EX-99.1 2 earningsdoc99120180930.htm EX-99.1 Exhibit

Exhibit 99.1
 
BANKUNITED, INC. REPORTS THIRD QUARTER 2018 RESULTS
 
Miami Lakes, Fla. — October 24, 2018 — BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter ended September 30, 2018.
For the quarter ended September 30, 2018, the Company reported net income of $97.3 million, or $0.90 per diluted share compared to $67.8 million, or $0.62 per diluted share, for the quarter ended September 30, 2017, a 45% increase in diluted earnings per share. For the nine months ended September 30, 2018, the Company reported net income of $272.5 million, or $2.49 per diluted share, compared to $196.5 million, or $1.79 per diluted share, for the nine months ended September 30, 2017.
Non-loss share earnings per share(1) for the trailing four quarters ended September 30, 2018 increased by 28% to a total of $2.39 from a total of $1.87 for the preceding four quarters.
The annualized return on average stockholders’ equity for the nine months ended September 30, 2018 was 11.80% compared to 10.21% for the nine months ended September 30, 2017, while the annualized return on average assets was 1.19% compared to 0.92% for the same periods.

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

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

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

1
 
 
 




During the quarter ended September 30, 2018, the Company completed the $150 million share repurchase program authorized by its Board of Directors, repurchasing 2.4 million shares for an aggregate purchase price of $96 million. During the nine months ended September 30, 2018, the Company repurchased approximately 3.8 million shares of its common stock for an aggregate purchase price of $150.0 million.
On October 23, 2018 the Board of Directors of the Company authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock. Any repurchases will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.
Capital

The Company and its banking subsidiary continue to exceed all regulatory guidelines required to be considered well capitalized. The Company’s and BankUnited, N.A.'s regulatory capital ratios at September 30, 2018 were as follows:
 
BankUnited, Inc.
 
BankUnited, N.A.
Tier 1 leverage
9.5
%
 
10.3
%
 
 

 
 
Common Equity Tier 1 ("CET1") risk-based capital
13.2
%
 
14.3
%
 
 
 
 
Tier 1 risk-based capital
13.2
%
 
14.3
%
 
 

 
 
Total risk-based capital
13.8
%
 
14.9
%
Loans and Leases
Loans, including premiums, discounts and deferred fees and costs, totaled $21.9 billion at September 30, 2018 compared to $21.4 billion at December 31, 2017. Non-covered loans grew to $21.6 billion while covered loans declined to $360 million at September 30, 2018.

A comparison of non-covered loan and lease portfolio composition at the dates indicated follows:
 
September 30, 2018
 
June 30, 2018
 
December 31, 2017
Residential and other consumer loans
$
4,563,578

 
21.0
%
 
$
4,448,660

 
20.6
%
 
$
4,196,080

 
19.8
%
Multi-family
2,762,998

 
12.8
%
 
2,861,559

 
13.4
%
 
3,218,953

 
15.4
%
Non-owner occupied commercial real estate
4,567,589

 
21.4
%
 
4,526,922

 
21.2
%
 
4,474,801

 
21.5
%
Construction and land
244,619

 
1.1
%
 
255,393

 
1.2
%
 
310,484

 
1.5
%
Owner occupied commercial real estate
2,091,978

 
9.7
%
 
2,046,266

 
9.6
%
 
2,012,742

 
9.7
%
Commercial and industrial
4,708,545

 
21.9
%
 
4,594,857

 
21.5
%
 
4,137,827

 
19.9
%
Commercial lending subsidiaries
2,620,097

 
12.1
%
 
2,684,716

 
12.5
%
 
2,562,499

 
12.2
%
 
$
21,559,404

 
100.0
%
 
$
21,418,373

 
100.0
%
 
$
20,913,386

 
100.0
%
Equipment under operating lease, net
$
661,677

 
 
 
$
591,267

 
 
 
$
599,502

 
 

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

2
 
 
 


Asset Quality and Allowance for Loan and Lease Losses

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

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

Non-covered, non-performing loans totaled $206.1 million or 0.96% of total non-covered loans at September 30, 2018, compared to $172.0 million or 0.82% of total non-covered loans at December 31, 2017. Non-performing taxi medallion loans comprised $80.2 million or 0.37% of total non-covered loans at September 30, 2018 and $106.1 million or 0.51% of total non-covered loans at December 31, 2017. At September 30, 2018 and December 31, 2017, the entire taxi medallion portfolio was on non-accrual status.

