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BankUnited, Inc. Reports Second Quarter 2019 Results

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BankUnited, Inc. (the "Company") (NYSE:BKU) today announced financial results for the quarter ended June 30, 2019.

For the quarter ended June 30, 2019, the Company reported net income of $81.5 million, or $0.81 per diluted share compared to $89.9 million, or $0.82 per diluted share, for the quarter ended June 30, 2018. Non-loss share diluted earnings per share, as previously reported,(1) for the quarter ended June 30, 2018 was $0.59.

For the six months ended June 30, 2019, the Company reported net income of $147.4 million, or $1.45 per diluted share compared to $175.1 million, or $1.59 per diluted share, for the six months ended June 30, 2018.

The annualized return on average stockholders' equity for the six months ended June 30, 2019 was 10.1%, while the annualized return on average assets was 0.91%.

Rajinder Singh, Chairman, President and Chief Executive Officer, said, "This was a solid quarter for BankUnited. Earnings were strong, our success in growing non-interest bearing deposits continued and we embarked on the implementation phase of our BankUnited 2.0 initiative. We remain on track to deliver the results we outlined for investors last quarter."

Quarterly Highlights

  • For the quarter ended June 30, 2019, non-interest bearing demand deposits grew by $335 million, to 17.1% of total deposits at June 30, 2019 compared to 15.4% of total deposits at December 31, 2018. Total deposits increased by $243 million for the quarter ended June 30, 2019. Non-interest bearing demand deposits grew by $478 million for the six months ended June 30, 2019 while total deposits increased by $448 million. The cost of total deposits increased by 0.03% over the immediately preceding quarter ended March 31, 2019, to 1.70%.
  • Loans and leases, including equipment under operating lease, grew by $231 million during the quarter; loan and lease growth was $420 million excluding the transfer of $189 million of Pinnacle Public Finance loans to loans held for sale at June 30, 2019. For the six months ended June 30, 2019, excluding the transfer of Pinnacle loans to held for sale, loans and leases grew by $809 million.
  • Net interest income for the quarter ended June 30, 2019 was flat to the immediately preceding quarter at $190.9 million and, as expected, decreased by $64.4 million from $255.3 million for the quarter ended June 30, 2018. The net interest margin, calculated on a tax-equivalent basis, was 2.52% for the quarter ended June 30, 2019 compared to 2.54% for the immediately preceding quarter ended March 31, 2019 and 3.60% for the quarter ended June 30, 2018. The most significant reason for the declines in net interest income and the net interest margin for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 was the decrease in accretion on formerly covered residential loans.
  • During the quarter ended June 30, 2019, the Company repurchased approximately 3.0 million shares of its common stock for an aggregate purchase price of approximately $102 million. During the six months ended June 30, 2019, the Company repurchased approximately 4.1 million shares of its common stock for an aggregate purchase price of approximately $142 million, at a weighted average price of $34.44 per share.
  • We are in the implementation phase of our BankUnited 2.0 initiative and remain on target to deliver the projected benefits presented to investors last quarter. Non-interest expense for the quarter ended June 30, 2019 included costs directly related to BankUnited 2.0 of $6.2 million.
  • Book value per common share grew to $30.09 at June 30, 2019 from $29.49 at December 31, 2018 while tangible book value per common share increased to $29.27 from $28.71 over the same period.

(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.

Loans and Leases

Loans, including premiums, discounts and deferred fees and costs, totaled $22.6 billion at June 30, 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):

 

June 30, 2019

 

March 31, 2019

 

December 31, 2018

Residential and other consumer loans

$

5,267,788

 

 

23.3

%

 

$

5,045,687

 

 

22.6

%

 

$

4,948,989

 

 

22.5

%

Multi-family

2,383,116

 

 

10.5

%

 

2,536,588

 

 

11.3

%

 

2,585,421

 

 

11.8

%

Non-owner occupied commercial real estate

4,862,256

 

 

21.5

%

 

4,731,127

 

 

21.2

%

 

4,611,573

 

 

21.0

%

Construction and land

220,536

 

 

1.0

%

 

198,265

 

 

0.9

%

 

