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BankUnited, Inc. Reports Third Quarter 2022 Results

MIAMI LAKES, Fla., October 20, 2022--(BUSINESS WIRE)--BankUnited, Inc. (the "Company") (NYSE: BKU) today announced financial results for the quarter ended September 30, 2022.

"We are happy to announce a very strong earnings quarter with double digit growth in EPS. We're optimistic about the opportunities we see in front of us," said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended September 30, 2022, the Company reported net income of $87.9 million, or $1.12 per diluted share, compared to $65.8 million, or $0.82 per diluted share for the immediately preceding quarter ended June 30, 2022 and $86.9 million, or $0.94 per diluted share, for the quarter ended September 30, 2021. Earnings for the quarter ended September 30, 2022 generated an annualized return on equity of 13.5%. For the nine months ended September 30, 2022, the Company reported net income of $220.8 million, or $2.71 per diluted share, compared to $289.7 million, or $3.12 per diluted share, for the nine months ended September 30, 2021. Earnings for the nine months ended September 30, 2021 were favorably impacted by a $67.4 million recovery of the provision for credit losses.

Quarterly Highlights

  • The net interest margin, calculated on a tax-equivalent basis, expanded to 2.76% for the quarter ended September 30, 2022 from 2.63% for the immediately preceding quarter and 2.33% for the quarter ended September 30, 2021. Net interest income increased by $10.4 million compared to the immediately preceding quarter ended June 30, 2022 and by $40.7 million compared to the quarter ended September 30, 2021.

  • In response to the rising interest rate environment, the average cost of total deposits increased to 0.78% for the quarter ended September 30, 2022, from 0.30% for the immediately preceding quarter ended June 30, 2022 and 0.20% for the quarter ended September 30, 2021. The yield on average interest earning assets increased to 3.80% for the quarter ended September 30, 2022 from 3.11% for the immediately preceding quarter and 2.79% for the quarter ended September 30, 2021.

  • For the quarter ended September 30, 2022, the Company recorded a provision for credit losses of $3.7 million compared to a provision of $24.0 million for the immediately preceding quarter ended June 30, 2022 and a recovery of the provision for credit losses of $(11.8) million for the quarter ended September 30, 2021. The ratio of the ACL to total loans was consistent with the prior quarter-end at 0.54%.

  • Loans, excluding the runoff of PPP loans, grew by $186 million for the quarter ended September 30, 2022. The core C&I and commercial real estate portfolio segments grew by a total of $444 million. As expected given the market-wide decline in mortgage origination activity, mortgage warehouse loans declined by $194 million.

  • Total deposits declined by $1.1 billion during the quarter ended September 30, 2022. Non-interest bearing demand deposits declined by $851 million to 32% of total deposits, from 34% of total deposits at June 30, 2022. Year to date, non-interest bearing demand deposits declined by $182 million. Time deposits grew by $976 million during the quarter ended September 30, 2022, reflecting a strategy to extend the term of deposits.

  • The positive trend in levels of criticized and classified loans continued during the quarter ended September 30, 2022, declining by $175 million; the annualized net charge-off ratio declined to 0.16% compared to 0.29% for the year ended December 31, 2021. The ratio of non-performing loans to total loans was 0.64% at September 30, 2022. The guaranteed portion of SBA loans on non-accrual status represented 0.17% of total loans and 27% of non-performing loans at September 30, 2022.

  • On October 5, 2022, BankUnited was named #3 on the list of the healthiest 100 workplaces in America published by Healthiest Employers, highlighting our commitment to employee wellness initiatives and programs.

  • Hurricane Ian made landfall on the southwest Florida coast on September 28, 2022. BankUnited did not sustain significant damage or disruption to facilities or operations. Based on information collected to date, we do not expect the impact of the storm to be material to our financial condition or results of operations.

  • As previously reported, on September 13, 2022, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock. During the quarter ended September 30, 2022, the Company repurchased approximately 0.3 million shares of its common stock for an aggregate purchase price of $10.8 million, at a weighted average price of $34.36 per share.