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

The following table summarizes the activity in the allowance for loan and lease losses for the periods indicated (in thousands):
 
Three Months Ended September 30, 2018
 
Three Months Ended September 30, 2017
 
ACI
Loans
 
Non-ACI
Loans
 
Non-Covered
Loans
 
Total
 
ACI
Loans
 
Non-ACI
Loans
 
Non-Covered
Loans
 
Total
Balance at beginning of period
$

 
$
590

 
$
134,381

 
$
134,971

 
$
1,812

 
$
2,737

 
$
151,099

 
$
155,648

Provision (recovery)

 
(50
)
 
1,250

 
1,200

 

 
261

 
37,593

 
37,854

Charge-offs

 
(740
)
 
(12,340
)
 
(13,080
)
 

 

 
(36,028
)
 
(36,028
)
Recoveries

 
214

 
1,435

 
1,649

 

 
38

 
1,061

 
1,099

Balance at end of period
$

 
$
14

 
$
124,726

 
$
124,740

 
$
1,812

 
$
3,036

 
$
153,725

 
$
158,573

 
Nine Months Ended September 30, 2018
 
Nine Months Ended September 30, 2017
 
ACI
Loans
 
Non-ACI
Loans
 
Non-Covered
Loans
 
Total
 
ACI
Loans
 
Non-ACI
Loans
 
Non-Covered
Loans
 
Total
Balance at beginning of period
$

 
$
258

 
$
144,537

 
$
144,795

 
$

 
$
2,100

 
$
150,853

 
$
152,953

Provision

 
517

 
12,825

 
13,342

 
1,812

 
881

 
60,880

 
63,573

Charge-offs

 
(979
)
 
(35,001
)
 
(35,980
)
 

 
(55
)
 
(61,034
)
 
(61,089
)
Recoveries

 
218

 
2,365

 
2,583

 

 
110

 
3,026

 
3,136

Balance at end of period
$

 
$
14

 
$
124,726

 
$
124,740

 
$
1,812

 
$
3,036

 
$
153,725

 
$
158,573


3
 
 
 



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

Deposits

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

Net interest income for the quarter ended September 30, 2018 increased to $252.0 million from $241.3 million for the quarter ended September 30, 2017. Net interest income was $755.0 million for the nine months ended September 30, 2018, compared to $711.4 million for the nine months ended September 30, 2017. Increases in interest income were partially offset by increases in interest expense. The increases in interest income were primarily attributable to increases in the average balances of loans and investment securities and related average yields. Interest expense increased due to increases in average interest bearing deposits and the cost of funds.

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

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

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

4
 
 
 


Non-interest income

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

The most significant factors contributing to these decreases in non-interest income included (i) decreases of $26.5 million and $26.3 million, respectively, in gain on investment securities and (ii) increases of $10.5 million and $10.7 million, respectively, in gain on sale of covered loans, inclusive of the impact of FDIC indemnification for the quarter and nine months ended September 30, 2018, as compared to the corresponding periods in the prior year. During the quarter ended September 30, 2018, under the terms of the Purchase and Assumption Agreement with the FDIC, the Company sold approximately $154 million in unpaid principal balance of covered residential loans. Decreases in gain on investment securities primarily reflected gains recognized in the quarter ended September 30, 2017 from the sale of certain securities formerly covered under the Commercial Shared-Loss Agreement and originally acquired at significant discounts in the FSB Acquisition.