210,516

 

 

1.0

%

Owner occupied commercial real estate

1,966,004

 

 

8.7

%

 

1,979,161

 

 

8.9

%

 

2,007,603

 

 

9.1

%

Commercial and industrial

4,531,948

 

 

20.1

%

 

4,484,992

 

 

20.1

%

 

4,312,213

 

 

19.6

%

National commercial lending platforms

 

 

 

 

 

 

 

 

 

 

 

Pinnacle

1,269,468

 

 

5.6

%

 

1,450,316

 

 

6.4

%

 

1,462,655

 

 

6.7

%

Bridge - franchise finance

593,005

 

 

2.6

%

 

546,489

 

 

2.4

%

 

517,305

 

 

2.4

%

Bridge - equipment finance

677,061

 

 

3.0

%

 

640,910

 

 

2.9

%

 

636,838

 

 

2.9

%

SBF

256,274

 

 

1.1

%

 

250,930

 

 

1.1

%

 

252,221

 

 

1.1

%

Mortgage warehouse lending

564,393

 

 

2.5

%

 

494,352

 

 

2.2

%

 

431,674

 

 

2.0

%

 

$

22,591,849

 

 

100.0

%

 

$

22,358,817

 

 

100.0

%

 

$

21,977,008

 

 

100.0

%

Equipment under operating lease, net

$

707,680

 

 

 

 

$

710,209

 

 

 

 

$

702,354

 

 

 

The residential portfolio grew by $222 million for the quarter ended June 30, 2019. Continued runoff of the New York multi-family portfolio led to a decline of $153 million in multi-family loans for the quarter ended June 30, 2019. Non-owner occupied commercial real estate loans grew by $131 million for the quarter ended June 30, 2019. A decline of $25 million in the national commercial lending platforms, including equipment under operating lease, was net of the transfer of $189 million in Pinnacle Public Finance loans to held for sale, and included $80 million in growth at Bridge Funding Group, as well as a $70 million increase in mortgage warehouse outstandings.

Loans held for sale at June 30, 2019 included $189 million of Pinnacle Public Finance loans transferred to held for sale and $36 million of the guaranteed portion of SBA loans held for sale in the secondary market. At December 31, 2018, loans held for sale consisted entirely of the guaranteed portion of SBA loans.

Asset Quality and Allowance for Loan and Lease Losses

For the quarters ended June 30, 2019 and 2018 the Company recorded net recoveries of $2.7 million and a provision for loan losses of $9.0 million, respectively. The primary reason a net recovery was recognized for the quarter ended June 30, 2019 was reductions in certain specific reserves. For the six months ended June 30, 2019 and 2018, the Company recorded provisions for loan losses of $7.5 million and $12.1 million, respectively. The provision for the quarter and six months ended June 30, 2018 included $11.1 million and $14.0 million, respectively, related to taxi medallion loans.

Factors contributing to the recovery of loan losses for the quarter ended June 30, 2019 as compared to the provision recorded for the quarter ended June 30, 2018 included (i) the reduction in the provision related to taxi medallion loans; (ii) a decrease in the provision related to specific reserves for other loans; and (iii) changes in the composition of portfolio growth; offset by increases related to the relative impact on the provision of changes in certain qualitative loss factors. For the quarter ended June 30, 2018, there was a reduction in overall qualitative reserves.

Non-performing loans totaled $138.2 million or 0.61% of total loans at June 30, 2019, compared to $129.9 million or 0.59% of total loans at December 31, 2018. Non-performing loans included $28.4 million and $17.8 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.13% and 0.08% of total loans at June 30, 2019 and December 31, 2018, respectively.