Loans

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

September 30, 2022

June 30, 2022

December 31, 2021

Residential and other consumer loans

$

8,853,884

36.4

%

$

8,840,387

36.7

%

$

8,368,380

35.2

%

Multi-family

962,546

4.0

%

1,017,500

4.2

%

1,154,738

4.9

%

Non-owner occupied commercial real estate

4,368,686

18.1

%

4,276,697

17.7

%

4,381,610

18.4

%

Construction and land

246,202

1.0

%

213,833

0.9

%

165,390

0.7

%

Owner occupied commercial real estate

1,919,074

7.9

%

1,907,349

7.9

%

1,944,658

8.2

%

Commercial and industrial

5,786,907

23.9

%

5,423,998

22.5

%

4,790,275

20.2

%

PPP

10,191

%

29,828

0.1

%

248,505

1.0

%

Pinnacle

932,187

3.8

%

977,930

4.1

%

919,641

3.9

%

Bridge - franchise finance

254,137

1.0

%

262,570

1.1

%

342,124

1.4

%

Bridge - equipment finance

310,035

1.3

%

333,125

1.4

%

357,599

1.5

%

Mortgage warehouse lending ("MWL")

622,883

2.6

%

816,797

3.4

%

1,092,133

4.6

%

$

24,266,732

100.0

%

$

24,100,014

100.0

%

$

23,765,053

100.0

%

In the aggregate, commercial loans, excluding the runoff of PPP, grew by $173 million during the quarter ended September 30, 2022. The largest increase was in the commercial and industrial segment, including owner-occupied commercial real estate, which grew by $375 million, followed by the commercial real estate segment with $69 million in growth. The remaining commercial segments declined during the quarter; the largest decline was in MWL, with $194 million. MWL utilization declined to 32% at September 30, 2022, compared to 46% at June 30, 2022 and 56% at December 31, 2021.

Asset Quality and the Allowance for Credit Losses ("ACL")

Non-performing loans totaled $156.4 million or 0.64% of total loans at September 30, 2022, compared to $144.0 million or 0.60% of total loans at June 30, 2022. Non-performing loans included $41.8 million and $43.4 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.17% and 0.18% of total loans at September 30, 2022 and June 30, 2022, respectively.

The following table presents criticized and classified commercial loans at the dates indicated (in thousands):

September 30, 2022

June 30, 2022

December 31, 2021

Special mention

$

26,939

$

89,153

$

148,593

Substandard - accruing

662,716

787,399

1,136,378

Substandard - non-accruing

104,994

117,518

129,579

Doubtful

32,093

7,971

47,754

Total

$

826,742

$

1,002,041

$

1,462,304

The following table presents the ACL and related ACL coverage ratios at the dates indicated and net charge-off rates for the periods ended September 30, 2022 and June 30, 2022, and the year ended December 31, 2021 (dollars in thousands):

ACL

ACL to Total
Loans (1)

ACL to Non-
Performing Loans

Net Charge-offs to
Average Loans (2)

December 31, 2021

$

126,457

0.53

%

61.41

%

0.29

%

June 30, 2022

$

130,239

0.54

%

90.45

%

0.23

%

September 30, 2022

$

130,671

0.54

%

83.54

%

0.16

%

___________________________

(1)

ACL to total loans, excluding government insured residential loans, PPP loans and MWL, which carry nominal or no reserves, was 0.60%, 0.61%, and 0.62% at September 30, 2022, June 30, 2022 and December 31, 2021, respectively.

(2)

Annualized for the six months ended June 30, 2022 and the nine months ended September 30, 2022.

The ACL at September 30, 2022 represents management's estimate of lifetime expected credit losses given our assessment of historical data, current conditions and a reasonable and supportable economic forecast as of the balance sheet date. For the quarter ended September 30, 2022, the Company recorded a provision for credit losses of $3.7 million, including $2.8 million related to funded loans. Offsetting factors impacting the provision for credit losses for the quarter ended September 30, 2022 included an increase related to the updated economic forecast, increases in specific reserves, loan growth and a $5 million provision related to the potential impact of Hurricane Ian, partially offset by decreases in certain qualitative factors and the impact of improving borrower financial results.

