
authorized; 98,404,303 and
99,141,374 shares issued and outstanding 984 991
Paid-in capital 1,179,235 1,220,147
Retained earnings 1,742,530 1,697,822
Accumulated other comprehensive income 641   4,873  
Total stockholders' equity 2,923,390   2,923,833  
Total liabilities and stockholders' equity $ 32,702,976   $ 32,164,326  
 
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
 

 

  Three Months Ended March 31,
2019   2018
Interest income:
Loans $ 240,632 $ 274,000
Investment securities 76,345 49,985
Other 4,852   3,791  
Total interest income 321,829   327,776  
Interest expense:
Deposits 97,421 56,361
Borrowings 33,507   23,606  
Total interest expense 130,928   79,967  
Net interest income before provision for loan losses 190,901 247,809
Provision for loan losses (including $273 for covered loans for the
three months ended March 31, 2018)
10,281   3,147  
Net interest income after provision for loan losses 180,620   244,662  
Non-interest income:
Income from resolution of covered assets, net 3,317
Net loss on FDIC indemnification (3,615 )
Deposit service charges and fees 3,830 3,487

Gain on sale of loans, net (including $1,703 related to covered
loans for the three months ended March

31, 2018)

2,936 3,501
Gain on investment securities, net 5,785 364
Lease financing 17,186 14,102
Other non-interest income 6,518   6,830  
Total non-interest income 36,255   27,986  
Non-interest expense:
Employee compensation and benefits 65,233 67,036
Occupancy and equipment 13,166

14,303

Amortization of FDIC indemnification asset 40,347
Deposit insurance expense 4,041 4,812
Professional fees 7,871 2,875
Technology and telecommunications 11,168

8,214

Depreciation of equipment under operating lease 11,812 9,316
Other non-interest expense 13,399   14,914  
Total non-interest expense 126,690   161,817  
Income before income taxes 90,185 110,831
Provision for income taxes 24,213   25,596  
Net income $ 65,972   $ 85,235  
Earnings per common share, basic $ 0.65   $ 0.78  
Earnings per common share, diluted $ 0.65   $ 0.77  
 
BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
 
  Three Months Ended March 31,
2019     2018
Average
Balance
  Interest (1)(2)   Yield/
Rate (1)(2)
Average
Balance
  Interest (1)(2)   Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Non-covered loans $ 21,974,453 $ 245,010 4.50% $ 20,783,987 $ 196,878 3.83%
Covered loans     —% 498,701   81,309   65.22%
Total loans 21,974,453 245,010 4.50% 21,282,688 278,187 5.26%
Investment securities (3) 8,520,555 77,607 3.64% 6,772,449 51,524 3.04%
Other interest earning assets 496,141   4,852   3.96% 518,857   3,791   2.96%
Total interest earning assets 30,991,149 327,469 4.26% 28,573,994 333,502 4.70%
Allowance for loan and lease losses (111,074 ) (145,216 )
Non-interest earning assets 1,603,922   1,944,678  
Total assets $ 32,483,997   $ 30,373,456  
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,702,479 5,639 1.34% $ 1,600,009 4,157 1.05%
Savings and money market deposits 11,453,980 52,817 1.87% 10,799,270 29,054 1.09%
Time deposits 6,907,011   38,965   2.29% 6,314,137   23,150   1.49%
Total interest bearing deposits 20,063,470 97,421 1.97% 18,713,416 56,361 1.22%
Federal funds purchased 137,378 824 2.40% —%
FHLB advances 4,660,222 27,374 2.38% 4,459,389 18,297 1.66%
Notes and other borrowings 404,852   5,309   5.25% 402,840   5,309   5.27%
Total interest bearing liabilities 25,265,922 130,928   2.10% 23,575,645 79,967   1.37%
Non-interest bearing demand deposits 3,605,131 3,318,952
Other non-interest bearing liabilities 657,360   414,842  
Total liabilities 29,528,413 27,309,439
Stockholders' equity 2,955,584   3,064,017  
Total liabilities and stockholders' equity $ 32,483,997   $ 30,373,456  
Net interest income $ 196,541   $ 253,535  
Interest rate spread 2.16% 3.33%
Net interest margin 2.54% 3.56%
   