The ratios of the allowance for loan and lease losses to total loans and to non-performing loans were 0.50% and 81.17%, respectively, at June 30, 2019, compared to 0.50% and 84.63%, at December 31, 2018. The annualized ratio of net charge-offs to average loans was 0.05% for the six months ended June 30, 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 June 30,

 

2019

 

2018

 

Residential

and Other

Consumer

 

Commercial

 

Total

 

Residential

and Other

Consumer

 

Commercial

 

Total

Beginning balance

$

10,952

 

 

$

103,751

 

 

$

114,703

 

 

$

10,832

 

 

$

126,644

 

 

$

137,476

 

Provision (recovery)

131

 

 

(2,878

)

 

(2,747

)

 

(280

)

 

9,275

 

 

8,995

 

Charge-offs

 

 

(1,711

)

 

(1,711

)

 

(222

)

 

(12,046

)

 

(12,268

)

Recoveries

153

 

 

1,743

 

 

1,896

 

 

8

 

 

760

 

 

768

 

Ending balance

$

11,236

 

 

$

100,905

 

 

$

112,141

 

 

$

10,338

 

 

$

124,633

 

 

$

134,971

 

 

Six Months Ended June 30,

 

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

281

 

 

7,253

 

 

7,534

 

 

94

 

 

12,048

 

 

12,142

 

Charge-offs

 

 

(7,844

)

 

(7,844

)

 

(504

)

 

(22,396

)

 

(22,900

)

Recoveries

167

 

 

2,353

 

 

2,520

 

 

28

 

 

906

 

 

934

 

Ending balance

$

11,236

 

 

$

100,905

 

 

$

112,141

 

 

$

10,338

 

 

$

124,633

 

 

$

134,971

 

Charge-offs related to taxi medallion loans totaled $8.1 million and $13.5 million, respectively, for the quarter and six months ended June 30, 2018.

Deposits

At June 30, 2019, deposits totaled $23.9 billion compared to $23.5 billion at December 31, 2018. The average cost of total deposits was 1.70% for the quarter ended June 30, 2019, compared to 1.67% for the immediately preceding quarter ended March 31, 2019, and 1.19% for the quarter ended June 30, 2018.

Net interest income

Net interest income for the quarter ended June 30, 2019 decreased to $190.9 million from $255.3 million for the quarter ended June 30, 2018. Net interest income was $381.8 million for the six months ended June 30, 2019, compared to $503.1 million for the six months ended June 30, 2018. Interest income decreased by $21.6 million and $27.6 million for the quarter and six month periods, respectively, primarily due to a decrease in both the yield on and average balance of formerly covered residential loans. Interest income on formerly covered residential loans declined by $67.7 million to $16.5 million for the quarter ended June 30, 2019 from $84.2 million for the quarter ended June 30, 2018. Interest expense increased by $42.8 million and $93.7 million for the quarter and six month periods, respectively, due to increases in both average interest bearing liabilities and the cost of funds.

The Company's net interest margin, calculated on a tax-equivalent basis, decreased to 2.52% for the quarter ended June 30, 2019, from 2.54% for the immediately preceding quarter ended March 31, 2019 and 3.60% for the quarter ended June 30, 2018. The Company's net interest margin, calculated on a tax-equivalent basis, was 2.53% for the six months ended June 30, 2019, compared to 3.58% for the six months ended June 30, 2018.

The most significant factor impacting the decrease in net interest margin for the quarter and six months ended June 30, 2019 compared to the quarter and six months ended June 30, 2018 was the decrease in accretion on formerly covered residential 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 34.05% and 33.52%, respectively, for the quarter and six months ended June 30, 2019 from 70.82% and 67.96%, respectively, for the quarter and six months ended June 30, 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 4.26% and 4.25%, respectively, for the quarter and six months ended June 30, 2019, from 3.96% and 3.89%, respectively, for the quarter and six months ended June 30, 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 3.61% and 3.63%, respectively, for the quarter and six months ended June 30, 2019 from 3.33% and 3.19%, respectively, for the quarter and six months ended June 30, 2018.
  • The average rate on interest bearing liabilities increased to 2.17% and 2.13%, respectively, for the quarter and six months ended June 30, 2019, from 1.58% and 1.48%, respectively, for the quarter and six months ended June 30, 2018, reflecting higher average rates on both interest bearing deposits and FHLB advances. Increases in the cost of interest bearing liabilities primarily reflected increases in market interest rates.
  • Average non-interest bearing demand deposits increased as a percentage of total deposits for the quarter and six months ended June 30, 2019 compared to the quarter and six months ended June 30, 2018.