The following table summarizes the activity in the ACL for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Beginning balance

$

130,239

$

175,642

$

126,457

$

257,323

Provision (recovery)

2,753

(11,554

)

33,406

(65,523

)

Net charge-offs

(2,321

)

(4,473

)

(29,192

)

(32,185

)

Ending balance

$

130,671

$

159,615

$

130,671

$

159,615

Net Interest Income

Net interest income for the quarter ended September 30, 2022 was $235.8 million compared to $225.4 million for the immediately preceding quarter ended June 30, 2022 and $195.1 million for the quarter ended September 30, 2021. Interest income increased by $59.1 million for the quarter ended September 30, 2022 compared to the immediately preceding quarter while interest expense increased by $48.6 million.

The Company’s net interest margin, calculated on a tax-equivalent basis, increased by 0.13% to 2.76% for the quarter ended September 30, 2022, from 2.63% for the immediately preceding quarter ended June 30, 2022. Factors impacting the net interest margin for the quarter ended September 30, 2022 included:

  • The tax-equivalent yield on investment securities increased to 3.12% for the quarter ended September 30, 2022, from 2.12% for the quarter ended June 30, 2022. This increase resulted from the reset of coupon rates on variable rate securities and purchases of higher-yielding securities.

  • The tax-equivalent yield on loans increased to 4.11% for the quarter ended September 30, 2022, from 3.59% for the quarter ended June 30, 2022. The resetting of variable rate loans to higher coupon rates and origination of new loans at higher rates contributed to the increase.

  • The average rate paid on interest bearing deposits increased to 1.14% for the quarter ended September 30, 2022, from 0.45% for the quarter ended June 30, 2022, primarily in response to the rising interest rate environment. Growth in time deposits as a percentage of interest bearing deposits also contributed to this increase, as we implemented a strategy to extend the term of interest bearing deposits.

  • The average rate paid on FHLB advances increased to 2.25% for the quarter ended September 30, 2022, from 1.07% for the quarter ended June 30, 2022, primarily in response to the rising interest rate environment.

Non-interest income and Non-interest expense

Non-interest income totaled $23.1 million for the quarter ended September 30, 2022 compared to $13.5 million for the quarter ended June 30, 2022 and $25.5 million for the quarter ended September 30, 2021.

  • Gain (loss) on investment securities was a net gain of $0.1 million for the quarter ended September 30, 2022, compared to a net loss of $(8.4) million for the quarter ended June 30, 2022, and a net loss of $(0.7) million for the quarter ended September 30, 2021. The net loss for the quarter ended June 30, 2022 was primarily attributable to a $9.3 million decrease in the fair value of certain preferred stock investments.

Non-interest expense increased by $10.7 million for the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022. As expected, an increasing trend was reflected in the compensation and technology categories as we continue to invest in people and technology to support future growth.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Thursday, October 20, 2022 with Chairman, President and Chief Executive Officer, Rajinder P. Singh, Chief Financial Officer, Leslie N. Lunak and Chief Operating Officer, Thomas M. Cornish.

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. Due to recent demand for conference call services, participants are encouraged to listen to the call via a live Internet webcast at https://ir.bankunited.com. To participate by telephone, participants will receive dial-in information and a unique PIN number upon completion of registration at https://register.vevent.com/register/BI4d0f0999272845dd996e3017ab4ea49a. For those unable to join the live event, an archived webcast will be available in the Investor Relations page at https://ir.bankunited.com approximately two hours following the live webcast.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $36.6 billion at September 30, 2022, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 58 banking centers in 12 Florida counties, 4 banking centers in the New York metropolitan area, and 1 banking center located in Dallas, Texas.

Forward-Looking Statements

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

The Company generally identifies forward-looking statements by terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "could," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," "forecasts" or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including (without limitations) those relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the Company's direct control. 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, 2021 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC’s website (www.sec.gov).

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)

September 30,
2022

December 31,
2021

ASSETS

Cash and due from banks:

Non-interest bearing

$

18,380

$

19,143

Interest bearing

707,758

295,714

Cash and cash equivalents

726,138

314,857

Investment securities (including securities recorded at fair value of $9,787,427 and $10,054,198)

9,797,427

10,064,198

Non-marketable equity securities

261,784

135,859

Loans

24,266,732

23,765,053

Allowance for credit losses

(130,671

)

(126,457

)

Loans, net

24,136,061

23,638,596

Bank owned life insurance

308,176

309,477

Operating lease equipment, net

579,693

640,726

Goodwill

77,637

77,637

Other assets

707,978

634,046

Total assets

$

36,594,894

$

35,815,396

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Demand deposits:

Non-interest bearing

$

8,794,109

$

8,975,621

Interest bearing

2,341,342

3,709,493

Savings and money market

12,513,398

13,368,745

Time

3,700,226

3,384,243

Total deposits

27,349,075

29,438,102

Federal funds purchased

199,000

FHLB advances

5,295,000

1,905,000

Notes and other borrowings

721,045

721,416

Other liabilities

748,789

514,117

Total liabilities

34,113,909

32,777,635

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01 per share, 400,000,000 shares authorized; 77,599,408 and 85,647,986 shares issued and outstanding

776

856

Paid-in capital

381,411

707,503

Retained earnings

2,506,539

2,345,342

Accumulated other comprehensive loss

(407,741

)

(15,940

)

Total stockholders' equity

2,480,985

3,037,761

Total liabilities and stockholders' equity

$

36,594,894

$

35,815,396

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2022

2022

2021

2022

2021

Interest income:

Loans

$

244,884

$

209,223

$

194,689

$

645,669

$

602,544

Investment securities

77,109

54,771

38,243

174,928

114,418

Other

4,031

2,979

1,413

8,364

4,613

Total interest income

326,024

266,973

234,345

828,961

721,575

Interest expense:

Deposits

53,206

20,501

14,273

85,569

53,965

Borrowings

36,982

21,056

24,950

73,498

77,937

Total interest expense

90,188

41,557

39,223

159,067

131,902

Net interest income before provision for credit losses

235,836

225,416

195,122

669,894

589,673

Provision for (recovery of) credit losses

3,720

23,996

(11,842

)

35,546

(67,365

)

Net interest income after provision for credit losses

232,116

201,420

206,964

634,348

657,038

Non-interest income:

Deposit service charges and fees

6,064

5,896

5,553

17,920

15,870

Gain (loss) on investment securities, net

135

(8,392

)

(664

)

(16,125

)

5,856

Lease financing

13,180

13,363

13,212

39,958

39,222

Other non-interest income

3,693

2,583

7,377

9,070

27,583

Total non-interest income

23,072

13,450

25,478

50,823

88,531

Non-interest expense:

Employee compensation and benefits

66,097

62,461

57,224

195,646

172,971

Occupancy and equipment

11,719

11,399

11,760

34,630

35,127

Deposit insurance expense

4,398

3,993

3,552

11,794

15,224

Professional fees

3,184

3,256

2,312

8,702

6,363

Technology

19,813

17,898

16,687

54,715

49,279

Depreciation of operating lease equipment

12,646

12,585

12,944

37,841

37,995

Other non-interest expense

20,248

15,810

13,563

48,503

42,756

Total non-interest expense

138,105

127,402

118,042

391,831

359,715

Income before income taxes

117,083

87,468

114,400

293,340

385,854

Provision for income taxes

29,233

21,704

27,459

72,576

96,125

Net income

$

87,850

$

65,764

$

86,941

$

220,764

$

289,729

Earnings per common share, basic

$

1.13

$

0.82

$

0.94

$

2.73

$

3.12

Earnings per common share, diluted

$

1.12

$

0.82

$

0.94

$

2.71

$

3.12

BANKUNITED, INC. AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS

(Dollars in thousands)

Three Months Ended
September 30, 2022

Three Months Ended
June 30, 2022

Three Months Ended
September 30, 2021

Average
Balance

Interest(1)

Yield/
Rate(1)(2)

Average
Balance

Interest(1)

Yield/
Rate(1)(2)

Average
Balance

Interest (1)

Yield/
Rate(1)(2)

Assets:

Interest earning assets:

Loans

$

24,053,742

$

248,168

4.11

%

$

23,709,190

$

212,395

3.59

%

$

22,879,654

$

197,995

3.45

%

Investment securities (3)

9,981,486

77,840

3.12

%

10,477,600

55,488

2.12

%

10,452,255

38,939

1.49

%

Other interest earning assets

596,879

4,031

2.68

%

718,904

2,979

1.66

%

750,700

1,413

0.75

%

Total interest earning assets

34,632,107

330,039

3.80

%

34,905,694

270,862

3.11

%

34,082,609

238,347

2.79

%

Allowance for credit losses