Non-interest expense

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

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

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

As the Company’s expected cash flows from ACI loans have improved since the FSB Acquisition, the Company has reclassified amounts from non-accretable difference to accretable yield, resulting in increases in the yield on covered loans. Non-accretable difference at acquisition represented the difference between the total contractual payments due and the cash flows expected to be received on ACI loans. The accretable yield on ACI loans represented the amount by which undiscounted expected future cash flows exceeded the recorded investment in the loans.
Changes in accretable yield on ACI loans for the nine months ended September 30, 2018 and the year ended December 31, 2017 were as follows (in thousands):
Balance, December 31, 2016
$
675,385

Reclassifications from non-accretable difference, net
81,501

Accretion
(301,827
)
Balance, December 31, 2017
455,059

Reclassifications from non-accretable difference, net
78,561

Accretion
(249,609
)
Balance, September 30, 2018
$
284,011


5
 
 
 


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

The estimates of expected cash flows from ACI loans underlying the balance of accretable yield and future estimated amortization of the FDIC indemnification asset reflected above as of September 30, 2018 were predicated on the assumption that a final sale of all of the remaining covered loans would occur in the second quarter of 2019. Based on preliminary discussions with the FDIC that have taken place subsequent to September 30, 2018, there is a reasonable possibility that a portion of these loans may be retained by the Bank and that the sale of any loans not retained may occur earlier than the second quarter of 2019. If a decision is made to retain a portion of the covered loan portfolio and the timing of sale of the remaining loans is accelerated, we expect the amount of estimated future amortization of the FDIC indemnification asset to increase and the timing of that amortization to be accelerated. Additionally, we expect that the balance of accretable yield will increase, in part due to expected collection of additional contractual interest, and that accretion will occur over a longer period of time reflective of the expected lives of the retained loans. Loss share coverage with respect to any loans retained is expected to terminate no later than May 21, 2019.
Impact of Hurricane Michael
In October, 2018, Hurricane Michael made landfall in the Florida panhandle as a category 4 hurricane, impacting some areas of Florida and the southeastern United States with significant wind damage, flooding and power outages. While the Company does not have physical operations in areas significantly impacted by the storm, some of the Company's borrowers may have been impacted. The Company is in the process of assessing the potential impact of the hurricane on the value of collateral underlying our loans and the ability of borrowers to repay their obligations to the Bank. Uncertainty remains as to the ultimate impact of the storm on the allowance for loan and lease losses.
Earnings Conference Call and Presentation

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

The earnings release and slides with supplemental information relating to the release will be available on the Investor Relations page under About Us on www.bankunited.com prior to the call. The call may be accessed via a live Internet webcast at www.bankunited.com or through a dial in telephone number at (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the confirmation number for the call is 7741909. A replay of the call will be available from 12:00 p.m. ET on October 24th through 11:59 p.m. ET on October 31st by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 7741909. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.

About BankUnited, Inc. and the FSB Acquisition 
BankUnited, Inc., with total assets of $31.5 billion at September 30, 2018, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 86 banking centers in 15 Florida counties and 5 banking centers in the New York metropolitan area at September 30, 2018.
On May 21, 2009, BankUnited acquired substantially all of the assets and assumed all of the non-brokered deposits and substantially all other liabilities of BankUnited, FSB from the FDIC, in a transaction referred to as the FSB Acquisition. Concurrently with the FSB Acquisition, BankUnited entered into two loss sharing agreements, or the Loss Sharing Agreements, which covered certain legacy assets, including the entire legacy loan portfolio and OREO, and certain purchased investment securities. Assets covered by the Loss Sharing Agreements are referred to as “covered assets” (or, in certain cases, “covered loans”). The Loss Sharing Agreements do not apply to subsequently purchased or originated loans or other assets. Effective May 22, 2014 and consistent with the terms of the Loss Sharing Agreements, loss share coverage was terminated for those commercial loans and OREO and certain investment securities that were previously covered under the Loss Sharing Agreements. Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC will reimburse BankUnited for 80% of losses, including certain interest and expenses, up to the $4.0 billion stated threshold and 95% of losses in excess of the $4.0 billion stated threshold. The Company’s estimate of cumulative losses on the covered assets, as of September 30, 2018, is approximately $3.5 billion. The Company has received $2.7 billion from the FDIC in reimbursements under the Loss Sharing Agreements for claims filed for incurred losses as of September 30, 2018.