Non-interest income

Non-interest income totaled $35.3 million and $71.6 million, respectively, for the quarter and six months ended June 30, 2019 compared to $32.0 million and $60.0 million, respectively, for the quarter and six months ended June 30, 2018.

The most significant factor contributing to the increase in non-interest income for the six months ended June 30, 2019 compared to the corresponding period in the prior year was an increase of $7.4 million in gain on investment securities. Gains on investment securities 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.

Lease financing income decreased by $0.5 million for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018. The quarter ended June 30, 2018 included gains of $3.8 million related to the disposition of equipment under operating lease.

Non-interest expense

Non-interest expense totaled $120.1 million and $246.8 million, respectively, for the quarter and six months ended June 30, 2019 compared to $161.2 million and $323.1 million, respectively, for the quarter and six months ended June 30, 2018. The most significant component of these decreases in non-interest expense was the 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.

Employee compensation and benefits declined by $8.3 million and $10.1 million for the quarter and six months ended June 30, 2019 relative to the comparable periods of the prior year, primarily due to a reduction in headcount. Professional fees increased by $4.3 million and $9.3 million, respectively, during the quarter and six months ended June 30, 2019 compared to the quarter and six months ended June 30, 2018. The increases in professional fees were primarily attributable to consulting services related to our BankUnited 2.0 initiative. Increased technology and telecommunications expense related primarily to investments we are making in cloud technology, our digital platforms, data initiatives and enhancement of some of our risk management capabilities.

Costs incurred directly related to the implementation of our BankUnited 2.0 initiative during the three and six months ended June 30, 2019 included professional fees of $4.7 million and $10.3 million, respectively; branch closure expenses of $0.6 million and $0.9 million, respectively; and severance costs of $0.9 million for both periods.

Provision for income taxes

The effective income tax rate was 25.2% and 25.9% for the quarter and six months ended June 30, 2019, compared to 23.2% and 23.1% for the quarter and six months ended June 30, 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 quarter and six months ended June 30, 2019 due primarily to the impact of state income taxes, partially offset by the benefit of income not subject to federal tax.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Wednesday, July 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 1136267. A replay of the call will be available from 12:00 p.m. ET on July 24th through 11:59 p.m. ET on July 31st by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 1136267. 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 $33.1 billion at June 30, 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 June 30, 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)

 

 

June 30,

2019

 

December 31,

2018

ASSETS

 

 

 

Cash and due from banks:

 

 

 

Non-interest bearing

$

10,152

 

 

$

9,392

 

Interest bearing

432,681

 

 

372,681

 

Cash and cash equivalents

442,833

 

 

382,073

 

Investment securities (including securities recorded at fair value of $8,128,708 and $8,156,878)

8,138,708

 

 

8,166,878

 

Non-marketable equity securities

289,789

 

 

267,052

 

Loans held for sale

224,759

 

 

36,992

 

Loans (including covered loans of $201,376 at December 31, 2018)

22,591,849

 

 

21,977,008

 

Allowance for loan and lease losses

(112,141

)

 

(109,931

)

Loans, net

22,479,708

 

 

21,867,077

 

Bank owned life insurance

274,603

 

 

263,340

 

Equipment under operating lease, net

707,680

 

 

702,354

 

Goodwill and other intangible assets

77,696

 

 

77,718

 

Other assets

456,489

 

 

400,842

 

Total assets

$

33,092,265

 

 

$

32,164,326

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Liabilities:

 

 

 

Demand deposits:

 

 

 

Non-interest bearing

$

4,099,636

 

 

$

3,621,254

 

Interest bearing

1,831,441

 

 

1,771,465

 

Savings and money market

10,910,607

 

 

11,261,746

 

Time

7,080,716

 

 

6,819,758

 

Total deposits

23,922,400

 

 

23,474,223

 

Federal funds purchased

99,000

 

 

175,000

 

Federal Home Loan Bank advances

5,331,000

 

 

4,796,000

 

Notes and other borrowings

403,661

 

 

402,749

 

Other liabilities

468,294

 

 

392,521

 

Total liabilities

30,224,355

 

 