(1) On a tax-equivalent basis where applicable

(2) Annualized

(3) At fair value except for securities held to maturity

BANKUNITED, INC. AND SUBSIDIARIES
EARNINGS PER COMMON SHARE
(In thousands except share and per share amounts)
       
Three Months Ended March 31,

 

2019   2018
Basic earnings per common share:
Numerator:
Net income $ 65,972 $ 85,235
Distributed and undistributed earnings allocated to participating
securities
(2,697 ) (3,216 )
Income allocated to common stockholders for basic earnings per
common share
$ 63,275 $ 82,019
Denominator:
Weighted average common shares outstanding 98,856,775 106,525,883
Less average unvested stock awards (1,171,921 ) (1,108,434 )
Weighted average shares for basic earnings per common share 97,684,854   105,417,449  
Basic earnings per common share $ 0.65   $ 0.78  
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per
common share
$ 63,275 $ 82,019
Adjustment for earnings reallocated from participating securities 5   11  
Income used in calculating diluted earnings per common share $ 63,280 $ 82,030
Denominator:
Weighted average shares for basic earnings per common share 97,684,854 105,417,449
Dilutive effect of stock options and certain share-based awards 279,779   516,161  
Weighted average shares for diluted earnings per common share 97,964,633   105,933,610  
Diluted earnings per common share $ 0.65   $ 0.77  
 
BANKUNITED, INC. AND SUBSIDIARIES
SELECTED RATIOS
   
Three Months Ended March 31,
2019   2018
Financial ratios (5)
Return on average assets 0.82% 1.14%
Return on average stockholders' equity 9.05% 11.28%
Net interest margin (4) 2.54% 3.56%
   
    March 31, 2019   December 31, 2018
Asset quality ratios
Non-performing loans to total loans (1) (3) 0.60% 0.59%
Non-performing assets to total assets (2) 0.44% 0.43%
Allowance for loan and lease losses to total loans (3) 0.51% 0.50%
Allowance for loan and lease losses to non-performing loans (1) 86.12% 84.63%
Net charge-offs to average loans 0.10% 0.28%
  BankUnited, Inc.   BankUnited, N.A.

Capital ratios

Tier 1 leverage 8.8% 9.2%
Common Equity Tier 1 ("CET1") risk-based capital 12.3%

12.9%

Total risk-based capital 12.8% 13.5%
   

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

(2) Non-performing assets include non-performing loans, OREO and other
repossessed assets.

(3) Total loans include premiums, discounts, and deferred fees and costs.

(4) On a tax-equivalent basis.

(5) Annualized for the three month periods.

Non-GAAP Financial Measures

Tangible book value per common share is a non-GAAP financial measure.
Management believes this measure is relevant to understanding the
capital position and performance of the Company. Disclosure of this
non-GAAP financial measure also provides a meaningful base for
comparison to other financial institutions. The following table
reconciles the non-GAAP financial measurement of tangible book value per
common share to the comparable GAAP financial measurement of book value
per common share at March 31, 2019 (in thousands except share and per
share data):

Total stockholders' equity             $ 2,923,390
Less: goodwill and other intangible assets 77,707
Tangible stockholders' equity $ 2,845,683
 
Common shares issued and outstanding 98,404,303
 
Book value per common share $ 29.71
 
Tangible book value per common share $ 28.92
 

Non-loss share diluted earnings per share is a non-GAAP financial
measure. Management believes disclosure of this measure provides readers
with information that may be useful in understanding the impact of the
covered loans and FDIC indemnification asset on the Company's earnings
for periods prior to the termination of the Single Family Shared-Loss
Agreement. The following table reconciles this non-GAAP financial
measurement to the comparable GAAP financial measurement of diluted
earnings per common share for the three months ended March 31, 2018 (in
millions except share and per share data. Shares in thousands):