Forward-Looking Statements

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

6
 
 
 



The Company generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including (without limitations) those relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 which is available at the SEC’s website (www.sec.gov).

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

7
 
 
 


BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except share and per share data)
 
 
September 30,
2018
 
December 31,
2017
ASSETS
 

 
 

Cash and due from banks:
 

 
 

Non-interest bearing
$
11,644

 
$
35,246

Interest bearing
268,155

 
159,336

Cash and cash equivalents
279,799

 
194,582

Investment securities (including securities recorded at fair value of $7,217,403 and $6,680,832)
7,227,403

 
6,690,832

Non-marketable equity securities
273,427

 
265,989

Loans held for sale
37,179

 
34,097

Loans (including covered loans of $359,767 and $503,118)
21,919,171

 
21,416,504

Allowance for loan and lease losses
(124,740
)
 
(144,795
)
Loans, net
21,794,431

 
21,271,709

FDIC indemnification asset
152,517

 
295,635

Bank owned life insurance
262,987

 
252,462

Equipment under operating lease, net
661,677

 
599,502

Goodwill and other intangible assets
77,729

 
77,796

Other assets
746,487

 
664,382

Total assets
$
31,513,636

 
$
30,346,986

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Liabilities:
 

 
 

Demand deposits:
 

 
 

Non-interest bearing
$
3,413,610

 
$
3,071,032

Interest bearing
1,587,812

 
1,757,581

Savings and money market
10,588,075

 
10,715,024

Time
6,715,793

 
6,334,842

Total deposits
22,305,290

 
21,878,479

Federal funds purchased
175,000

 

Federal Home Loan Bank advances
4,946,000

 
4,771,000

Notes and other borrowings
402,780

 
402,830

Other liabilities
609,678

 
268,615

Total liabilities
28,438,748

 
27,320,924

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 103,793,325 and 106,848,185 shares issued and outstanding
1,037

 
1,068

Paid-in capital
1,364,864

 
1,498,227

Retained earnings
1,667,092

 
1,471,781

Accumulated other comprehensive income
41,895

 
54,986

Total stockholders' equity
3,074,888

 
3,026,062

Total liabilities and stockholders' equity
$
31,513,636

 
$
30,346,986



8
 
 
 


BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Interest income:
 

 
 

 
 

 
 

Loans
$
293,543

 
$
253,815

 
$
855,807

 
$
739,586

Investment securities
59,319

 
51,851

 
165,396

 
141,624

Other
4,855

 
3,777

 
13,145

 
10,606

Total interest income
357,717

 
309,443

 
1,034,348

 
891,816

Interest expense:
 
 
 
 
 
 
 
Deposits
75,257

 
45,919

 
196,916

 
120,161

Borrowings
30,492

 
22,260

 
82,392

 
60,209

Total interest expense
105,749

 
68,179

 
279,308

 
180,370

Net interest income before provision for loan losses
251,968

 
241,264

 
755,040

 
711,446

Provision for (recovery of) loan losses (including ($50), $261, $517 and $2,693 for covered loans)
1,200

 
37,854

 
13,342

 
63,573

Net interest income after provision for loan losses
250,768

 
203,410

 
741,698

 
647,873

Non-interest income:
 
 
 
 
 
 
 
Income from resolution of covered assets, net
3,134

 
6,400

 
10,689

 
22,066

Net gain (loss) on FDIC indemnification
3,090

 
(4,838
)
 
(1,925
)
 
(14,174
)
Deposit service charges and fees
3,677

 
3,251

 
10,674

 
9,706

Gain (loss) on sale of loans, net (including $5,037, $0, $4,739 and $(1,582) related to covered loans)
8,691

 
2,447

 
12,960

 
6,601

Gain on investment securities, net
432

 
26,931

 
2,938

 
29,194

Lease financing
14,091

 
13,287

 
45,685

 
40,067

Other non-interest income
5,620

 
5,848

 
17,673

 
17,903

Total non-interest income
38,735

 
53,326

 
98,694

 
111,363

Non-interest expense:
 
 
 
 
 
 
 