29,240,493

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

Common stock, par value $0.01 per share, 400,000,000 shares authorized; 95,315,633 and 99,141,374 shares issued and outstanding

953

 

 

991

 

Paid-in capital

1,080,966

 

 

1,220,147

 

Retained earnings

1,803,360

 

 

1,697,822

 

Accumulated other comprehensive income (loss)

(17,369

)

 

4,873

 

Total stockholders' equity

2,867,910

 

 

2,923,833

 

Total liabilities and stockholders' equity

$

33,092,265

 

 

$

32,164,326

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Interest income:

 

 

 

 

 

 

 

Loans

$

249,364

 

 

$

288,264

 

 

$

489,996

 

 

$

562,264

 

Investment securities

72,796

 

 

56,092

 

 

149,141

 

 

106,077

 

Other

5,069

 

 

4,499

 

 

9,921

 

 

8,290

 

Total interest income

327,229

 

 

348,855

 

 

649,058

 

 

676,631

 

Interest expense:

 

 

 

 

 

 

 

Deposits

99,987

 

 

65,298

 

 

197,408

 

 

121,659

 

Borrowings

36,359

 

 

28,294

 

 

69,866

 

 

51,900

 

Total interest expense

136,346

 

 

93,592

 

 

267,274

 

 

173,559

 

Net interest income before provision for loan losses

190,883

 

 

255,263

 

 

381,784

 

 

503,072

 

Provision for (recovery of) loan losses (including $294 and $567 for covered loans for the three and six months ended June 30, 2018)

(2,747

)

 

8,995

 

 

7,534

 

 

12,142

 

Net interest income after provision for loan losses

193,630

 

 

246,268

 

 

374,250

 

 

490,930

 

Non-interest income:

 

 

 

 

 

 

 

Income from resolution of covered assets, net

 

 

4,238

 

 

 

 

7,555

 

Net loss on FDIC indemnification

 

 

(1,400

)

 

 

 

(5,015

)

Deposit service charges and fees

4,290

 

 

3,510

 

 

8,120

 

 

6,997

 

Gain (loss) on sale of loans, net (including $(2,002) and $(298) related to covered loans for the three and six months ended June 30, 2018)

2,121

 

 

768

 

 

5,057

 

 

4,269

 

Gain on investment securities, net

4,116

 

 

2,142

 

 

9,901

 

 

2,506

 

Lease financing

17,005

 

 

17,492

 

 

34,191

 

 

31,594

 

Other non-interest income

7,805

 

 

5,223

 

 

14,323

 

 

12,053

 

Total non-interest income

35,337

 

 

31,973

 

 

71,592

 

 

59,959

 

Non-interest expense:

 

 

 

 

 

 

 

Employee compensation and benefits

57,251

 

 

65,537

 

 

122,484

 

 

132,573

 

Occupancy and equipment

13,991

 

 

14,241

 

 

27,157

 

 

28,544

 

Amortization of FDIC indemnification asset

 

 

44,250

 

 

 

 

84,597

 

Deposit insurance expense

5,027

 

 

4,623

 

 

9,068

 

 

9,435

 

Professional fees

6,937

 

 

2,657

 

 

14,808

 

 

5,532

 

Technology and telecommunications

12,013

 

 

8,644

 

 

23,181

 

 

16,858

 

Depreciation of equipment under operating lease

11,489

 

 

9,476

 

 

23,301

 

 

18,792

 

Other non-interest expense

13,377

 

 

11,819

 

 

26,776

 

 

26,733

 

Total non-interest expense

120,085

 

 

161,247

 

 

246,775

 

 

323,064

 

Income before income taxes

108,882

 

 

116,994

 

 

199,067

 

 

227,825

 

Provision for income taxes

27,431

 

 

27,094

 

 

51,644

 

 

52,690

 

Net income

$

81,451

 

 

$

89,900

 

 

$

147,423

 

 

$

175,135

 

Earnings per common share, basic

$

0.81

 

 

$

0.82

 

 

$

1.46

 

 

$

1.60

 

Earnings per common share, diluted

$

0.81

 

 

$

0.82

 

 