     

Three Months Ended

March 31, 2018

Net Income (GAAP) $ 85.2
Less Loss Share Contribution (25.8 )
Net Income as reported, minus Loss Share Contribution $ 59.4  
Diluted earnings per common share, excluding Loss Share Contribution:
Diluted earnings per common share (GAAP) $ 0.77
Less: Net impact on diluted earnings per common share of Loss Share
Contribution (non-GAAP)
(0.23 )
Non-loss share diluted earnings per common share (non-GAAP) $ 0.54  
Non-loss share diluted earnings per share:
Loss Share Contribution $ 25.8
Weighted average shares for diluted earnings per common share (GAAP) 105,934  
Impact on diluted earnings per common share of Loss Share
Contribution (non-GAAP)
0.24  
Impact on diluted earnings per common share of Loss Share
Contribution:
Loss Share Contribution, net of tax, allocated to participating
securities
(1.0 )
Weighted average shares for diluted earnings per common share (GAAP) 105,934  
Impact on diluted earnings per common share of Loss Share
Contribution allocated to participating securities (non-GAAP)
(0.01 )
Net impact on diluted earnings per common share of Loss Share
Contribution (non-GAAP)
$ 0.23  

Supplemental Calculations

Calculation of Loss Share Contribution and Non-Loss Share Earnings
Per Share

Non-Loss Share Earnings are calculated by removing the total Loss Share
Contribution from Net Income. The Loss Share Contribution is a
hypothetical presentation of the impact of the covered loans and FDIC
indemnification asset on earnings for each respective quarter,
reflecting the excess of Loss Share Earnings over hypothetical interest
income that could have been earned on alternative assets (in millions
except share and per share data):

            Three Months Ended March 31, 2018
Net Income As Reported $ 85.2
Calculation of Loss Share Contribution:
Interest Income - Covered Loans (Accretion) $ 81.3
Amortization of FDIC Indemnification Asset (40.3)
Loss Share Earnings 41.0
Hypothetical interest income on alternate assets (1) (5.9)
Loss Share Contribution, pre-tax 35.1
Income taxes (2) (9.3)
Loss Share Contribution, after tax $ 25.8
 
Net Income as reported, minus Loss Share Contribution $ 59.4
 
Diluted Earnings Per Common Share, as Reported $ 0.77
Earnings Per Share, Loss Share Contribution 0.23
Non-Loss Share Diluted Earnings Per Share $ 0.54
 

(1) See section entitled "Supplemental Calculations - Calculation of
Hypothetical Interest Income on Alternate Assets" below for calculation
of these amounts and underlying assumptions.

(2) An assumed marginal tax rate of 26.5% was applied.

Calculation of Hypothetical Interest Income on Alternate Assets

The hypothetical interest income calculated below reflects the estimated
income that may have been earned if the average balance of covered loans
and the FDIC indemnification asset were liquidated and the proceeds
assumed to be invested in securities at the weighted average yield on
the Company's investment securities portfolio as reported. Historically,
cash received from the repayment, sale, or other resolution of covered
loans and cash payments received from the FDIC under the terms of the
Shared Loss Agreement have generally been reinvested in non-covered
loans or investment securities. There is no assurance that the
hypothetical results illustrated below would have been achieved if the
covered loans and FDIC indemnification asset had been liquidated and
proceeds reinvested (dollars in millions):

           

Three Months Ended

March 31, 2018

Average Balances (1)

Average Covered Loans $ 499
Average FDIC Indemnification Asset 278
Average Loss Share Asset $ 777
 

Yield

Yield on securities - reported (2) 3.04%
Hypothetical interest income on alternate assets $ 5.9
 

(1) Calculated as the simple average of beginning and ending balances
reported for each period.

(2) The weighted average yield on the Company's investment securities as
reported for the applicable quarter.

View Comments and Join the Discussion!