Employee compensation and benefits
65,612

 
58,327

 
198,185

 
178,386

Occupancy and equipment
18,887

 
18,829

 
56,704

 
56,689

Amortization of FDIC indemnification asset
48,255

 
45,225

 
132,852

 
135,351

Deposit insurance expense
5,375

 
5,764

 
14,810

 
16,827

Professional fees
5,240

 
2,748

 
10,772

 
12,573

Telecommunications and data processing
4,187

 
3,452

 
11,772

 
10,481

Depreciation of equipment under operating lease
9,870

 
8,905

 
28,662

 
25,655

Other non-interest expense
13,372

 
13,455

 
40,105

 
37,735

Total non-interest expense
170,798

 
156,705

 
493,862

 
473,697

Income before income taxes
118,705

 
100,031

 
346,530

 
285,539

Provision for income taxes
21,377

 
32,252

 
74,067

 
89,060

Net income
$
97,328

 
$
67,779

 
$
272,463

 
$
196,479

Earnings per common share, basic
$
0.90

 
$
0.62

 
$
2.50

 
$
1.79

Earnings per common share, diluted
$
0.90

 
$
0.62

 
$
2.49

 
$
1.79

Cash dividends declared per common share
$
0.21

 
$
0.21

 
$
0.63

 
$
0.63





9
 
 
 


BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
 
 
Three Months Ended September 30,
 
 
2018
 
2017
 
 
Average
Balance
 
Interest (1)
 
Yield/
Rate (1)(2)
 
Average
Balance
 
Interest (1)
 
Yield/
Rate
(1)(2)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Interest earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

Non-covered loans
 
$
21,311,706

 
$
216,746

 
4.05
%
 
$
19,710,115

 
$
187,928

 
3.79
%
Covered loans
 
408,182

 
81,302

 
79.67
%
 
518,026

 
73,452

 
56.70
%
Total loans
 
21,719,888

 
298,048

 
5.47
%
 
20,228,141

 
261,380

 
5.15
%
Investment securities (3)
 
7,118,626

 
60,677

 
3.41
%
 
7,002,615

 
55,046

 
3.14
%
Other interest earning assets
 
507,318

 
4,855

 
3.80
%
 
545,224

 
3,777

 
2.75
%
Total interest earning assets
 
29,345,832

 
363,580

 
4.94
%
 
27,775,980

 
320,203

 
4.60
%
Allowance for loan and lease losses
 
(137,784
)
 
 
 
 
 
(160,231
)
 
 
 
 
Non-interest earning assets
 
1,859,619

 
 
 
 
 
1,699,912

 
 
 
 
Total assets
 
$
31,067,667

 
 
 
 
 
$
29,315,661

 
 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing demand deposits
 
$
1,592,908

 
4,550

 
1.13
%
 
$
1,590,206

 
3,415

 
0.85
%
Savings and money market deposits
 
10,483,248

 
38,520

 
1.46
%
 
9,968,512

 
21,964

 
0.87
%
Time deposits
 
6,728,915

 
32,187

 
1.90
%
 
6,290,056

 
20,540

 
1.30
%
Total interest bearing deposits
 
18,805,071

 
75,257

 
1.59
%
 
17,848,774

 
45,919

 
1.02
%
Federal funds purchased
 
89,218

 
445

 
2.00
%
 

 

 
%
FHLB advances
 
4,772,902

 
24,743

 
2.06
%
 
4,924,325

 
16,946

 
1.37
%
Notes and other borrowings
 
402,782

 
5,304

 
5.27
%
 
402,828

 
5,314

 
5.28
%
Total interest bearing liabilities
 
24,069,973

 
105,749

 
1.74
%
 
23,175,927

 
68,179

 
1.17
%
Non-interest bearing demand deposits
 
3,369,393

 
 
 
 
 
3,036,046

 
 
 
 
Other non-interest bearing liabilities
 
520,118

 
 
 
 
 
468,735

 
 
 
 
Total liabilities
 
27,959,484

 
 
 
 
 
26,680,708

 
 
 
 
Stockholders' equity
 
3,108,183

 
 
 
 
 
2,634,953

 
 
 
 
Total liabilities and stockholders' equity
 
$
31,067,667

 
 