$

1.45

 

 

$

1.59

 

BANKUNITED, INC. AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS

(Dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

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

 

$

22,505,138

 

 

$

253,766

 

 

4.52

%

 

$

21,117,897

 

 

$

208,415

 

 

3.96

%

Covered loans

 

 

 

 

 

%

 

475,568

 

 

84,200

 

 

70.82

%

Total loans

 

22,505,138

 

 

253,766

 

 

4.52

%

 

21,593,465

 

 

292,615

 

 

5.43

%

Investment securities (3)

 

8,187,518

 

 

73,867

 

 

3.61

%

 

6,902,634

 

 

57,444

 

 

3.33

%

Other interest earning assets

 

525,563

 

 

5,069

 

 

3.87

%

 

484,087

 

 

4,499

 

 

3.73

%

 

 

31,218,219

 

 

332,702

 

 

4.27

%

 

28,980,186

 

 

354,558

 

 

4.90

%

Allowance for loan and lease losses

 

(117,206

)

 

 

 

 

 

(140,223

)

 

 

 

 

Non-interest earning assets

 

1,589,286

 

 

 

 

 

 

1,912,471

 

 

 

 

 

Total assets

 

$

32,690,299

 

 

 

 

 

 

$

30,752,434

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing demand deposits

 

$

1,773,912

 

 

6,225

 

 

1.41

%

 

$

1,621,161

 

 

4,195

 

 

1.04

%

Savings and money market deposits

 

10,924,580

 

 

52,191

 

 

1.92

%

 

10,553,624

 

 

33,317

 

 

1.27

%

Time deposits

 

6,944,862

 

 

41,571

 

 

2.40

%

 

6,475,569

 

 

27,786

 

 

1.72

%

 

 

19,643,354

 

 

99,987

 

 

2.04

%

 

18,650,354

 

 

65,298

 

 

1.40

%

Federal funds purchased

 

127,242

 

 

771

 

 

2.42

%

 

 

 

 

 

%

FHLB advances

 

5,028,418

 

 

30,263

 

 

2.41

%

 

4,761,659

 

 

22,988

 

 

1.94

%

Notes and other borrowings

 

405,726

 

 

5,325

 

 

5.25

%

 

402,805

 

 

5,306

 

 

5.27

%

Total interest bearing liabilities

 

25,204,740

 

 

136,346

 

 

2.17

%

 

23,814,818

 

 

93,592

 

 

1.58

%

Non-interest bearing demand deposits

 

3,932,716

 

 

 

 

 

 

3,315,851

 

 

 

 

 

Other non-interest bearing liabilities

 

601,703

 

 

 

 

 

 

536,800

 

 

 

 

 

 

 

29,739,159

 

 

 

 

 

 

27,667,469

 

 

 

 

 

Stockholders' equity

 

2,951,140

 

 

 

 

 

 

3,084,965

 

 

 

 

 

 

 

$

32,690,299

 

 

 

 

 

 

$

30,752,434

 

 

 

 

 

Net interest income

 

 

 

$

196,356

 

 

 

 

 

 

$

260,966

 

 

 

Interest rate spread

 

 

 

 

 

2.10

%

 

 

 

 

 

3.32

%

Net interest margin

 

 

 

 

 

2.52

%

 

 

 

 

 

3.60

%

(1) On a tax-equivalent basis where applicable

(2) Annualized

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

BANKUNITED, INC. AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS

(Dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

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

 

$

22,241,262

 

 

$

498,776

 

 

4.51

%

 

$

20,951,864

 

 

$

405,293

 

 

3.89

%

Covered loans

 

 

 

 

 

%

 

487,070

 

 

165,509

 

 

67.96

%

Total loans

 

22,241,262

 

 

498,776

 

 

4.51

%

 

21,438,934

 

 

570,802

 

 

5.35

%

Investment securities (3)

 

8,353,116

 

 

151,474

 

 

3.63

%

 

6,837,901

 

 

108,967

 

 

3.19

%

Other interest earning assets

 

510,933

 

 

9,921

 

 

3.91

%

 

501,376

 

 

8,291

 

 

3.33

%

Total interest earning assets

 