 
 
 
$
29,315,661

 
 
 
 
Net interest income
 
 
 
$
257,831

 
 
 
 
 
$
252,024

 
 
Interest rate spread
 
 
 
 
 
3.20
%
 
 
 
 
 
3.43
%
Net interest margin
 
 
 
 
 
3.51
%
 
 
 
 
 
3.62
%
 
 
(1)
On a tax-equivalent basis where applicable
(2)
Annualized
(3)
At fair value except for securities held to maturity

10
 
 
 


BANKUNITED, INC. AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
 
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
 
Average
Balance
 
Interest (1)
 
Yield/
Rate
(1)(2)
 
Average
Balance
 
Interest (1)
 
Yield/
Rate
(1)(2)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Interest earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

Non-covered loans
 
$
21,073,130

 
$
622,039

 
3.94
%
 
$
19,169,479

 
$
535,926

 
3.73
%
Covered loans
 
460,485

 
246,811

 
71.46
%
 
560,934

 
225,194

 
53.54
%
Total loans
 
21,533,615

 
868,850

 
5.39
%
 
19,730,413

 
761,120

 
5.15
%
Investment securities (3)
 
6,932,504

 
169,645

 
3.26
%
 
6,569,553

 
151,337

 
3.07
%
Other interest earning assets
 
503,378

 
13,145

 
3.49
%
 
557,623

 
10,606

 
2.54
%
Total interest earning assets
 
28,969,497

 
1,051,640

 
4.85
%
 
26,857,589

 
923,063

 
4.59
%
Allowance for loan and lease losses
 
(141,047
)
 
 
 
 
 
(157,015
)
 
 
 
 
Non-interest earning assets
 
1,905,278

 
 
 
 
 
1,754,499

 
 
 
 
Total assets
 
$
30,733,728

 
 
 
 
 
$
28,455,073

 
 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing demand deposits
 
$
1,604,666

 
12,902

 
1.07
%
 
$
1,564,229

 
8,913

 
0.76
%
Savings and money market deposits
 
10,610,889

 
100,891

 
1.27
%
 
9,557,907

 
55,741

 
0.78
%
Time deposits
 
6,507,726

 
83,123

 
1.71
%
 
5,988,433

 
55,507

 
1.24
%
Total interest bearing deposits
 
18,723,281

 
196,916

 
1.41
%
 
17,110,569

 
120,161

 
0.94
%
Federal funds purchased
 
30,066

 
445

 
1.97
%
 

 

 
%
FHLB advances
 
4,665,799

 
66,028

 
1.89
%
 
4,889,578

 
44,262

 
1.21
%
Notes and other borrowings
 
402,809

 
15,919

 
5.27
%
 
402,821

 
15,947

 
5.28
%
Total interest bearing liabilities
 
23,821,955

 
279,308

 
1.57
%
 
22,402,968

 
180,370

 
1.08
%
Non-interest bearing demand deposits
 
3,327,521

 
 
 
 
 
3,034,682

 
 
 
 
Other non-interest bearing liabilities
 
498,368

 
 
 
 
 
443,430

 
 
 
 
Total liabilities
 
27,647,844

 
 
 
 
 
25,881,080

 
 
 
 
Stockholders' equity
 
3,085,884

 
 
 
 
 
2,573,993

 
 
 
 
Total liabilities and stockholders' equity
 
$
30,733,728

 
 
 
 
 
$
28,455,073

 
 
 
 
Net interest income
 
 
 
$
772,332

 
 
 
 
 
$
742,693

 
 
Interest rate spread
 
 
 
 
 
3.28
%
 
 
 
 
 
3.51
%
Net interest margin
 
 
 
 
 
3.56
%
 
 
 
 
 
3.69
%
 
 
(1)
On a tax-equivalent basis where applicable
(2)
Annualized
(3)
At fair value except for securities held to maturity


11
 
 
 


BANKUNITED, INC. AND SUBSIDIARIES
EARNINGS PER COMMON SHARE
(In thousands except share and per share amounts)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
c
2018
 
2017
 
2018
 
2017
Basic earnings per common share:
 
 
 

 
 