31,105,311

 

 

660,171

 

 

4.26

%

 

28,778,211

 

 

688,060

 

 

4.80

%

Allowance for loan and lease losses

 

(114,157

)

 

 

 

 

 

(142,706

)

 

 

 

 

Non-interest earning assets

 

1,596,565

 

 

 

 

 

 

1,928,486

 

 

 

 

 

Total assets

 

$

32,587,719

 

 

 

 

 

 

$

30,563,991

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing demand deposits

 

$

1,738,393

 

 

11,864

 

 

1.38

%

 

$

1,610,643

 

 

8,352

 

 

1.05

%

Savings and money market deposits

 

11,187,818

 

 

105,008

 

 

1.89

%

 

10,675,768

 

 

62,371

 

 

1.18

%

Time deposits

 

6,926,041

 

 

80,536

 

 

2.34

%

 

6,395,299

 

 

50,936

 

 

1.61

%

Total interest bearing deposits

 

19,852,252

 

 

197,408

 

 

2.01

%

 

18,681,710

 

 

121,659

 

 

1.31

%

Federal funds purchased

 

132,282

 

 

1,596

 

 

2.41

%

 

 

 

 

 

%

FHLB advances

 

4,845,337

 

 

57,637

 

 

2.40

%

 

4,611,359

 

 

41,285

 

 

1.81

%

Notes and other borrowings

 

405,547

 

 

10,633

 

 

5.24

%

 

402,822

 

 

10,615

 

 

5.27

%

Total interest bearing liabilities

 

25,235,418

 

 

267,274

 

 

2.13

%

 

23,695,891

 

 

173,559

 

 

1.48

%

Non-interest bearing demand deposits

 

3,769,828

 

 

 

 

 

 

3,306,238

 

 

 

 

 

Other non-interest bearing liabilities

 

629,123

 

 

 

 

 

 

487,313

 

 

 

 

 

Total liabilities

 

29,634,369

 

 

 

 

 

 

27,489,442

 

 

 

 

 

Stockholders' equity

 

2,953,350

 

 

 

 

 

 

3,074,549

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

32,587,719

 

 

 

 

 

 

$

30,563,991

 

 

 

 

 

Net interest income

 

 

 

$

392,897

 

 

 

 

 

 

$

514,501

 

 

 

Interest rate spread

 

 

 

 

 

2.13

%

 

 

 

 

 

3.32

%

Net interest margin

 

 

 

 

 

2.53

%

 

 

 

 

 

3.58

%

(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 June 30,

 

Six Months Ended June 30,

2019

 

2018

 

2019

 

2018

Basic earnings per common share:

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Net income

$

81,451

 

 

$

89,900

 

 

$

147,423

 

 

$

175,135

 

Distributed and undistributed earnings allocated to participating securities

(3,382

)

 

(3,463

)

 

(6,074

)

 

(6,676

)

Income allocated to common stockholders for basic earnings per common share

$

78,069

 

 

$

86,437

 

 

$

141,349

 

 

$

168,459

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares outstanding

97,451,019

 

 

106,170,834

 

 

98,150,014

 

 

106,347,378

 

Less average unvested stock awards

(1,174,339

)

 

(1,222,436

)

 

(1,173,137

)

 

(1,165,750

)

Weighted average shares for basic earnings per common share

96,276,680

 

 

104,948,398

 

 

96,976,877

 

 

105,181,628

 

Basic earnings per common share

$

0.81

 

 

$

0.82

 

 

$

1.46

 

 

$

1.60

 

Diluted earnings per common share:

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Income allocated to common stockholders for basic earnings per common share

$

78,069

 

 

$

86,437

 

 

$

141,349

 

 

$

168,459

 

Adjustment for earnings reallocated from participating securities

9

 

 

12

 

 

13

 

 

23

 

Income used in calculating diluted earnings per common share

$

78,078

 

 

$

86,449

 

 

$

141,362

 

 

$

168,482

 

Denominator:

 

 

 

 

 

 

 

Weighted average shares for basic earnings per common share

96,276,680

 

 

104,948,398

 

 