 
 

Numerator:
 
 
 

 
 
 
 

Net income
$
97,328

 
$
67,779

 
$
272,463

 
$
196,479

Distributed and undistributed earnings allocated to participating securities
(3,771
)
 
(2,525
)
 
(10,444
)
 
(7,331
)
Income allocated to common stockholders for basic earnings per common share
$
93,557

 
$
65,254

 
$
262,019

 
$
189,148

Denominator:
 
 
 
 
 
 
 
Weighted average common shares outstanding
105,063,770

 
106,809,381

 
105,914,807

 
106,488,396

Less average unvested stock awards
(1,178,982
)
 
(1,101,485
)
 
(1,170,209
)
 
(1,102,381
)
Weighted average shares for basic earnings per common share
103,884,788

 
105,707,896

 
104,744,598

 
105,386,015

Basic earnings per common share
$
0.90

 
$
0.62

 
$
2.50

 
$
1.79

Diluted earnings per common share:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Income allocated to common stockholders for basic earnings per common share
$
93,557

 
$
65,254

 
$
262,019

 
$
189,148

Adjustment for earnings reallocated from participating securities
13

 
6

 
37

 
21

Income used in calculating diluted earnings per common share
$
93,570

 
$
65,260

 
$
262,056

 
$
189,169

Denominator:
 
 
 
 
 
 
 
Weighted average shares for basic earnings per common share
103,884,788

 
105,707,896

 
104,744,598

 
105,386,015

Dilutive effect of stock options and executive share-based awards
499,431

 
365,286

 
512,801

 
479,459

Weighted average shares for diluted earnings per common share
104,384,219

 
106,073,182

 
105,257,399

 
105,865,474

Diluted earnings per common share
$
0.90

 
$
0.62

 
$
2.49

 
$
1.79



12
 
 
 



BANKUNITED, INC. AND SUBSIDIARIES
SELECTED RATIOS
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Financial ratios (5)
 
 
 
 
 
 

 
 

Return on average assets
 
1.24
%
 
0.92
%
 
1.19
%
 
0.92
%
Return on average stockholders’ equity
 
12.42
%
 
10.21
%
 
11.80
%
 
10.21
%
Net interest margin (4)
 
3.51
%
 
3.62
%
 
3.56
%
 
3.69
%
 
 
September 30, 2018
 
December 31, 2017
 
 
Non-Covered
 
Total
 
Non-Covered
 
Total
Asset quality ratios
 
 
 
 
 
 
 
 
Non-performing loans to total loans (1) (3)
 
0.96
%
 
0.94
%
 
0.82
%
 
0.81
%
Non-performing assets to total assets (2)
 
0.68
%
 
0.70
%
 
0.60
%
 
0.61
%
Allowance for loan and lease losses to total loans (3)
 
0.58
%
 
0.57
%
 
0.69
%
 
0.68
%
Allowance for loan and lease losses to non-performing loans (1)
 
60.51
%
 
60.47
%
 
84.03
%
 
83.53
%
Net charge-offs to average loans (5)
 
0.21
%
 
0.21
%
 
0.38
%
 
0.38
%
 
 
(1)
We define non-performing loans to include non-accrual loans, and loans, other than ACI loans and government insured residential loans, that are past due 90 days or more and still accruing. Contractually delinquent ACI loans and government insured residential loans on which interest continues to be accreted or accrued are excluded from non-performing loans.
(2)
Non-performing assets include non-performing loans, OREO and other repossessed assets.
(3)
Total loans include premiums, discounts, and deferred fees and costs.
(4)
On a tax-equivalent basis.
(5)
Annualized for the three and nine month periods.

Non-GAAP Financial Measures

Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful base for comparison to other financial institutions. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at September 30, 2018 (in thousands except share and per share data): 
Total stockholders’ equity
 
$
3,074,888

Less: goodwill and other intangible assets
 
77,729

Tangible stockholders’ equity
 
$
2,997,159

 
 
 
Common shares issued and outstanding
 
103,793,325

 
 
 
Book value per common share
 
$
29.63

 
 
 
Tangible book value per common share
 
$
28.88


13