96,976,877

 

 

105,181,628

 

Dilutive effect of stock options and certain share-based awards

345,899

 

 

522,997

 

 

312,821

 

 

519,598

 

Weighted average shares for diluted earnings per common share

96,622,579

 

 

105,471,395

 

 

97,289,698

 

 

105,701,226

 

Diluted earnings per common share

$

0.81

 

 

$

0.82

 

 

$

1.45

 

 

$

1.59

 

BANKUNITED, INC. AND SUBSIDIARIES

SELECTED RATIOS

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Financial ratios (5)

 

 

 

 

 

 

 

Return on average assets

1.00

%

 

1.17

%

 

0.91

%

 

1.16

%

Return on average stockholders' equity

11.1

%

 

11.7

%

 

10.1

%

 

11.5

%

Net interest margin (4)

2.52

%

 

3.60

%

 

2.53

%

 

3.58

%

 

June 30, 2019

 

December 31, 2018

Asset quality ratios

 

 

 

Non-performing loans to total loans (1) (3) (6)

0.61

%

 

0.59

%

Non-performing assets to total assets (2) (6)

0.45

%

 

0.43

%

Allowance for loan and lease losses to total loans (3)

0.50

%

 

0.50

%

Allowance for loan and lease losses to non-performing loans (1) (6)

81.17

%

 

84.63

%

Net charge-offs to average loans (5)

0.05

%

 

0.28

%

 

BankUnited, Inc.

 

BankUnited, N.A.

Capital ratios

 

 

 

Tier 1 leverage

8.6

%

 

9.3

%

Common Equity Tier 1 ("CET1") risk-based capital

12.0

%

 

12.9

%

Total risk-based capital

12.4

%

 

13.4

%

(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 and six month periods.

(6) Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling $28.4 million or 0.13% of total loans and 0.09% of total assets, at June 30, 2019; compared to $17.8 million or 0.08% of total loans and 0.06% of total assets, at December 31, 2018.

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 June 30, 2019 (in thousands except share and per share data):

Total stockholders' equity

$

2,867,910

 

Less: goodwill and other intangible assets

77,696

 

Tangible stockholders' equity

$

2,790,214

 

 

 

Common shares issued and outstanding

95,315,633

 

 

 

Book value per common share

$

30.09

 

 

 

Tangible book value per common share

$

29.27

 

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 June 30, 2018 (in millions except share and per share data. Shares in thousands):

 

Three Months Ended

June 30, 2018

Net Income (GAAP)

$

89.9

 

Less Loss Share Contribution

(25.0

)

Net Income as reported, minus Loss Share Contribution

$

64.9

 

Diluted earnings per common share, excluding Loss Share Contribution:

 

Diluted earnings per common share (GAAP)

$

0.82

 

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)

$

0.59

 

Non-loss share diluted earnings per share:

 

Loss Share Contribution

$

25.0

 

Weighted average shares for diluted earnings per common share (GAAP)

105,471

 

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)

105,471

 

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

June 30, 2018 (3)

Net Income As Reported

$

89.9

 

Calculation of Loss Share Contribution:

 

Interest Income - Covered Loans (Accretion)

$

84.2

 

Amortization of FDIC Indemnification Asset

(44.3

)

Loss Share Earnings

40.0

 

Hypothetical interest income on alternate assets (1)

(5.9

)

Loss Share Contribution, pre-tax

34.1

 

Income taxes (2)

(9.0

)

Loss Share Contribution, after tax

$

25.0

 

 

 

Net Income as reported, minus Loss Share Contribution

$

64.9

 

 

 

Diluted Earnings Per Common Share, as Reported

$

0.82

 

Earnings Per Share, Loss Share Contribution

0.23

 

Non-Loss Share Diluted Earnings Per Share

$

0.59

 

(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.

(3) Calculation variances of $0.1 million in the table above are due to rounding.

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

June 30, 2018

Average Balances (1)

 

Average Covered Loans

$

476

 

Average FDIC Indemnification Asset

231

 

Average Loss Share Asset

$

707

 

 

 

Yield

 

Yield on securities - reported (2)

3.33

%

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.

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